GROUP 1

RESEARCH ON FINANCIAL MANAGEMENT

1. Nature, Purpose, and Scope of Financial Management

2. Relationship of Financial Objectives to Organizational Strategy and Other Organizational
Objectives
3. Functions of Financial Management

Submitted by:
Ausa, Leonell
Miclat, Micko
Casalla, Janet Julia
Madaya, Kristine
Marcelo, Thrisha
Organo, Christine
Pagaduan, Rochelle
Rosel, Annie
Sarmiento, Carissa

Section:
BSBA – FM 3

Submitted to:
Ms. Hustianei Hilao
NATURE, PURPOSE, AND SCOPE OF FINANCIAL MANAGEMENT

NATURE OF FINANCIAL MANAGEMENT

By: Carissa Sarmiento

Financial management is essential for businesses, individuals, and organizations to ensure

financial stability, sustainability, and growth. It involves making informed decisions about financial
resources to maximize profitability and long-term value. The key aspects of financial management
include:

1. Financial Planning

• Setting short-term and long-term financial goals.

• Forecasting income, expenses, and cash flow.

• Preparing budgets and financial strategies for efficient resource allocation.

2. Investment Decisions (Capital Budgeting)

• Identifying and evaluating profitable investment opportunities.

• Assessing risks and returns associated with various investments.

• Deciding on long-term asset purchases such as equipment, real estate, or new projects.

3. Financing Decisions

• Choosing the best sources of funding (debt vs. equity).

• Managing capital structure to optimize financial stability.

• Ensuring cost-effective borrowing and maintaining a good credit standing.

4. Liquidity and Working Capital Management

• Ensuring the company has enough cash to cover operational expenses.

• Managing short-term assets and liabilities efficiently.

• Monitoring accounts receivable, accounts payable, and inventory levels.

5. Risk Management

• Identifying financial risks such as market fluctuations, inflation, and credit risks.

• Using strategies like diversification, hedging, and insurance to mitigate risks.

• Establishing financial policies to protect assets and ensure business continuity.

6. Dividend Decisions

• Determining how much profit should be reinvested versus distributed to shareholders.

• Balancing between rewarding investors and ensuring business growth.

• Maintaining investor confidence through consistent and strategic dividend policies.

7. Profit Maximization vs. Wealth Maximization

• Striking a balance between short-term profit and long-term financial health.

• Focusing on sustainable growth rather than immediate returns.

• Creating value for stakeholders, including investors, employees, and customers.

8. Compliance and Financial Control

• Ensuring adherence to financial laws, regulations, and corporate governance policies.

• Implementing strong internal controls to prevent fraud and financial mismanagement.

• Regularly auditing financial statements for transparency and accountability.

Effective financial management helps businesses and individuals make informed financial
decisions, achieve stability, and drive long-term success.

THE GOAL OF FINANCIAL MANAGEMENT

By: Annie Rosel

The goals of financial management depend on efficient and effective management of financial
resources. Some of the main goals are described below.

1. Profit Maximization
Profit maximization is the primary objective of financial management. This means a company
should make decisions that increase its earnings per share (EPS) and overall profitability.
2. Wealth Maximization
When it comes to the goals of financial management, one must concentrate on the
maximization of wealth. The strategy of maximizing wealth in finance management targets
enhancing a company’s worth by elevating the share value owned by shareholders. In doing so,
the management team must always strive to achieve the highest returns on invested capital
while considering risk level.
3. Maintenance of Liquidity
In financial management, liquidity maintenance means managing a company’s cash and
financial resources to have enough liquidity to meet its financial obligations as and when they
become due. It involves methods and actions directed toward enhancing, optimizing and
preserving the liquidity position of an entity.
4. Resource Allocation Efficiency
One of the goals of financial management is how to use resources, specifically financial
resources effectively to the areas that generate considerable revenues. Through strategic
functions alone can financial management guarantee the well-being of an organization; fund
distribution assigns resources on the value and future potentiality, among others.
5. Accelerated Productivity
Money management aims to increase company swiftness by shortening operations, reducing
costs and streamlining resource utilization. This means that one should measure efficiency
using indicators like ROI (return on investment), gross margin as well as OER (operating expense
ratio).
6. Reducing Operational Risk
Financial management incorporates risk management strategies to mitigate operational
risks and protect investments. That includes diversification of investments, hedging against
losses, controlling cash flows, managing debts, and preparing contingency plans.
7. Optimisation of marketing activities
Financial management optimizes marketing efforts through resource allocation, ROI
assessment and alignment of tactics with financial objectives. Businesses should set goals and
KPIs and regularly evaluate and analyze their undertakings.
8. Business Survival
A business cannot survive without sound financial management practices because it is
through planning, controlling the decision-making process, and analysis that a strategy can be
formulated to achieve sustainable growth for any organization.

SCOPE OF FINANCIAL STATEMENTS

By: Janet Julia Casalla

The scope of financial statements extends to internal teams and external parties such as investors.
Let’s look at some areas where financial statements play a vital role.

1. Internal Business Management

Internal teams can use income and cash flow statements to understand if the current
operations are effective or if they need to be improved. Financial statements can also aid in
budgeting, forecasting and defining objectives that align with the company’s vision.
 2. Analysis by External Parties
To investors, the scope of financial statements includes judging a company’s growth
prospects, profitability and financial strength. These reports help them determine whether to
purchase, retain or sell shares of the company in question.
3. Evaluation by Lenders
Banks and financial institutions rely on financial statements to assess a company’s
creditworthiness before extending loans or credit facilities. A strong balance sheet and
consistent cash flow indicate a company is financially stable and can manage its debt
obligations.
4. Regulatory and Tax Compliance
Financial statements serve as a control mechanism, to ensure companies comply
with legal obligations. In most jurisdictions, financial reports must follow accounting
standards like Ind AS. Adherence to these regulations can help avoid expensive legal
penalties.
5. Strategic Planning and Forecasting
By studying past financial data, businesses can predict future trends, anticipate
expenses and to find out ways to overcome potential threats. The proactive approach can
safeguard the business in the face of changing market conditions.

The scope of financial statements serves a wide array of needs – from internal management
operations to financial assessments for investors and creditors. They are essential to business
planning, regulatory compliance and sound financial health.

TYPES OF FINANCIAL DECISION

By: Kristine Madaya

In financial management, financial decisions refer to the various choices made by management to
allocate resources effectively in order to maximize the value of the firm.

These decisions typically focus on three primary areas: Investment Decisions, Financing
Decisions, and Dividend Decisions.

1. Investment Decision

• Also known as capital budgeting decisions, these are one of the most important types of
financial management decisions. When making investment decisions, managers choose
where and how to allocate resources to generate the best possible returns for the
company’s investors. They carefully evaluate investments such as stocks mutual funds,
and real estate, and invest in those that are aligned with the company’s short-term, and
long-term financial goals and risk tolerance.
 • A long-term investment decision is called capital budgeting decisions which involve huge
amounts of long-term investments and are irreversible except at a huge cost. Short-term
investment decisions are called working capital decisions, which affect day to day
working of a business.

Purpose: To decide where to allocate funds to generate returns over time.

Examples: Investing in stocks, bonds, real estate, mutual funds, or starting a business.

Considerations: Risk, return on investment (ROI), liquidity, and time horizon.

2. Financing Decision

• Financial decision is significant in decision-making on when, where, and how a business

acquire funds. When the market estimation of an organization’s share expands the firm
tends to gain more profit, it is not only a sign of development of the firm but also fastens
investors’ wealth.

• A financial decision which is concerned with the amount of finance to be raised from
various long-term sources of funds like, equity shares, preference shares, debentures,
bank loans etc. Is called financing decision. In other words, it is a decision on the ‘capital
structure’ of the company.

Purpose: To determine how to raise capital to fund operations, investments, or expansion.

Examples: Taking loans, issuing stocks or bonds, or choosing between debt or equity financing.

Considerations: Interest rates, repayment terms, ownership dilution, and financial risk.

3. Dividend Decision

• Dividend decisions relate to the distribution of profit that are earned by the organization.
The main criteria in this decision are whether to distribute to the shareholders or to retain
the earnings.

• Dividend decisions are affected by the earnings of the business, dependency on earnings.

Purpose: To decide how much profit should be distributed to shareholders as dividends and how
much should be reinvested in the business.

Examples: Declaring dividends or choosing to reinvest earnings.

Considerations: Business profitability, cash flow, growth plans, and shareholder expectations.
RELATIONSHIP OF FINANCIAL OBJECTIVES TO ORGANIZATIONAL STRATEGY AND OTHER
ORGANIZATIONAL OBJECTIVES

STRATEGIC PLANNING
By: Leonell Ausa

Strategic planning is a structured process that organizations use to define their long-term goals and
determine the best strategies to achieve them.

In Financial Management, it serves as an instrument in aligning financial decisions with business

objectives, ensuring efficient resource allocation and sustainable growth. By analyzing internal and
external factors, companies can develop strategies that enhance profitability, manage risks, and
maintain a competitive advantage. Ultimately, strategic planning provides a roadmap for decision-
making, helping businesses adapt to changing market conditions and achieve financial stability.

Here’s the most important concepts in Strategic Planning:

1. Definition & Purpose – Strategic planning is a systematic process that organizations use to define
their long-term direction. It helps businesses set financial and operational goals while outlining the
steps to achieve them. This ensures financial stability and sustainable growth.

2. Vision & Mission – A vision statement describes the company’s future aspirations, while a mission
statement explains its core purpose and how it delivers value. Together, they guide financial
decisions, investments, and overall business strategy.

3. SWOT Analysis – A tool used to evaluate internal strengths (e.g., strong brand, financial health)
and weaknesses (e.g., high costs, debt), as well as external opportunities (e.g., market expansion)
and threats (e.g., competition, economic downturns). It helps businesses create strategies that
leverage strengths and minimize risks.

4. Goal Setting (SMART Goals) – Strategic goals must be Specific (clear objectives), Measurable
(quantifiable targets), Achievable (realistic based on resources), Relevant (aligned with business
strategy), and Time-bound (set deadlines). This framework improves decision-making and
accountability.

5. Strategic Formulation – The process of choosing the right business strategy. Companies may
adopt cost leadership (offering lower prices than competitors), differentiation (offering unique
products/services), or focus strategies (targeting a niche market) to gain a competitive edge.

6. Financial Strategy Alignment – Financial management must support strategic goals through
budgeting, investment planning, capital structure decisions, and risk management. This ensures
financial resources are allocated efficiently to achieve business success.
7. Resource Allocation – Businesses must allocate financial, human, and technological resources
wisely to maximize efficiency, reduce waste, and support high-priority projects. Proper allocation
ensures that capital is used where it generates the highest returns.

8. Competitive Advantage – A company’s ability to outperform competitors by offering superior

value. This can be achieved through cost efficiency, innovation, brand strength, or customer service,
leading to long-term profitability and market leadership.

9. Risk Management – Identifying potential financial, operational, and market risks. Companies
develop mitigation strategies such as diversifying investments, hedging financial risks, and
maintaining cash reserves to prevent major disruptions.

10. Performance Measurement (KPIs) – Businesses track Key Performance Indicators (KPIs) such
as return on investment (ROI), profit margins, cash flow, and market share to assess strategic
success. If performance is lacking, adjustments can be made to improve results.

SHORT-TERM AND LONG-TERM FINANCIAL OBJECTIVES OF A BUSINESS ORGANIZATION

By: Micko Miclat

Financial objectives are essential for a business to ensure sustainability, profitability, and growth.
These objectives can be classified into short-term and long-term goals, each contributing to the
organization's overall financial health.

Short-Term Financial Objectives (0-1 year)

Short-term financial objectives focus on immediate financial stability and operational efficiency.
These include:

1. Increase Cash Flow – Ensuring the business has sufficient liquidity to cover operational expenses
and short-term liabilities.

2. Manage Working Capital – Optimizing current assets and liabilities, including accounts
receivable, accounts payable, and inventory, to maintain smooth operations.

3. Break-Even Point Achievement – Generating enough revenue to cover fixed and variable costs,
ensuring the business is not operating at a loss.

4. Reduce Short-Term Debt – Paying off outstanding loans, supplier obligations, and other short-
term financial liabilities.

5. Improve Profit Margins – Enhancing revenue streams while controlling costs to maximize short-
term profitability.
6. Effective Budgeting and Cost Control – Monitoring expenses to avoid overspending and
improving overall financial discipline.

Long-Term Financial Objectives (3-5+ years)

Long-term financial objectives focus on the business's growth, expansion, and financial
sustainability. These include:

1. Business Expansion – Entering new markets, launching new products, or expanding operations to
increase market presence.

2. Increase Market Share – Strengthening the company’s position by attracting more customers and
outperforming competitors.

3. Sustainable Profitability – Ensuring consistent growth in revenue and cost efficiency over time.

4. Debt Management – Reducing long-term liabilities and improving the company's

creditworthiness.

5. Capital Investment – Investing in infrastructure, technology, or research and development to

enhance business efficiency and innovation.

6. Enhancing Shareholder Value – Increasing the company's valuation through higher profits,
dividends, and stock price appreciation.

Achieving these financial objectives requires strategic planning, sound financial management, and
continuous monitoring of the business environment. By aligning short-term and long-term goals,
organizations can ensure financial stability and sustainable growth.

RESPONSIBILITIES TO ACHIEVE THE FINANCIAL OBJECTIVES

By: Christine Organo

INVESTING

- The finance manager is responsible for determining how scarce resources or funds are
committed to projects. The investing function deals with managing the firm's assets.
Because the firm has numerous alternative uses of funds, the financial manager strives to
allocate funds wisely within the firm. This task requires both the mix and type of assets to
hold. The asset mix refers to the number of pesos invested in current and fixed assets.
FINANCING

- The finance manager is concerned with the ways in which the firm obtains and manages the
financing it needs to support its investments. The financing objective asserts that the mix of
debt and equity chosen to finance investments should maximize the value of investments
made.

OPERATING

- This third responsibility area of the finance manager concerns working capital management.
Managing the firm's short-term assets, and liabilities.

To achieve financial objectives, individuals or organizations must take on a variety of responsibilities

that encompass strategic planning, monitoring, and disciplined execution.

These responsibilities include:

- Setting Clear Financial Goals: Establish specific, measurable, achievable, relevant, and
time-bound (SMART) goals to guide financial decisions and align efforts.
- Budgeting and Cash Flow Management: Regularly track income and expenses, prioritize
savings, and avoid unnecessary spending to maintain healthy cash flow.
- Investment Planning: Develop and implement an investment strategy that aligns with long-
term financial goals, risk tolerance, and time horizon.
- Risk Management: Identify financial risks (e.g., market fluctuations, emergencies) and
develop strategies like insurance, diversification, and emergency savings to mitigate these
risks.
- Debt Management: Keep track of any outstanding debts and create plans to reduce
liabilities while minimizing interest payments.
- Savings and Emergency Funds: Establish and regularly contribute to savings accounts,
retirement funds, and emergency funds to provide financial stability.
- Tax Planning: Understand tax implications and use strategies like tax-efficient investments
and deductions to minimize tax liabilities.
- Regular Monitoring and Adjustments: Continuously assess progress toward financial
objectives and make adjustments when needed, taking into account changes in income,
expenses, or financial goals.
- Financial Education: Stay informed on personal finance topics, financial products, and
changing regulations to make informed decisions.
- Accountability: Regularly review financial progress, either individually or with a financial
advisor, to ensure that goals are met.
ENVIRONMENTAL (GREEN) POLICIES AND THEIR IMPLICATIONS FOR THE MANAGEMENT OF THE
ECONOMY AND FIRM

By: Thrisha Marcelo

Environmental green policies can significantly impact the management of an economy and
individual firms by creating new market opportunities in sustainable technologies, driving
innovation, influencing consumer behavior towards greener products, and potentially increasing
costs for businesses that heavily pollute, ultimately pushing them to adopt more environmentally
friendly practices; however, these policies can also present challenges like initial investment costs
and potential disruption to established industries.

Key implications for the economy:

• New economic sectors:

Green policies can stimulate the growth of new industries focused on renewable energy, energy
efficiency, sustainable agriculture, and green technologies, creating new jobs and economic
opportunities.

• Market shifts:

Consumer demand may shift towards environmentally friendly products and services, prompting
businesses to adapt their offerings to meet these changing market preferences.

• International competitiveness:

Countries with strong green policies may gain a competitive edge in global markets, especially in
sectors where sustainability is a key concern.

Key implications for firms:

• Innovation opportunities:

Green policies can push companies to develop innovative solutions for environmental challenges,
leading to new products, services, and competitive advantages.

• Brand reputation:

Adopting green practices can improve a company's brand image and attract environmentally
conscious consumers.

• Regulatory compliance:

Firms must comply with environmental regulations, which can involve significant costs if they fail to
adapt their operations accordingly.
Examples of environmental green policies and their implications:

• Carbon pricing:

Placing a price on carbon emissions can incentivize businesses to reduce their carbon footprint by
investing in cleaner technologies.

• Renewable energy mandates:

Requiring a certain percentage of electricity to come from renewable sources can boost the
development of solar and wind power industries.

• Energy efficiency standards:

Setting energy efficiency standards for appliances and buildings can drive innovation and reduce
energy consumption.

• Sustainable procurement policies:

Government agencies and businesses prioritizing environmentally friendly products in their

procurement practices can create new markets for sustainable goods.

FUNCTIONS OF FINANCIAL MANAGEMENT

ROLES OF FINANCIAL MANAGER

By: Rochelle Pagaduan

Finance managers play a crucial role in overseeing a company's financial operations. Within an ever-
changing economic landscape, a strong finance manager can bring stability and continuity to a
company.

The important roles of finance manager include:

1. Coordinating the financial aspects of a company, including managing budgets, cash flows
and expenditures.

2. Providing input related to funding requests or strategic decisions about mergers and
acquisitions.

3. Preparing financial reports such as profit projections in layman's terms by paying attention to
detail.

4. To analyse the market trends and competitors’ moves to expand the organisation's
opportunities.
 5. To stay updated about the latest trends in the stock markets.

6. To oversee budgetary allocation and focus on maximising the finances of the organisation.

7. To know the best interests of the company’s shareholders.

8. Handle financial negotiations with banks and other financial institutions.

9. Develop long-term business plans based on financial reports.

10. Predicting future financial trends and analysing associated financial risks.

THE FINANCE ORGANIZATION

By: Carissa Sarmiento

A finance organization refers to the structure and framework within a company or institution
responsible for managing financial activities, ensuring compliance, and supporting business
objectives. It plays a crucial role in maintaining financial health, optimizing resource allocation, and
driving strategic decision-making.

Key Components of a Finance Organization

1. Chief Financial Officer (CFO)

• Leads the finance organization and oversees all financial activities.

• Develops financial strategies aligned with business goals.

• Ensures compliance with regulations and financial reporting standards.

2. Financial Planning & Analysis (FP&A) Team

• Prepares budgets, forecasts, and financial models.

• Analyzes financial performance and provides insights for decision-making.

• Identifies cost-saving opportunities and revenue growth strategies.

3. Accounting & Reporting

• Manages financial transactions, bookkeeping, and record-keeping.

• Prepares financial statements and ensures compliance with accounting standards.

• Conducts audits to maintain accuracy and transparency.

4. Treasury & Cash Management

• Manages company liquidity, cash flow, and banking relationships.

 • Oversees investments and financing activities.

• Ensures the company has sufficient funds for operations and growth.

5. Tax & Compliance

• Ensures compliance with local, national, and international tax regulations.

• Develops tax strategies to optimize financial efficiency.

• Prepares and files tax returns while minimizing tax liabilities.

6. Internal Audit & Risk Management

• Identifies and mitigates financial and operational risks.

• Ensures strong internal controls to prevent fraud and errors.

• Conducts regular audits to maintain corporate governance and accountability.

7. Corporate Finance & Investor Relations

• Manages capital structure, fundraising, and mergers & acquisitions.

• Communicates with investors, analysts, and stakeholders.

• Works on strategies to enhance shareholder value.

8. Procurement & Cost Control

• Oversees purchasing decisions to optimize costs.

• Negotiates with suppliers to ensure cost efficiency.

• Implements cost-saving measures to improve profitability.

Importance of a Well-Structured Finance Organization

• Ensures financial stability and sustainability.

• Supports strategic decision-making with data-driven insights.

• Manages risks and ensures compliance with regulations.

• Optimizes resource allocation for growth and expansion.

• Enhances transparency and accountability in financial operations.

A strong finance organization is essential for businesses of all sizes, ensuring financial discipline and
driving long-term success.
RELATIONSHIP WITH OTHER KEY FUNCTIONAL MANAGER IN THE ORGANIZATION
By: Annie Rosel

Finance is one of the major functional areas of a business. For example, the functional areas
of business operations for a typical manufacturing firm are manufacturing, marketing, and finance.
Manufacturing deals with the design and production of a product. Marketing involves the selling,
promotion, and distribution of a product. Manufacturing and marketing are critical for the survival of
a firm because these areas determine what will be produced and how these products will be sold.
However, these other functional areas could not operate without funds. Since finance is concerned
with all of the monetary aspects of a business, the financial manager must interact with other
managers to ascertain the goals that must be met, when and how to meet them. Thus, finance is an
integral part of total management and cuts across functional boundaries.

ETHICAL BEHAVIOR
By: Janet Julia Casalla

Ethics are of primary importance in any practice of finance. Finance professionals commonly
manage other people's money. For instance, corporate managers control the stockholders' firm,
bank employees perform cash receipts and disbursements functions and investment advisors
manage people's investment portfolios.

These fiduciary relationships oftentimes create tempting opportunities for finance

professionals to make decisions that either benefit the client or benefit the advisors themselves.
Strong emphasis on ethical behavior and ethics training and standards are provided by professional
associations such as the Finance Executives of the Philippines (FINEX), Bankers, and Association of
the Philippines, Investment Professionals, and so forth. Nevertheless, as with any profession with
millions of practitioners, a few are bound to act unethically. In a number of instances, the corporate
governance system has created ethical dilemmas and has failed to prevent unethical managers from
stealing from firms which ultimately means stealing from owners or stockholders.

Governments all over the world have passed laws and regulations meant to ensure
compliance with ethical codes of behavior. And if professionals do not act appropriately,
governments have set up strong punishment for financial fraud and abuse. Ultimately, financial
manager must realize that they owe the owners/shareholders the very best decisions to protect and
further shareholder interests, but they also have a broader obligation to society as a whole.
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