Slide 1: Types of Bonds

Script:
“Let’s begin with the different types of bonds used by companies to raise money. Bonds are a
form of loan that the company promises to repay with interest. Some bonds are secured with
assets, while others are not.

1. Debentures – These are unsecured bonds, meaning they aren’t backed by any collateral.

2. Mortgage Bonds – These are secured by real estate owned by the company.

3. Collateral Trust Bonds – Backed by stocks and bonds held by the company.

4. Guaranteed Bonds – Another company or person guarantees the payment.

5. Subordinated Debentures – These have a lower claim if the company goes bankrupt.

6. Convertible Bonds – These can be turned into shares of stock.

7. Bonds with Warrants – Come with options to buy company stock at a fixed price.

8. Income Bonds – Only pay interest if the company earns profit.

Each bond serves different financing needs depending on the company’s situation and risk
tolerance.”

Slide 2: Sources of Funds

Script:
“As an engineering manager, choosing where to get funds is a critical decision. The source can
affect the company’s operations, flexibility, and control. That’s why managers must evaluate
funding options carefully.”

Slide 3: Flexibility

Script:
“Flexibility refers to how much freedom a company has after borrowing money. Short-term
loans are often more flexible because they can be paid off quickly, allowing managers to adjust
plans as needed.”

Slide 4: Flexibility Example

Script:
“From the example,An engineering manager chooses a short-term loan instead of a long-term
bond because it gives more flexibility. If the project changes, they can adjust plans or find new
funding without being stuck in a long-term commitment.
Slide 5: Risk

Script:
“Risk is the chance that the funding source might harm the company financially. Short-term
loans may seem easier, but they’re riskier—if the lender doesn’t renew the loan, the company
could run out of money.”

Slide 6: Risk Example

Script:
“From the example The manager avoids short-term loans for a year-long project because the
loan might not be renewed later. If that happens, the company could run out of money and the
project might stop, causing stress and delays.

Slide 7: Income

Script:
“This factor looks at how borrowing affects the company’s profits. If the borrowed funds don’t
lead to higher earnings, the interest payments can reduce overall profit.”

Slide 8: Income Example

Script:
“From the example The manager gets a loan to buy equipment hoping it will increase output.
But if it doesn’t work as expected, the company might have trouble paying the loan, leading to
lower profits and worrying investors.

Slide 9: Control

Script:
“Sometimes, getting funds means giving up control—like when selling shares. New investors get
voting rights, which can change how decisions are made.”

Slide 10: Control Example

Script:
“From the example The manager plans to grow the business but avoids selling shares to keep
full control. Instead, they choose a loan so new investors won’t influence company decisions.

Slide 11: Timing

Slide 12: Timing Example

Script:
“The manager sees that interest rates are high, so they wait to borrow later when rates are
lower. This helps the company save money and makes future payments easier.

Slide 13: Other Factors

Script:
“Other important factors include:

• Collateral values – whether the company owns assets that can be used as security.

• Flotation costs – expenses involved in issuing bonds or stocks.

• Speed – how quickly funds are needed.

• Exposure – how much outside involvement the funding brings in.”

Slide 14: Other Factors Example

Script:
“From the example The manager needs quick funding for a big project opportunity. They choose
a fast loan with low extra costs and little collateral, helping the company stay competitive and
move quickly.

Slide 15: The Firm's Financial Health

Script:
“Financial health means the company is stable, profitable, and can meet all its financial
obligations. A financially healthy firm can:

• Make profits,

• Repay loans,

• Continue serving customers and paying employees.”

Slide 16: Financial Health Example

Script:
“From the example The manager closely monitors spending and billing to stay on budget. This
helps the company pay workers, suppliers, and loans on time, keeping the business financially
healthy and trusted.

.”

Slide 17: Indicators of Financial Health

Top engineer managers must manage risks well to keep the company profitable. Problems like
accidents or equipment failure can cause big losses, so knowing how to handle risks is very
important.

From the EXAMPLE The manager sees that late material delivery could stop the project, so they
prepare backup suppliers and adjust the schedule to keep work going and avoid delays.

Script:
“We measure financial health using three key reports:

1. Balance Sheet – shows assets, debts, and equity at a certain date.

2. Income Statement – shows profit or loss during a time period.

3. Cash Flow Statement – shows how money moves in and out of the company.”

Slide 18: Sample Statement

Script:
“This is an example of a financial report. It lists where the company got its money, how it spent
it, and what’s left. This helps managers and investors see how well the company is managing its
cash.”

SOURCES (Inflow of Funds):

These are the funds the company generated or received during the year:

1. Net profit from operation – ₱692

o This is the profit earned from core business activities.

2. Plus: Depreciation – ₱600

o A non-cash expense added back to reflect actual cash retained.

3. Plus: Increase in deferred taxes – ₱771

o Tax expense that was recorded but not yet paid, meaning cash was retained.

Funds from operations total – ₱2,063

• Increase in accounts payable – ₱583

• Increase in notes payable – ₱517

• Increase in accrued salaries and wages – ₱8

Total Sources = ₱3,171

These are the funds spent or invested by the company:

Slide 19: Risk Management and Insurance

Script:
“Engineering managers must also protect the company from risks like equipment failure,
accidents, or financial losses. Risk management is about planning ahead to reduce or avoid
these problems.”

Slide 20: Risk Defined

Script:
“Risk means there’s uncertainty about loss. Companies face risks like fires, accidents, or unpaid
bills. Managing these risks is key to staying in business.”

Slide 21: Types of Risk

Script:

• Pure Risk – only a loss is possible, like in a fire. These are insurable.

FROM THE EXAMPLE The manager gets insurance for company vehicles to protect
against losses like theft or accidents.

• Speculative Risk – there’s a chance of loss or gain, like in investing. These are not
insurable.

FROM THE EXAMPLE An engineering manager uses company money to buy new
machines aiming to make work faster and better. If the machines work well, the
company earns more money. But if they don’t, the company can lose money.
Slide 22: Ways to Manage Risk

Script:
There are five ways to deal with risk:

1. Avoidance – don’t do risky activities.

2. Retention – accept the risk, especially small ones.

3. Hazard Reduction – reduce the chance of risk happening.

4. Loss Reduction – reduce the damage if it happens.

5. Risk Shifting – pass the risk to others, like through insurance.

Slide 23: Retention & Hazard Reduction

Script:
Retention can be planned (budgeting for it) or unplanned (ignoring it).

Planned: The engineer manager chooses not to insure small tools because the company can pay
for repairs or replacements from its budget.

Unplanned: The engineer manager forgets to consider the risk of a machine overheating. When
it breaks down, it causes expensive delays.

Hazard Reduction means taking steps to prevent problems—for example, banning drunk driving
on company vehicles or limiting access to sensitive areas.

Slide 24: Risk Shifting

Script:
Some ways to shift risk:

• Insurance – pay a premium to transfer risk to an insurance company.

• Subcontracting – pass part of the risk to other firms.

• Hedging – offsetting risks in pricing.

• Incorporation – owners only risk their investment, not personal property.

Slide 25: Loss Reduction

Loss reduction means trying to make any damage smaller if something goes wrong. This can be
done by sharing assets or tasks so not everything is affected at once.
Script:
To reduce damage:

• Use fireproof materials,

• Store goods in multiple places,

• Use multiple transport vehicles,

• Keep backup records.

This helps a company recover faster if something goes wrong.

Slide 26: Insurance Products

Script:
Companies can buy many types of insurance to protect themselves:

• Fire, theft, accident, marine, aviation, machinery breakdown, and more.

Company Details:

People's Trans-East Asia Insurance Corporation

• Contact Numbers: (02) 49-12-81 to 85, 527-7611 to 15

• All departments are interconnected

Categories of Insurance Products:

FIRE Insurance

• Fire and Allied Perils: Covers damage due to fire, lightning, and related hazards.

• Business Interruption: Covers loss of income if business operations are halted due to fire
or other insured events.

MARINE Insurance

• Hull Insurance: Covers damage to ships/vessels.

• Shipowner’s Liability Insurance: Protects shipowners against legal liabilities.

• Protection and Indemnity (P&I): Covers third-party risks like damage to cargo,
environmental damage, etc.
 CASUALTY Insurance

• Motorcar Insurance: Covers vehicles against accidents, theft, and damages.

• Property Floater: Protects mobile or transportable property.

• Personal Accident Insurance: Covers injury or death of individuals.

• Comprehensive General Liability: Covers legal liabilities from bodily injury or property
damage.

• Money, Security and Payroll: Protects against losses involving cash and payroll.

• Cash in Transit: Covers cash being transported.

• Burglary Insurance: Protects against theft or break-ins.

ENGINEERING Insurance

• Contractor’s All Risk (CAR): Covers construction projects against damage or loss during
execution.

• Machinery Breakdown: Covers repair or replacement of broken equipment.

• Contractor’s Plant and Equipment All Risks: Covers heavy machinery used on-site.

• Erector’s All Risks: For installation and erection of machinery or steel structures.

• Boilers and Explosion: Covers damage due to boiler failures or explosions.

• Electronic Insurance: Covers computers, communication equipment, etc.

• Consequential Losses: Covers loss of income resulting from damage to insured property.

AVIATION Insurance

• Hull and Liabilities Insurance: Covers aircraft damage and legal liabilities.

• Airport Operator Liability: Covers liabilities of airport operators for injury or damage.

• Hangarkeeper’s Liability: Covers damage to aircraft stored in a hangar.

• Aircraft Refueling Liability: Covers damage during aircraft refueling.

• Pilot’s License Insurance: Protects the pilot if their license is revoked or suspended.

• Pilot/Crew Personal Accident Cover: Covers accidents involving pilots and crew.

BONDS
• Covers all kinds of bonds, which are typically financial guarantees (e.g., bid bonds,
performance bonds, surety bonds) used in construction and other industries to ensure
contract compliance.

Purpose of the Slide:

This slide illustrates the broad range of risk coverage available for engineering and
business operations. It emphasizes the importance of risk transfer through insurance,
especially in high-risk industries like construction, transportation, and aviation.

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