Fundamentals of Finance and

Financial Management
To finance means to provide funds.
(example: -to finance your education.
-to finance your tour.)

Finance- the allocation of scarce

resources which includes money.
- an area which is responsible for
managing the operations that deals with
money.
- concerned with not just allocation of
funds but sources of funds.
To answer the study of Finance it needs
to answer;
1. What type of Investments to
undertake? Short term or Long term.
2. What sources of funds to tap in order
to fund the investment?
3. Will the cash flow support its day to
day operation?
Financial Management covers p.o.l.c.
of management organization.
- puts emphasis on management of funds
of an organization which includes day to
day operations, investment decisions,
and financing those investments.
Branches of Finance
1. Public Finance comes from
collection of taxes, government
allocation of budget for programs
designed to benefit the public.
2. Personal Finance comes from
personal income or fund to satisfy the
needs.
3. Corporate Finance- concerned with
the management of financial activities
of business organization.
Public Finance:
for government projects like roads,
bridges, public market, municipal health
centres, funds for disaster.. Etc.
Personal Finance:
for familys budget, childrens education,
health, personal needs and wants. Etc.
Corporate Finance:
cost of materials, equipment's and
machineries, hiring of manpower, product
development.. Etc.
Four Interrelated Areas of Corporate
Finance

1. Financial Markets and Institutions

banks, insurance companies, finance
companies that offers loans, and other
financial institutions.
2. Investments business venture,
buying stocks, mutual funds, etc.
3. Financial Services banks, insurance
companies, and other organizations that
offers financial services on how to manage
funds for investment, retirement, stocks..
Etc.
4. Managerial (Business) Finance
- cash flow analysis
- acquisitions of assets
- financing options if cash is deficient
- firms excess fund
- optimal inventory level
- Accounts receivable and accounts
payable management
- How much of the earnings should be
paid out, and how much to be
reinvested
- to merge or to acquire
Relationship between Accounting and
Finance

In Finance, its main feature is

managerial accounting. It involves
preparation of reports like budgeting,
cost analysis, inventory analysis, sales
and profit projection and risk and return
analysis. It relies heavily on historical
data provided by financial accounting.
Financial Accounting keeps track of all
the historical transaction of business which
will then be used in the preparation of
report intended for the use of external
parties such as government agencies,
investors, creditors. Managerial Accounting
will then provides financial data to help
internal users in making decisions about
the future of the organization.
Example: Additional Product Line
Expansion
Financial Management

Financial Managers are responsible in

financial planning for the goal of the
organization. He needs to know
information's from different
departments to prepare and decide
financial reports.
Information comes from ;
- Human Resources to Accounting
- Accounting to Sales
- Employee to other employee
decisions for different organizations
- Research and Development
- Employee Relations
- Marketing Promotion
- Expansion
-Meeting Contingencies
-Government Agencies
-Asset Management
-Information System
Financial Institutions organization that handles
financial transaction for individual, group and
organization whether for profit or non-profit,
private or government.

1. Commercial Banks
2. Savings and Loan
3. Credit Unions
4. Investment Banks
5. Insurance Companies
6. Brokerage
7. Investment Companies
Financial Market an institution that
operates for buying and selling of
stocks, bonds and other financial
instruments.

Money Market where transactions for

short term debt securities take
place.(usually one year or less)
- treasury bills, commercial paper and
other negotiable certificate of deposits.
Capital Market -
where transactions for long term
debt securities take place. (usually
more than a year)

The Role of Financial Intermediaries

in Financial Markets

-reduce costs, diversification,

pooling of funds, financial flexibility
Most Common Financial Instruments

1. Savings
2. Loans
3. Bonds
4. Security (Stocks)
5. Treasury Bills
6. Insurance Products
7. Mutual Funds
Careers in Finance

1. Investment Banker
2. Insurance Agent/Broker
3. Financial Advisor
4. Stockbroker
5. Fund Manager
6. Academe
7. Corporate Consultant
8. Country Manager
9. Corporate Finance Manager/Officer
10. Chief Finance Officer
Qualities of Finance Professionals

1. Integrity
2. Attention to Detail
3. Strong Oral and Written Communication skills
4. Ability to Multi task
5. Analytical
6. Ability to think strategically
7. Ability to use technology
8. Team Player
9. Leadership Skill
10. Flexibility
Treasury Bill