Introduction to

Financial
Management Pt. 2
Prepared by: Erica B. Evangelista
 The corporate
organization structure
 Shareholders

• The shareholders elect the Board of Directors

(BOD). Each share held is equal to one voting
right. Since the BOD is elected by the
shareholders, their responsibility is to carry out
the objectives of the shareholders otherwise,
they would not have been elected in that
position.
 Board of directors

• The board of directors is the highest policy

making body in a corporation. The board’s
primary responsibility is to ensure that the
corporation is operating to serve the best
interest of the stockholders.
 The following are among the responsibilities of the board
of directors:
• Setting policies on investments, capital structure and dividend
policies.
• Approving company’s strategies, goals and budgets.
• Appointing and removing members of the top management including
the president.
• Determining top management’s compensation.
• Approving the information and other disclosures reported in the
financial statements (Cayanan, 2015)
 President (Chief
Executive Officer)
Among the responsibilities of a president are
the following:
• Overseeing the operations of a company and ensuring
that the strategies as approved by the board are
implemented as planned.
• Performing all areas of management: planning,
organizing, staffing, directing and controlling.
• Representing the company in professional, social, and
civic activities.
 VP for Marketing
The following are among the responsibilities of VP for Marketing
• Formulating marketing strategies and plans.
• Directing and coordinating company sales.
• Performing market and competitor analysis.
• Analyzing and evaluating the effectiveness and cost of marketing
methods applied.
• Conducting or directing research that will allow the company identify new
marketing opportunities, e.g. variants of the existing products/services
already offered in the market.
• Promoting good relationships with customers and distributors. (Cayanan,
2015)
 VP for Production
The following are among the responsibilities of VP for
Production:
• Ensuring production meets customer demands.
• Identifying production technology/process that minimizes
production cost and make the company cost competitive.
• Coming up with a production plan that maximizes the
utilization of the company’s production facilities.
• Identifying adequate and cheap raw material suppliers.
(Cayanan, 2015)
 VP for
Administration
The following are among the responsibilities of VP for Administration:
• Coordinating the functions of administration, finance, and
marketing departments.
• Assisting other departments in hiring employees.
• Providing assistance in payroll preparation, payment of vendors,
and collection of receivables.
• Determining the location and the maximum amount of office space
needed by the company.Identifying means, processes, or systems
that will minimize the operating costs of the company. (Cayanan,
2015)
 Functions of a
Financial Manager

- Financing
- Investing
- Operating
- Dividend Policies
 Financing decisions

include making decisions on how to fund

long term investments (such as company
expansions) and working capital which
deals with the day to day operations of the
company (i.e., purchase of inventory,
payment of operating expenses, etc.).
 Key terms

Financing – to determine the appropriate

capital structure of the company and to
raise funds from debt and equity.
Capital structure - refers to how much of
your total assets is financed by debt and
how much is financed by equity.
Sample capital
structure
 Investments

Short-term investments
Long-term investments
 Operating

determine how to finance working

capital accounts such as accounts
receivable and inventories (short
term vs. long term)
• Short Term sources are those that will
be payable in at most 12 months. This
includes short-term loans with banks
and suppliers’ credit.
• Liquidity risk
• Long Term sources
 Dividend policies

Before a company may be able to declare

cash dividends, two conditions must exist:
1. The company must have enough
retained earnings (accumulated profits)
to support cash dividend declaration.
2. The company must have cash.
 Assignment:
(1 whole)

Define the following and give examples:

1. Private placement
2. Financial Market
3. Financial Institution
4. Financial Instruments