Chapter 3 discusses the functions of financial management and the role of financial managers in maximizing shareholder wealth through effective fund acquisition and utilization. Their responsibilities include preparing financial statements, monitoring compliance, and making informed financial decisions that affect both operational and financing aspects of the firm. Additionally, the chapter highlights the ethical obligations of finance professionals and the importance of corporate governance in ensuring responsible financial practices.

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CHAPTER 3
FUNCTIONS OF FINANCIAL
MANAGEMENT

2. ROLE OF FINANCE MANAGER
• Having examined the field of finance
and some of its more recent
development, let us turn our attention to
the function of the financial manager.

3. Financial Manager Makes Decisions Involving
Analysis and Planning
Acquisition of Funds
Utilization of funds
Impact on Risk and
Return
Affect the Market Price
of Common Stock
Lead to Shareholder's
Wealth Maximization
The financial manager’s role in achieving the gaol of the firm

4. In aiming to increase owners' or
shareholders' wealth, the financial
manager makes decisions involving,
obtaining, and utilizing funds which involve
a set of risk-return trade-offs. These
financial decisions affect the market value
of the firm's stock which leads to wealth
development.

5.  In the short run, many factors affect the market
price of a firm's shares which are beyond
management's control. In the long run, increased
prices of the firm's stock reflect an increase in the
value of the firm. Hence, financial decision making
should take a prolonged point of view.

6. It is the responsibility of financial management
to allocate funds the current and fixed assets,
to obtain the best mix of financing alternatives,
and to develop an appropriate dividend policy
within the context of the firm's objectives. The
daily activities of financial management
include credit management, inventory control,
and the receipt and disbursement of funds.

7. Risk-return trade-offs states that the potential
return rises with an increase in risk.
The risk-return decision will influence not only
the operational side of the business (capital
versus labor) but also the financing mix
(stocks versus bonds
versus retained
earnings).

8. Financial manager typically:
 Prepares financial statements, business activity reports,
and forecasts,
 Monitors financial details to ensure that legal requirements are
met,
 Supervises employees who do financial reporting and
budgeting,
 Reviews company financial reports and seek ways to
reduce costs,
 Analyses market trends to find opportunities for expansion
or for acquiring other companies,
 Helps management make financial decisions.

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10. Financial management
 Function is associated w/ TOP OFFICERS of the firm such as VICE
PRESIDENT OF FINANCE or CHIEF FINANCE OFFICER (CFO).
VICE PRESIDENT OR CFO of finance
Coordinates the activities of TREASURER and the CONTROLLER.
CONTROLLER offices
Handles cost, and financial acct.,tax and management
information system.
TREASURER office
Responsibles for cash, and credits, financial planning and
capital expenditures.

11. Board Director
Chairman of the board
and chief Executive (CEO)
President and Chief Operations
Officer (COO)
Vice President Marketing Vice President Finance (CFO) Vice President Prduction
Treasurer Controller
Credit Manage
Cash Manage
Financial
Planning
Capital
Expenditure
Cost Accounting
Manager
Tax Manage
Data Processing
Manager
Financial
Accounting
Manager

12. RELATIONSHIP WITH
OTHER KEY
FUNCTIONAL
MANAGERS IN THE
ORGANIZATION

13. For business operations of a typical
manufacturing firm we have:
1. Finance which is one of the major functional areas of a
business. Integral part of total management and cuts
across functional boundaries.
2. Manufacturing deal with the design and production of a
product.
3. Marketing involves the selling, promotion and distribution of
a product.

14.  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, Functional areas could not operate without
funds. Finance deals with monetary aspects of a
business ,the financial manager must interact with other
managers to determined:
1. ascertain the goals that must be met
2. when to meet them
3. how to meet them

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16. Is the process of monitoring managers and aligning
their incentives with shareholders are usually inactive.
In reality, because shareholders are usually inactive,
the firm seems belong t management.
Generally speaking the investing public does not know
what goes on at firms operational level.

17. MONITORS
Inside the firm
BOARD OF DIRECTROS
Out side the
firm
Auditors
Investment Analysts
Investment Bankers
Credit Analysts
Hires CEO
Evaluates management
Represents shareholder’s
interest
Can also design
compensation contracts
for management salaries
Managers
Stockholders
Keep track of firm’s
performance, evaluates business
activities and reports to
investment community
External auditors examine
firm’s accounting systems
and comment whether FS
fairly represent the firm’s FP
Examine a firm’s financial
strength for its debt
holders
Government
SEC, BIR, BSP
Help firms access capital
markets and monitors
performance
Corporate Governance Monitors

19. Ethical Behavior Primary importance in
finance.
Finance Professional commonly
manages others money.

21. FIDUCIARY RELATIONSHIPS
Create tempting opportunities for finance professionals
to make decisions that either benefit the client or benefit
the advisors themselves.
PROFESSIONAL ASSOCIATIONS
 Finance Executives of the Philippines (FINEX)
 Bankers Association of the Philippines
Investment Professionals

22. 1. These professionals associations provided strong
emphasis on ethical behavior and ethics training and
standards.
2. Any profession with millions of practitioners, a few are
bound to act unethically.
3. Some instances, corporate governance system has
created ethical dilemmas and has failed to prevent
unethical managers from stealing firms from owners or
stakeholders.

23.  Ensuring
compliance with
ethical code of
behaviors has
passed by the
governments all over
the world.
 If some
professionals
do not act
appropriately,
governments
set up strong
punishment for
financial fraud
and abuse.

24. FINANCIAL MANAGER
 They owe the
owners/shareholders the best
decisions to protect and further
shoulder interest; they also have a
broader obligation to society as a
whole.

25. THANK YOU.
Merie Nes Villegas
Danah Dela Rosa
Jelly Joy Ramos
Jhizevel Galorport
Rona Mae Salazar
Catheriene Abang