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Introduction to Financial Management: Key Concepts and Principles, Lecture notes of Financial Accounting

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COLLEGE OF ACCOUNTANCY AND
ACCOUNTING TECHNOLOGY
General De Jesus College
San Isidro, Nueva Ecija 3106
Telefax (044) 940-6181 / e-mail: gendejesus@gmail.com
CONTADORES INTEGRIDAD
2008
UNITY * LEADERSHIP * EXCELLENCE
INTRODUCTION TO
FINANCIAL
MANAGEMENT
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COLLEGE OF ACCOUNTANCY AND ACCOUNTING TECHNOLOGY

General De Jesus College

San Isidro, Nueva Ecija 3106 Telefax (044) 940-6181 / e-mail: gendejesus@gmail.com CONTADORES INTEGRIDAD 2008 UNITY * LEADERSHIP * EXCELLENCE

INTRODUCTION TO

FINANCIAL

MANAGEMENT

What is Finance?

  • (^) The art and science of managing money, or management of money.
  • (^) It is the study of value.
  • (^) It is the study of how to make good decision that involve money.
  • (^) What assets to buy?
  • (^) How to pay for the assets you buy?

KEY ISSUES IN FINANCE

What is FINANCIAL MANAGEMENT?

  • (^) Is a decision making process concerned with planning, acquiring, and utilizing funds in a manner that achieves the firm’s desired goals.
  • (^) Acquisition of fund at optimum cost and its utilization with minimum financial risk.
  • It is concerned with management of fund.

GOALS OF FINANCIAL MANAGEMENT

  1. MAXIMIZATION OF SHAREHOLDERS’ WEALTH
  2. MAXIMIZATION OF PROFIT
  3. MANAGERIAL REWARDS
  4. SOCIAL RESPONSIBILITY and ETHICAL BEHAVIOR

PROFIT MAXIMIZATION VS. SHAREHOLDERS’ WEALTH MAXIMIZATION OBJECTIVES PROFIT SHAREHOLDERS’ WEALTH OBTAIN LARGE AMOUNT OF PROFIT ACHIEVE HIGHEST MARKET VALUE OF COMMON STOCK ADVANTAGES:

  1. CALCULATING PROFITS IS EASY;
  2. DETERMINING THE LINK BETWEEN FINANCIAL DECISIONS AND PROFITS IS SIMPLE.

ADVANTAGES:

1. THE LONG TERM IS EMPHASIZED;

2. RISK OR UNCERTAINTY IS

RECOGNIZED;

3. THE TIMING OF RETURNS IS TAKEN

INTO ACCOUNT;

4. SHAREHOLDERS’ RETURN IS

CONSIDERED.

ROLE OF FINANCIAL MANAGERS

  1. INVESTMENT DECISIONS
  2. FINANCING DECISIONS
  3. DIVIDEND POLICY DECISIONS

Corporate Organization Chart