NATIONAL COLLEGE OF BUSINESS AND ARTS
College Department
San Juan Ilog Pugad Rizal Ave, Taytay Rizal• Telephone Nos. 8913-8785 to 87
Introduction of Financial Management
TABLE OF CONTENTS
Definition and Objectives of Financial Management
Relationship of finance with other relevant disciplines
Role of Financial Manager in Business
Legal forms of Business organization
Importance of Financial Management
Finance organization and career opportunities in Finance
Interface between finance and other functions
Financial Management
Financial management is the strategic planning, organizing, directing, and controlling
of an organization’s financial resources—including budgeting, forecasting, cash flow,
investment decisions, and risk management—to meet its objectives efficiently and
effectively
Key Components:
• Planning: Estimating future financial needs and allocating funds to ensure
operational continuity and growth .
• Organizing & Directing: Managing budgets, investment strategies, and
compliance with financial regulations
• Controlling & Monitoring: Tracking performance against forecasts, analyzing
financial reports, and mitigating risks to maintain stability and profitability
Why it matters:
Maximizes value for owners and stakeholders while ensuring long-term sustainability
Informs strategic decisions, such as investments and funding choices, using accurate
financial insights
Protects liquidity and helps manage financial risks like cash flow issues, debt levels,
and regulatory compliance
In essence, financial management ensures that an organization has the funds it needs,
uses them wisely, and builds a solid foundation for future growth and resilience.
“Financial management involves planning, organizing and controlling an organization’s
financial activities” including budgeting, forecasting, investment analysis, and financial
reporting—helping businesses achieve their goals, optimize profits, and maintain
sustainability. Nasdaq/Smart Asset
NATIONAL COLLEGE OF BUSINESS AND ARTS
College Department
San Juan Ilog Pugad Rizal Ave, Taytay Rizal• Telephone Nos. 8913-8785 to 87
“Financial management is the strategic practice of planning, organizing, directing,
monitoring, and controlling an organization’s monetary resources to accomplish
business objectives and return maximum value to stakeholders.” Emeritus & Sage
“Financial management refers to the functions involved in the management of financial
resources: fund procurement, working capital management, capital budgeting, and
capital structure design.” Economic [Link]
OBECTIVES OF FINANCIAL MANAGEMENT
Profit Maximization
● A primary goal is to increase revenue while minimizing costs to maximize profits.
This involves optimizing resource allocation, pricing strategies, and operational
efficiencies to enhance profitability.
Wealth Maximization
● This objective focuses on increasing the overall value of the organization for its
shareholders by strategically managing financial resources to generate maximum
returns and enhance long-term shareholder wealth.
Liquidity Management
● Ensuring that the organization maintains adequate cash flow to meet its short-
term obligations is crucial. Effective liquidity management involves balancing
cash reserves to cover operational expenses while avoiding idle funds that could
be invested elsewhere.
Risk Management
● Identifying, assessing, and mitigating financial risks are essential to protect the
organization's assets and ensure long-term stability. This includes managing
market fluctuations, credit risks, and operational uncertainties.
Optimal Utilization of Resources
● Financial management aims to allocate resources efficiently to maximize returns.
This involves evaluating investment opportunities, managing capital
expenditures, and ensuring that funds are used effectively to support business
growth and operations.
Compliance and Ethical Standards
● Adhering to legal and regulatory requirements is fundamental to maintaining
credibility and avoiding penalties. Financial management ensures that all
financial activities comply with established standards and ethical practices.
Relationship of finance with other relevant disciplines
NATIONAL COLLEGE OF BUSINESS AND ARTS
College Department
San Juan Ilog Pugad Rizal Ave, Taytay Rizal• Telephone Nos. 8913-8785 to 87
Finance is deeply interconnected with various business disciplines, forming a cohesive
framework that drives organizational success. Here's an overview of how finance relates
to key functional areas:
Economics
● Finance and economics are closely linked; economics provides the foundational
understanding of resource allocation and human behavior, while finance applies
these principles to manage resources efficiently, allocate capital, and optimize
financial strategies.
Accounting
● Accounting serves as the language of finance, providing accurate financial
reporting, ledgers, and balance sheets essential for financial management and
decision-making. Finance professionals rely on accounting data to assess the
company’s financial health and make informed choices.
Operations
● Finance is integral to operations through budgeting and investment in resources.
Operational decisions, such as purchasing materials or investing in machinery,
have financial implications that require careful planning and analysis to ensure
cost-effectiveness and alignment with financial goals.
Human Resource
Budgeting and Resource Allocation:
• Finance allocates funds for HR activities like recruitment, training, compensation,
and benefits. HR, in turn, manages these resources effectively, ensuring that
employee development and welfare align with the financial strategy.
Performance-Based Compensation:
• Finance and HR collaborate to design compensation packages that are linked to
organizational performance metrics. This ensures that employee incentives drive
the desired outcomes while remaining financially sustainable.
Workforce Planning:
NATIONAL COLLEGE OF BUSINESS AND ARTS
College Department
San Juan Ilog Pugad Rizal Ave, Taytay Rizal• Telephone Nos. 8913-8785 to 87
• HR assesses staffing needs and future talent requirements, while Finance
ensures that these plans are financially feasible and integrated into the overall
budget.
Compliance:
• Both departments play a role in ensuring compliance with labor laws, tax
regulations, and financial reporting requirements.
Finance and Marketing:
Funding Marketing Activities:
• Finance provides the budget for marketing campaigns, product development, and
market research. Marketing, in turn, aims to generate revenue and a positive
return on investment.
Measuring Marketing ROI:
• Finance analyzes the financial performance of marketing activities to assess their
effectiveness and contribution to the company's profitability.
Pricing Strategies:
• Finance and marketing collaborate to determine optimal pricing strategies that
maximize revenue while remaining competitive.
Regulatory Compliance and All Departments:
Legal Framework:
• All departments must operate within the legal framework established by various
regulations, including employment laws, advertising standards, and financial
regulations.
Compliance Programs:
• HR often takes the lead in implementing and managing compliance programs
related to employment practices, while finance may handle compliance related to
financial reporting and transactions. Marketing needs to ensure compliance with
advertising regulations.
Risk Management:
• All departments must identify and mitigate potential risks related to non-
compliance, such as legal penalties, reputational damage, and financial losses.
In essence, Finance provides the resources, HR manages the people, Marketing drives
revenue, and all departments must operate within the boundaries of regulatory
compliance.
NATIONAL COLLEGE OF BUSINESS AND ARTS
College Department
San Juan Ilog Pugad Rizal Ave, Taytay Rizal• Telephone Nos. 8913-8785 to 87
ROLE OF FINANCIAL MANAGER
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Here are the core roles of a financial manager, backed by real-world responsibilities:
1. Strategic Planning & Budgeting
They develop long-term financial strategies—setting budgets, forecasting cash needs,
and aligning plans with organizational goals to support sustainable growth
2. Investment & Risk Management
They evaluate investment opportunities, balance risk-return trade-offs, and implement
risk mitigation strategies—ensuring smarter deployment of funds
3. Cash Flow & Liquidity Oversight
They manage daily finances—monitoring cash inflows/outflows, maintaining liquidity for
operations, and planning for future cash requirements .
4. Financial Reporting & Compliance
They prepare and present accurate financial statements, ensure regulatory compliance,
and provide insights to executives and stakeholders
5. Team Leadership & Collaboration
They lead finance teams, mentor staff, collaborate with other departments, and translate
financial data into actionable business insights
Forms of Organization
Sole-proprietorship, Partnership, Corporation, Cooperative
Sole-proprietorship
• The simplest form of business structure, where a single individual owns and
manages the entire business.
• There is no legal distinction between the owner and the business, meaning the
owner is personally liable for all business debts and obligations and is entitled to
all profits.
Examples:
• Freelancers
• Self-employed professionals (like plumbers, carpenters)
• Small retail shops
• Individually managed occupations
NATIONAL COLLEGE OF BUSINESS AND ARTS
College Department
San Juan Ilog Pugad Rizal Ave, Taytay Rizal• Telephone Nos. 8913-8785 to 87
Advantages:
• Easy and inexpensive to start, Owner has complete control, Simple to manage,
and All profits go directly to the owner.
Disadvantages:
• Unlimited personal liability, Difficult to raise capital, Limited growth potential, and
Business and personal finances are not separate.
Partnership
• a business structure where two or more individuals agree to share in the profits
or losses of a business.
• Partnerships involve shared responsibilities for managing the business and
contributing resources like capital, property, or labor.
• Types of Partnerships:
General Partnership:
• All partners share equally in the business's management, profits, and liability.
Limited Partnership:
• Includes both general partners with unlimited liability and limited partners whose
liability is limited to their investment.
Limited Liability Partnership (LLP):
• Offers limited liability to all partners, protecting them from the debts and
obligations of the partnership.
• In essence, a partnership is a collaborative business structure where individuals
pool their resources and expertise to pursue common goals, sharing both the
rewards and risks of the venture.
CORPORATION
• a legal entity, separate from its owners, that can conduct business, enter into
contracts, and be held liable for its actions.
• It's essentially an "artificial person" created by law, allowing for the pooling of
capital and the separation of ownership and management.
How it works:
1. Incorporation:
NATIONAL COLLEGE OF BUSINESS AND ARTS
College Department
San Juan Ilog Pugad Rizal Ave, Taytay Rizal• Telephone Nos. 8913-8785 to 87
A corporation is formed through a legal process called incorporation, where the
founders file articles of incorporation with the state.
2. Raising Capital:
Corporations raise capital by selling shares of stock to investors.
3. Management:
The board of directors appoints officers (like a CEO or CFO) to manage the day-to-day
operations.
4. Profit Distribution:
Profits can be distributed to shareholders as dividends or reinvested in the company.
Types of Corporations:
Private (or Closely Held) Corporations: Have a limited number of shareholders
and their shares are not publicly traded.
Public Corporations: Have many shareholders and their shares are traded on
stock exchanges.
Non-profit Corporations: Are formed for charitable, educational, or other public
purposes and do not distribute profits to owners.
Examples:
Jollibee Foods Corporation (JFC): A Philippine multinational company and the owner
of the Jollibee fast-food brand.
● Many other large companies, like Apple, Google, and Microsoft, are also
corporations.
IMPORTANCE OF FINANCIAL MANAGEMENT
1. Ensures Cash Flow & Liquidity
Maintaining enough cash on hand prevents disruptions—letting businesses meet
payroll, pay suppliers, and cover unexpected expenses
2. Informs Smart Decision-Making
Accurate and timely financial data guides wise choices—like when to invest, cut costs,
or expand—keeping the company agile and focused [Link].
3. Boosts Profitability & Value
Effective budgeting, cost control, and ROI analysis help maximize profits and
shareholder wealth over the long term
NATIONAL COLLEGE OF BUSINESS AND ARTS
College Department
San Juan Ilog Pugad Rizal Ave, Taytay Rizal• Telephone Nos. 8913-8785 to 87
4. Manages Risk & Protects the Business
By identifying potential financial threats—such as market fluctuations or liquidity
shortages—businesses can buffer against them and avoid crises
5. Builds Credibility & Attracts Investment
Transparent financial reporting builds trust with investors, lenders, and stakeholders—
making it easier to raise funds or secure credit
6. Supports Long-Term Strategy
Strategic financial management aligns daily operations with long-term goals—helping
✅
companies invest in growth and navigate market changes
Summary
Effective financial management ensures stability, drives better decisions, enhances
profitability, mitigates financial risks, and strengthens trust with stakeholders—all while
aligning resources to support sustainable growth.
TYPICAL FINANCE DEPARTMENT STRUCTURE
The finance department is vital for organizational success—from securing funding and
controlling costs, to ensuring smooth operations and informed strategic decisions. For
individuals, finance careers offer excellent compensation, growth potential, and
opportunities to specialize in areas like investment banking, corporate finance, risk
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management, and advisory roles.
Common Career Paths in Finance
Finance career options are abundant and diverse:
1. Financial Analyst
• Works in corporate finance, banking, or consulting.
• Involves data analysis, budgeting, and financial modeling.
• Median salary around $99K
2. Investment Banking / Portfolio Management
• Involves advising on M&A, raising capital, or managing client portfolios.
• Career progression: Analyst → Associate → VP → MD.
• High earning potential; CFA certification often helpful
3. Corporate Finance / FP&A
NATIONAL COLLEGE OF BUSINESS AND ARTS
College Department
San Juan Ilog Pugad Rizal Ave, Taytay Rizal• Telephone Nos. 8913-8785 to 87
• Roles include FP&A Manager, Treasurer, CFO.
• Supports strategic decisions via plans, forecasts, risk management
4. Risk / Credit / Analytics
• Roles like Risk Analyst, Credit Analyst, Actuary.
• Focus on assessing and mitigating financial risks
5. Personal & Wealth Management
• Includes Financial Planners, Advisors, Private Equity/Venture Capital
Professionals.
• Emphasizes guiding individuals or institutions on investments
6. Banking & Lending
• Includes Loan Officers, Commercial Bankers, Underwriters.
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• Involves evaluating and managing loan portfolios
Skills & Qualifications to Excel
1. Educational background: Degrees in Finance, Economics, Accounting, Math,
or Data Science.
2. Certifications: CFA, CPA, FRM, CFP—depending on career path
3. Technical skills: Excel, financial modeling, BI tools (e.g., Power BI), analytical
software.
4. Soft skills: Communication, critical thinking, risk assessment, attention to detail.
Interface between finance and other functions
1. Finance & Accounting
• Interface: Accounting tracks daily transactions, while finance analyzes this data
to guide budgeting, forecasting, and reporting.
• Benefit: Ensures accurate financial data supports informed decision-making and
regulatory compliance
2. Finance & Operations
• Interface: Finance collaborates with operations on cost control, supply chain
efficiency, capital investments, and product costing.
• Benefit: Aligns production and procurement with budgeted goals, optimizes
resource allocation, and improves overall process efficiency [Link].
NATIONAL COLLEGE OF BUSINESS AND ARTS
College Department
San Juan Ilog Pugad Rizal Ave, Taytay Rizal• Telephone Nos. 8913-8785 to 87
3. Finance & Marketing/Sales
• Interface: Finance sets marketing budgets, evaluates ROI on campaigns, and
assesses pricing strategies.
• Benefit: Ensures marketing spends are effective and contribute to profitability,
while enabling sales targets aligned with financial planning .
4. Finance & Human Resources (HR)
• Interface: Finance collaborates with HR on payroll, benefits budgeting,
recruitment costs, and workforce planning.
• Benefit: Helps balance competitive compensation with financial sustainability
and supports strategic hiring based on financial insights
5. Finance & IT/Systems
• Interface: Finance partners with IT to implement ERP systems, automate
reporting, and safeguard data accuracy.
• Benefit: Streamlines financial processes, reduces errors, and improves real-time
financial insights across functions
6. Cross-Functional Planning
• Interface: Finance plays a central role in Sales & Operations Planning (S&OP)
and Integrated Business Planning (IBP), coordinating inputs across departments.
• Benefit: Promotes synchronized planning, ensuring forecasts, budgets, and
operations align with strategic goal
