The Finance FunctionJuan Raul Relloso MBA

Ateneo de Naga UniversityJanuary 27, 2014

Objectives:

•Identify the primary goals of business•Discuss the functions of Finance and investment portfolio• Describe the primary activities of Financial Manager

Primary Goals

• To earn profitFunds are invested in a business to earn sufficient return

on investment.

ROI=Net Income (Profit-Depreciation)/Average Capital (Equity Capital)

Primary Goals

• To increase its own value as an economic entity

GrowthIncrease in Assets, improved production capacity, increase in

sales volume and increase in owners’ equity

StabilityAbility to continue operations despite anticipated risks in a

business

Primary Goals

• To improve the quality of life in the community Increase in Business creates chain of effects of business activities

(multiplier effect)

>business activities > sales > productions > employment> money to spend

Social Responsibility of Businessmen

• Improvement of the quality of life in the communityImprove the economy and its environment

Refrain from increasing the price of the product in order to contribute to the social objective of preventing inflation

Spend to reduce pollution caused by the business to protect and improve the environment

Provide opportunities for employment to financially challenge individuals to reduce poverty in the community

What is Business Finance?

•Business Finance “art and science of managing the financial resources of a business”

Functions of Business Finance

•Allocation of Financial ResourcesFunds are channelled to activities that are considered

profitable.

Functions of Business Finance

•Procurement of FundsCapital – at the least cost when it is neededAwareness of the different sources of funds

Functions of Business Finance

•Efficient utilization of financial resourcesEconomical useFinancial resources are used for what they have been intended.

Functions of Business Finance

•Effective utilization of financial resourcesRefers to their use towards The attainment of predetermined objectives Requires periodic review of operation

Investment Portfolio

•Aggregate of assets held as investments by an organization or individualo stockso bondso money market placementso real estateo precious stones and metals

The Financial Manager - Primary Activities• Financial planning and analysiso takes part in corporate, strategic and operational

planningo makes projections based from accumulated data and

different options open to management revenue cost & expenses capital outlays changes in company assets, liabilities and owners equity

The Financial Manager - Primary Activities•Managing the firm’s assets

o How much must be in the form of cash, receivables, inventories, and other current assets?

o How much must be in plant, property and equipment?o What are the fixed assets to be acquired?o Which of the fixed assets already owned must be modified or replaced?o Are assets duly safeguarded? Who are accountable for them?o How effective is the internal control system in the company?

The Financial Manager - Primary Activities•Financial planning and analysis•Managing the firm’s assets• Managing the firm’s liabilities and owners’ equity

End of Presentation