FINANCE

Dividend for shareholders

dividend and the rate of it has to be decided

Retained profits

the amount of retained profits has to be finalized which will depend upon the expansion and diversification plans of the enterprise.

Estimation of capital requirements

One of the major functions of financial management is to make estimations with regard to the capital requirements of the company. This is dependent upon expected costs and profits and future programs and policies of a business entity. Estimations have to be made in an adequate manner which increases the earning capacity of the enterprise.

Determination of capital composition

After the estimation has been made, a decision on the capital structure follows so this involves short-term and long-term debt-equity analysis. This results in an acceptable proportion of the company's equity capital and additional funds to be raised from external creditors and interested parties.

Choice of sources of funds

For additional funds to be procured, a company has many choices like, additional issuance of shares of stock and/or issue bonds, loans from banks or any willing financial institutions; and investments from the public in the form of bonds.

Investment of funds

The excess funds have to be decided for allocation into profitable ventures so that there is safety on investment and regular returns are possible.

Disposal of surplus

The net profits decision has to be made and can be done in two ways

Dividend declaration

It includes identifying the rate of dividends and other benefits like bonuses.

Retained Earnings

The amount of earnings to be retained will depend on the expansion plans, the introduction of innovation and diversification strategies of the company.

Management of cash

is one of the important decisions in financial management. Maintaining enough cash is required for continuous operation and working capital like payment of salaries and wages, payment of utilities (e.g., electricity and water bills), payment to creditors for maturing obligations, maintaining enough inventories, purchase of raw materials, etc.

Financial controls

Financial management involves not only planning, procurement, and utilization of funds but also exercising control over finances. This can be done through many techniques like ratio analysis, financial forecasting, cost and profit control, etc.

senior leaders

are responsible for all aspects of its financial health. They are the ones who understand one's financial situation and do not allow unintended deficits to occur. They are accountable for the resources entrusted to them that include the funds, facilities, and the recruitment of employees, even if the control and tasks have been delegated to their staff, under command of responsibilities.

Unit heads

are responsible for internal financial management and to develop budgeting, financial reporting and management practices. Units are encouraged to develop an oversight process that builds on best practices.

Financial Instruments

_______ like stocks and bonds are recorded evidence of obligations on which exchanges of resources are founded. The effective investment management of these ______ is one of the important aspects of the financing activities of any organization.

Financial Markets

are the mechanisms used to trade the financial instruments.

Financial Institutions

Financial institutions are the ones that facilitate the transfer of resources among those investors who are involved in buying and selling of financial instruments.

central bank

is a financial institution responsible for the oversight and management of all other banks.

Commercial Banks

work directly with businesses. The majority of large banks offer deposit accounts, lending and financial advice to any business in different industries. Products offered at commercial banks include checking and savings accounts, certificates of deposit (CDs), personal and mortgage loans, credit cards and business banking accounts.

Credit cooperatives

are not-for-profit financial institutions that exist to serve its members. Credit cooperatives provide products and services to people to Share something in common, such as where they work or live, or even their nationality.

Savings and Loan Associations

Savings and loan associations are financial institutions that are mutually held and provide no more than 20% of total lending to businesses. Individual consumers use savings and loan associations for deposit accounts, personal loans and mortgage lending.

Investment Banks and Companies

help individuals, businesses and governments by raising capital through the issuance of securities instead of accepting deposits. Investment companies or more commonly known as mutual fund companies, pool funds from individual and institutional investors to provide them access to the broader securities market.

Brokerage Firms

is the one that provides services to individuals and institutions who are willing to buy and sell available investment securities.

Insurance Companies

are financial institutions that help individuals to transfer risk of loss. The services of insurance companies include protection against financial loss due to death, disability, accidents, property damage and other misfortunes of individuals and businesses

Mortgage companies

are financial institutions that provide funds through loans subject to the availability of property used as collaterals. Most of these mortgage companies have specialization in lending options for commercial real estate only. However, they also serve the individual consumer market.

Savings Accounts

are a safe haven to store emergency funds. It provides easy access to extra money and is generally insured with Philippine

Time deposits

are deposits that cannot be withdrawn over a fixed term or period. Since, they will not be withdrawn for certain duration, time deposits earn higher interest rates compared to savings and checking accounts, depending on the amount placed and term. With the deposits being held for a pre-specified length of time, the banks or financial institution can re-invest/re-lend it for higher return before the term deposit matures.

Money market funds

are relatively conservative and low-risk instruments invested in highly marketable and "near-cash" instruments like short term government securities, money market securities, and other highly marketable fixed-income instruments.

Stocks

gives the opportunity to buy shares of companies under normal circumstances. Companies list or sell portions of the shares of stock to raise capital instead of borrowing from financial institutions or using its cash flow. The more profitable a company becomes, the more its share prices increase over time.

Bonds

is a debt security wherein someone is borrowing money and there's another one lending it. As a security, it means the borrower is under a legal obligation to pay the lender. A bond is a certificate of debt issued by the government or a company with a promise to pay a specified sum of money at a future date and carries interest at a fixed rate.

Mutual Funds

is generally a pool of money from a group of investors entrusted to a financial institution for investment purposes. The fund is usually professionally managed by a mutual fund manager for investments in securities, like shares of stock, bonds, money market instruments or a combination of these.

Annuities

is an insurance product that pays out income on a predetermined amount during the lifetime or upon its maturity. It is being used as part of a retirement strategy. Annuities are a popular choice for investors who want to receive a steady income stream upon retirement.

Profit earning

is one of the prime functions of any business organization. Profit earning is important for survival and sustenance of any organization.

Understanding Capital Markets

is one of the important functions of a financial manager. The trading of shares of stock of a company in the stock exchange will involve a lot of risks. The finance manager is expected to realize the calculation of the risk involved if ever a decision is arrived at in trading of shares and other securities.

financial manager

is a qualified person who does have a lot of experiences in handling all the important financial functions of an organization. He or she should maintain far sightedness in order to ensure that the funds are utilized in the most efficient manner. The results of his or her actions will directly affect the profitability, growth and goodwill of the firm.

Horizontal Analysis

This method analyses the trend of the company's financial information over a period of time. Each line item is examined specifically the percentage change from the previous period.

Vertical Analysis

This method compares the relationship between a single item on the Financial Statements to the total transactions within one given period. It will show the percentage of change of the financial information from the last period and can be performed on both income Statement and Balance Sheet.

Financial Planning

is the process of estimating the capital requirements and determining their sources including their efficient utilization. It is also the process of outlining the financial policies of an enterprise in terms of procurement, investment and administration of funds.

To defermine the capital requirements of the firm

This involves identification of the firm's capital requirements like the cost of current and fixed assets, promotionol expenses, and other future plans that aro capital intensive. The noeded copilal los to be considered for both short term and long-term requirements

To determine the appropriate capital structure

The copital structure of the firm refers to the composition of capital or the appropriate proportion of capital requirements to support the operation of the business.

projected financial statements

are representations of the financial picture of a firm through summarized current trends and expectations as of a future date. At a minimum, projected financial statements will show a summary-level Income statement and statement of financial position (balance sheet). This Information is based on a revenue trend line, as well as expense percentages consistent with the current proportions of expenses to revenues

Obtain capital budget requests.

This is to summarize and validate all capital budget requests supported by comments and recommendations for endorsement to the senior management team.

Update the budget model.

This is to consolidate all budget information into the master budget model.

Review the budget.

The review of the budget is done through a meeting with the senior management team. This is to highlight possible constraint issues, and any limitations caused by funding limitations. All of the comments made by the management team aro forwarded back to the budget originators for appropriate modification.

Costs consideralions.

This Is to determine any costs that will be incurred by a range of business octivitles in tha upcoming budget period and to define the amount of these costs at certain aclivity levels

Create a budget package.

This is to provide the base budgeting Instructions from the Instruction packet used in the preceding year. It is necessary to include the year-to-date actual expenses incurred in the current year, aside from ennualized figures for the full current year. An additional commentary to the packet is also needed like stating costing Information, balflenecks, and expecied fund in a limitation for the upcoming budget year.

Issuance of the budget package.

The budget package issuance Includes the due date for the first draft of the budget package induding where to ask possible questions from reciplents budgets.

Obtain revenue forecast.

The revenue forecast distributed to other department managers is the one prepared by the sales manager and validated by the CEO, This revenue informarion is used as a basis for developing all of the departments

Obtain department budgets.

The submission of budgets from all dapartments is checked for errors, compared to the Identified botileneds, indiated funding requirements, and step cosling constraints. Adjustments of the budgets, if necessary, are coordinated with all concerned.

Update budget assumptions.

The assumptions about the company's business environment that were used as the bates for the last budget have to be reviewed for necessary changes or updates.

Review bottlenecks.

This Is to determine the capacity level of the primary bottlenecks that limit the company from generating further sales and define how this will impact any additional budgeted revenue growth.

Available funding.

This is to Identify the amount of funding that will be avallable during the budget period,which may affect growth plans.

Process budget iterations.

This is to update the budget model of the outstanding budget change requests through the new iterations.

Issue the budget.

All authorized recipients are issued with a bound version of the revised and approved budget.

Load the budget.

Informotion into the financial software, to monitor implementation and generate budget versus actual reports.

Preparing Budgets

Most organizations prepore budgett as basen in evaluating the results of their operations by comparing the achial figures over the previous years. The process of preparing a budget should be highly well-organized and should follow a set schedule, so that the completed budget is ready for use by the beginning of the next calendar year.

Financial Planning

is a process of setting the objectives, policies, procedures, programs, and budgets relative to the financial octivities ond transactions of a firm. the effecliveness of the financial plan is dependent on the adequacy of financial and investment policies.