ESIMOS, EAON JAY A-223 – BSA 2nd YEAR

1. Functions of Financial Management or Financial Managers

According to (Grozdanovska, 2017) In the business, there is somebody who are the one
to take the responsibility regarding to the financial health of a firm, and this is being
performed of which we called the financial manager. Financial manager is responsible for
making a business plan for them to know on how to budget their resources. Meanwhile,
as stated by (Strutner, 2020), financial manager is responsible for making a business plan
for them to know on how to budget their resources. Also, comparing it with the information
above, the importance of making decision regarding on where to invest the assets of a
certain firm because it will help the firm to have a growth with their assets. Also, in
increasing their earnings, coordinating with different management team with the firm will
give him an insight on what is the appropriate action to take. Lastly, to prevent
encountering any distress the financial manager may practice cash management in which
they must be aware with their decisions such purchasing a Financial Markets equipment.
With that, he must oversee the inflows of cash whether inside or outside of the business.
However, according to Magalie (2019) this financial management has its own share of
functions in a business and the author listed at least seven functions: initially is the
estimation of capital requirements that requires a financial manager to make projections
regarding sales, profits, cost, and programs that has to agree with the capital
requirements of the company; secondly is the determination of capital composition where
the capital structure must agree with estimation and once this estimation is determined,
the amount of estimation mut be decided upon and this process relies on short-term and
long-term debt equity scrutiny where the analysis depend on the proportion of equity
capital that the company possesses that are being collected from outside entities; thirdly,
the options for the sources of funds where the business has many alternative or options
to consider for collecting additional funds such as shares and debentures, loans that are
withdrawn from banks and other financial institutions, and public deposits in the form of
bonds/debt. Next is the investment of funds where the funds that are allocated into
profitable ventures is determined by the financial manager who will decide if the
investment is safe and ensures regular returns. Fifth is that the disposal of surplus where
the finance manager makes the decisions regarding net profits, and it can be realized
through dividend declaration where the rate of profits and bonuses would be accounted
for and retained profits where the volume would be determined that would depend on
expansion, innovation, and diversification plans of the company. Second to the last
function is that the management of cash where the finance manager makes decisions on
how the cash that is invested on payment of wages and salaries, purchases of raw
materials, payment to creditors, meeting current liabilities, payment of utilities, and
maintenance of stocks will be managed; and lastly, the financial controls where the
finance manager plans, raises, and utilizes the funds and exercises control over the
finances through financial forecasting, ratio analysis, and the cost and profit control.
ESIMOS, EAON JAY A-223 – BSA 2nd YEAR

2. Agency Theories and Issues

Acording to Panda and Leepsa (2017) the author describes the agency theory as the
crucial interactions that exist between principals and their respective agents. This theory
examines the issues that arise in organizations because of the separation of owners and
managers, with a focus on how to address them. Alongside, the emergence of agency
issues has indeed been broadly observed across a variety of academic disciplines, such
as accounting, finance, marketing, etc. As stated in the study of Panda and Leepsa
(2017), the agency problem has broadened as time passes by, and it encompasses
parties other than the principal and agent, including creditors, major shareholders, and
minor shareholders. However, there are still additional causes of agency problems, as
well as possible solutions and other issues that might be addressed in future. On the other
hand, Bendickson, Muldoon, Liguori and Davis were perplexed as to how agency theory
was formulated. It is sure that the said theory is used in different aspects such as
marketing, accounting, healthcare, family business, and organizational behavior.
However, the paper focused more on the issues that agency theory must bring, rather
than expounding its meaning and purpose. Agency theory comes together with the issue
of separation of ownership and management, and the inability of business owners to
shield the rights of their property. The problem stated is somehow a representation of
progress since scholars are having a difficult time locating connections between corporate
performance and agency problems. Alongside with that problem, another issue arises
(Bendickson et. al., 2016). However, according to (Gordon, 2021), agency theory is when
one individual invests in a corporation considered as the principal for, they entrust their
money with the executives of the corporation which serves as the agents. They have their
agents since they cannot be present with the day-to-day activities inside the corporation.
However, one of the issues of agency theory is having of different interest, and to avoid
from having any conflicts both the principal and agent must set aside their self-interest
because having common interest and goals means that they aim to pursue the same
outcome.
ESIMOS, EAON JAY A-223 – BSA 2nd YEAR

3. Primary and Secondary Markets

In the financial markets there are two classifications, and these are primary and
secondary markets. Primary markets in which there is a transfer of stock between the
corporation and stockholder and as for the secondary markets the transfer of stock is
between the shareholder and another shareholder. In primary market, the buying of bonds
or stocks are directly from the corporations. Therefore, it shows us that these are traded
and issued for the first time for those who are willing and interested to acquire. However,
the individuals must also make a narrow decision whenever they acquire in the primary
market because they cannot receive a full return of investment. With that, studying the
information of those stocks or bonds must be perform so you will know on what to expect
regarding with those returns and what are the benefits that you will going to gain from it.
Additionally, the author discussed what a secondary market is. Wherein, author states
that it is the selling of shares by the investor with his co-investor, it means that a certain
a company is not involved with this situation because you are dealing with the investor
and not directly with the company. Under the secondary market, there is the auction and
dealer markets, for auction market the bidding of price is perform and the one who can
offer at a higher price he will be the one who can avail it. In dealer market, the dealers
are the who sets the price for the buying and selling and that is the way he can gain profits
from it (Merrill, 2021). However, the study of Holden et.al, (2020) shows that the existence
of the secondary markets improves the liquidity of the primary markets the Peer-to-Peer
(P2P) lending sector and to other instruments involving the asset class such as bonds,
stocks, etc. Furthermore, it was included in the study a theoretical model which they have
built comprising of understanding of the primary market without a secondary market,
primary market with a secondary market, and the comparison of the two cases and
determining the differential effect on primary market liquidity. In these two studies, it was
empirically described that primary market is the first market level which includes, private
placement but only Initial Public Offering (IPO) is mentioned; while secondary market is
the subsequent market in which all securities that were created are bought and sold.
Moreover, comparing with what mentioned above, according to (Beers, 2020), primary
markets tend to give opportunity to the investor because they let them purchase stocks
with a direct issue from a certain corporation. To be clear enough, when a corporation is
selling their fresh stocks are securities it is considered as an initial public offering (IPO).
While for the secondary markets, it is the trading of stocks in the circle of investors
because instead of purchasing directly from a corporation you are purchasing a stock to
the one who owns a share within that company.
ESIMOS, EAON JAY A-223 – BSA 2nd YEAR

REFERENCES:
Functions of Financial Management or Financial Managers.
Related literature 1 - Grozdanovska, V. (2017). FINANCIAL MANAGEMENT AND
FINANCIAL PLANNING IN THE ORGANIZATIONS.
https://core.ac.uk/download/pdf/234627714.pdf
Related literature 2 - Magalie (2019). MGT Blog. Financial Management: Meaning,
Objectives and Functions.
https://mgtblog.com/financialmanagement/#functions_of_financial_management
Related literature 3 - Strutner, S. (2020). Financial Management Explained: Scope,
Objectives, and
Importance.https://www.netsuite.com/portal/resource/articles/financialmanagement/fina
ncial-management.shtml

Agency Theories and Issues.

Related literature 1 - Panda, B., & Leepsa, N. M. (2017). Agency theory: Review of theory
and evidence on problems and perspectives. Indian Journal of Corporate Governance,
10(1), 74-95.
Related literature 2 - Bendickson, J., Muldoon, J., Liguori, E., & Davis, P. (2016). Agency
theory: background and epistemology. Journal of Management History, 22(4), 437-449.
Related literature 3 - Gordon, J. (2021). Agency Theory of Corporate Governance.
Retrieved from https://thebusinessprofessor.com/en_US/business-governance/agency-
theory-andstakeholder-theory

Primary and Secondary Markets.

Related literature 1 - Merrill, T (2021). Primary Vs. Secondary Markets: What’s The
Difference https://www.fortunebuilders.com/primary-vs-secondary-market/
Related literature 2 - Holden, C.W., Lin, M., Lu, K., Wei, Z. & Yang, J. (2020, April). The
Effect of Secondary Market Existence on Primary Market Liquidity: Theory and Evidence
from a Natural Experiment in Peer-to-Peer Lending. SSRN.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3502006
Related literature 3 - Beers, B. (2020). A Look at Primary and Secondary Markets.
https://www.investopedia.com/investing/primary-and-secondary-markets/