INTRODUCTION TO

FINANCIAL MANAGEMENT
1
Financial Management is mainly concerned with using
efficiently the important economic resources of a firm like its
capital funds. It is immediately associated to accounting which is a
common mistake that most individuals make. Financial
management focuses more on what is the interpretation of the
accounting data presented and on how to actually implement a
strategy with regards to the data presented. It is more concerned
with what to do with a firm’s capital funds. It answers questions
such as “how to raise capital?”, “how to allocate available funds”,
and “what strategy can be adapted?”.

In today’s business environment, financial managers have

been assigned various and changing roles. The modern financial manager has now a very crucial role in the
effective management of the company. It is imperative that he has broader knowledge of the financial
environment in order to take financial decisions or any corrective measures, concerning the firm's operation.
This is in contrary to the traditional role of mainly being in charge with the procurement of cash, maintaining
accurate records and preparing reports that caters to the company’s current financial condition and
performance.

Financial Management differs with Financial Accounting in that the latter mainly focuses on
gathering data in accordance with the applicable standards. With the former being able to apply the
provisions of certain accounting standards in reporting data while also being able to apply strategies that
would address issues with regards to the interpretation of those data. In simple terms, Financial Accounting
is the application of decision-making skills in interpreting the data provided by Financial Accounting. The
field of Financial Management makes huge impacts in determining what kind of investors will have and the
direction of the company in the future.

This module will allow the learners to have a grasp of what Financial Management is about and its
applications in the real world.

Definitions of Financial Management

Since Financial Management has become popular in the business world over the past
couple of years, there are many definitions coined by different people to explain the subject
matter. The definitions listed below should give a deeper sense of reflection on what Financial
Management is about.
"It is concerned with the efficient use of an important economic resource namely, capital
funds".

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 "Financial Management deals with procurement of funds and their effective utilization in
the business”.
Howard and Upton: Financial management "is an application of general managerial
principles to the area of financial decision-making”.
Weston and Brigham: Financial management “is an area of financial decision-making,
harmonizing individual motives and enterprise goals”.
Joseph and Massie: Financial management “is the operational activity of a business that is
responsible for obtaining and effectively utilizing the funds necessary for efficient operations”.
Richard A. Brealey: "Financial management is the process of putting the available funds to
the best advantage from the long-term point of view of business objectives."
Still another definition states that Financial Management is the efficient and effective
planning and controlling of financial resources so as to maximize profitability and ensuring lion
individual called personal finance), government (called public finance and for prof
organization/firm (called corporate or managerial finance).

Main Features of Financial Management

The main characteristics presented in financial management may be inferred from the
definitions presented in this module.
1. Analytical Thinking- Under financial management financial problems are analyzed and
considered. Study of trend of actual figures is made and ratio analysis is done
2. Continuous Process- previously financial management was required rarely but now the
financial manager remains busy throughout the year.
3. Basis of Managerial Decisions- All managerial decisions relating to finance are taken after
considering the report prepared by the finance manager. The financial management is the
base managerial decisions
4. Maintaining Balance between Risk and Profitability- Larger the risk in the business the
larger is expectation of profits. Financial management maintains balance between risk
profitability.
5. Coordination between Process- There is always a coordination between various processed
of the business.
6. Centralized Nature- Financial management is of a centralized nature. Other activities can
be decentralized but there is only one department for financial management.

Importance of Financial Management

As you have learned earlier, Financial management is more than just accounting.
Accounting primarily focuses on recording business transactions and every day activities whereas
Financial Management takes on the role of actually interpreting the data being reported. This
involves decision-making with regards to the firm. The right mix of fund allocation is also a vital role
of financial management since having the expertise in this area, will allow businesses to thrive in
terms of their cash management and cash flow.
Another important function of Financial Management is the ability of a firm to conduct
Asset Management. This involves the efficient allocation of available resources within a firm. Many

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 organizations rely not on the quantity and extent of the assets but rather on how these assets are
managed within the organization. A handful of organizations reached the pinnacle of its success
even with very little assets. A big part of this success is their ability to efficiently manage the
available resources they have procured. On the other hand, some firms may also experience some
turbulence in their businesses like bankruptcy and liquidation despite them having large amounts
of resources available for their disposable. This may be linked to poor financial management
decisions by their top executives.
Financial Management is important in today’s business world as it is proven to be a vital
part of an organization’s structure. Right from the recording of financial transactions to the
preparation of financial statements, organization has to make sure that proper procedures have
been followed. This is because the organization has to ultimately depend on that information for
future planning and forecasting and decision making.

Relationship with other business functions

Other organizational
functions are closely tied to
Financial Management and in
one way or another, is affected
by the decisions made by
financial managers. The following
are some of the notes with
regards to other business functions.

1. Financial Management and Economics

Economics provides a structure for decision making in such areas as risk analysis, pricing
theory through supply and demand relationships, comparative return analysis, and many
other important areas. Economics also provides the broad picture of the economic
environment in which corporations must continually make decisions. In this regard,
Financial Management is related to economics in a sense that the decision of a financial
manager must also be taking into consideration the economic environment in which the
business exists.

2. Financial Management and Accounting

Financial Management, as discussed earlier is the interpretation of the data presented in
accounting. Interpretation gives color to the somewhat vague numbers presented in financial
reports. The firm’s finance and accounting activities are closely-related and generally overlap.
Accounting is sometimes said to be the language of finance because it provides financial data
through income statements, balance sheets, and the statement of cash flows. The financial
manager must know how to interpret and use these statements in allocating the firm's financial
resources to generate the best return possible in the long run.

3. Financial Management and Mathematics

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 Modern approaches of the financial management apply large number of mathematical and
statistical tools and techniques. They are also called as econometrics. Economic order quantity,
time value of money, cost of capital, capital structure theories, dividend theories, ratio analysis and
working capital analysis are used as mathematical and statistical tools and techniques in the field of
financial management.

4. Financial Management and Production Management

Profit of the concern depends upon the production performance. Production performance
finance, because production department requires raw material, machinery, wages, operating
expenses etc. Important production decisions like make or buy can be taken only after financial
implications have been considered.

5. Financial Management and Marketing

Marketing is another vital part of a firm’s profitability that is linked with financial
management. Marketing strategies such as holding inventories to provide uninterrupted service
to customers to increase sales are a cost of a firm that needs the area of financial management.
Managers need to know whether to spend much on these marketing strategies since they bring
about large chunks of their sales or just to forfeit these marketing strategies. Spending on
advertisement is also what financial managers keep an eye on depending on its relationship with
the company’s sales data.

6. Financial Management and Personnel

The provision of wages, salary, remuneration, commission, bonus, pension and other
monetary benefits has become a major financial decision in in the area of human resource
management. Should the firm give out a bonus to its employees? Or how much should a firm give
as bonus to its top performing manager? Are some questions that might be answered by financial
management.

7. Financial management and Top Management

Strategic planning and management control are two important functions of the top management.
Finance function provides the basic inputs needed for undertaking these activities.

8. Financial Management and Quantitative Methods

Quantitative methods such as linear programming, probability, discounting techniques,
present value techniques etc. are useful in analysing complex financial management
problems.

9. Financial Management and Costing

Cost efficiency is a major strategic advantage to a firm, and will greatly contribute towards its
competitiveness, sustainability and profitability. A finance manager has to understand, plan and
manage cost, through appropriate tools and techniques including Budgeting and Activity-based
Costing.

10. Financial Management and Law

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 A sound knowledge of legal environment, corporate laws, business laws, Import Export
guidelines, international laws, trade and patent laws, commercial contracts, etc. are again finance
executive in a globalized business scenario.
11. Financial Management and Taxation
A sound knowledge in taxation, both direct and indirect, is expected of a finance manager,
as all financial decisions are likely to have tax implications. Tax planning is an important function of
a finance manager. Some of the major business decisions are based on the economics of taxation.
A finance manager should be able to assess the tax benefits before committing funds.

12. Financial Management and Treasury Management

Every finance manager should be well grounded in treasury operations, which is considered
as a profit centre. It deals with optimal management of cash flows, judiciously investing surplus
cash in the most appropriate investment avenues, anticipating and meeting emerging cash
requirements and maximizing the overall returns. In banks, it includes design of new financial
products from existing products.

13. Financial Management and Banking

It is imperative for every finance manager to be up to date on the changes in services &
products offered by banking sector including several foreign players in the field. Thanks to
Government's liberalized investment norms in this sector, the banking system has essentially been
an important consideration in financing decisions.

14. Financial Management and Insurance

Evaluating and determining the commercial insurance requirements, choice of products and
insurers. analysing their applicability to the needs and cost effectiveness, techniques, ensuring
appropriate and optimum coverage, claims handling, etc. fall within the ambit of a finance
manager's scope of work & responsibilities.

15. Financial management and Information Technology

A finance manager needs to know how to integrate finance and costing with operations
through software packages. Now more than ever, the difficult job of valuation of financial
instruments in the past is now made easier with the aid of better information technology.

Scope of Financial Management

The cope of financial management includes the following A’s.
1. Anticipation
-
In financial management, estimation of a firm’s needs is important as well as estimating the
amount of income that may enter the company or the amount of expense that a company has to
incur. Anticipation involves finding out how much finance is required by a company.
2. Acquisition

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 -Once the required capital or finance is determined by the company, then the company must find
out how these finances will be procured from different sources.
3. Allocation
- The collection of a firm’s finances will now be determined on where it will be spend. Will it be
spent to purchase a fixed asset? Or will it be used to purchase inventories to increase sellable
products?
4. Appropriation
- Upon earning profits, appropriation means the decision of the firm to determine the division of
profits among shareholders, credit holders, or will it be part of a firm’s reserved capital.
5. Assessment
- This controls the financial activities of a company.

Functional Areas of Financial Management

1. Determining Sources of Funds

In a business, there are different ways in which it can procure funds. Investors/Owners can be the
easiest source of funds as they have a direct stake with regards to the company’s financing. Another source of
fund would be from the sales of the company. Externally, a company can also tap the resources of a third-
party such as a bank to finance its operations and acquisitions.

2. Financial Analysis
The financial data reported to a company must be interpreted by financial managers and analysts in order for
them to determine where a firm performs best or slacks. It is the evaluation and interpretation of a firm's
financial position and operations, and involves a comparison and interpretation of accounting data. The
financial manager has to interpret it g
Gtgg guy gotooy oudifferent statements. He is required to measure the company's liquidity, determine its
profitability, and assess overall performance in financial terms.

3. Optimal Capital Structure

Using the basic accounting equation of “Assets = Liabilities + Equities”, a firm may be able to determine
what level of its capital structure must be achieved for it to perform at a high level. A firm may either have
more debt than it has equity or the other way around. Or a more balanced firm may opt to have its debt and
equity at an equal level. The financial manager has to establish an optimum capital structure and ensure the
maximum rate turn on investment. The financial manager should have adequate knowledge of different
empirical studies on the optimum capital structure and find out whether, and to what extent, he can apply their
findings to the advantage of the firm.

4. Cost-Volume-Profit Analysis

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 This is popularly known as the 'CVP relationship'. The financial manager has to ensure that the income for
the firm will cover its variable costs. This will further be discussed in more advanced management accounting
subjects. What is important to know is that the cost and volume of a product/service has a direct effect with its
profit and this is what financial managers need to understand to gain an edge in their company.

5. Profit Planning and Control

Profit planning ensures attainment of stability and growth. Profit planning is an important responsibility of the
financial manager. Profit planning and control is a dual function which enables to determine costs it has
incurred, and revenues it has earned during a particular period.

6. Fixed Assets Management

The acquisition of fixed assets involves capital expenditure decisions and
long-term commitments of funds. Because of this long-term commitment of
funds, decisions governing their purchase, replacement, etc., should be taken
with great care and caution. It is important for financial managers to know
that funds used in fixed assets won’t be available anymore to be used in its
current operations.

7. Capital Budgeting
Capital budgeting decisions are most crucial; for they have long-term implications. They relate to judicious
allocation of capital. Current funds have to be invested in long-term activities in anticipation of an expected
flow of future benefits spread over a long period of time. Capital budgeting forecasts returns on proposed
long-term investments and compares profitability of investments and their cost of capital. It results in capital
expenditure investment. The financial analyst should be able to blend risk with returns so as to get current
evaluation of potential investments.

8. Working Capital Management .

This involves the working capital equation of “Working Capital = Current Assets - Current Liabilities”.
Working capital is rightly an adjunct of fixed capital investment. It is a financial lubricant which keeps
business operations going. It is the life-blood of a firm.

9. Dividend Policies
Dividend policies constitute a crucial area of financial management. While owners are interested in getting
the highest dividend from a corporation, the Board of Directors may be interested in maintaining its financial
health by retaining the surplus to be used when contingencies arise. A firm may try to improve its internal

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 financing so that it may avail itself of benefits of future expansion. However, the interests of a firm and its
stockholders are complementary, for the financial management is interested in maximizing the value of the
firm, and the real interest of stockholders always lies in the maximization of this value of the firm; and this is
the ultimate goal of financial management.

10. Acquisitions and Mergers

Firms may expand externally through co-operative arrangements, by acquiring other concerns or by entering
into mergers. Acquisitions consist of either the purchase or lease of a smaller firm by a bigger organization.
Mergers may be accomplished with a minimum cash outlay, though these involve major problems of
valuation and control.

11. Corporate Taxation

Corporate taxation is an important function of the financial management, for the former has a serious impact
on the financial planning of a firm.

Explain activity: As a student studying Bachelor of Science in Accountancy/Management Accounting, explain

why you should have knowledge with regards to Financial Management. Limit your explanation in five to ten
sentences.

Elaborate activity: Through an infographic portray the relationships of financial management with the other
business functions.

Evaluate activity (Assignment #1) This should be done after reading all of Module 1: Using the Ten
Axioms of Financial Management, create a reflection paper that details your own understanding of these
axioms.

Financial Management Process

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 Financial
Financial Planning Financial Control Decision-Making
- Create Budgets -Control Cash Flows -Investment
and Forecasts - Control Cash Decisions (Where
- Determine the Acquisitions and do you invest
sources of funds Expenditures scarce resources?)
-Addresses whether - Financing
company assets are Decisions (Where
being used should the needed
efficiently capital be sourced
out?)
- Dividend Decisions
(How much of the
profit should be
reinvested or
returned?)
- Liquidity Decisions
(How should the
working capital be
managed?)

Jobs in Financial Management

There are different career paths that may be undertaken when Financial Management is the are of
expertise to e studied. A detailed discussion of Jobs in Finance is further discussed in Chapter 1 of Brigham’s
Fundamentals of Financial Management.
Investment Banking Jobs are generally involved in working with corporations, government and other
large institutions giving them strategic advices. Hedge Fund Jobs are among the most sought-after jobs in the
financial world. Depending on the firm and the level of the trader, these jobs can involve taking orders from
portfolio managers or using discretion on what to buy and sell. Financial Advisory Jobs are perhaps the most
familiar to the general public and are primarily focused upon providing financial services to the retail
investor. The term "financial advisor" encompasses a variety of jobs whose practitioners have often been
referred to stockbrokers, although the industry has tried to move away from that term. Financial Media Jobs
incorporate knowledge of finance and economics with the ability to write or speak intelligently about the
markets. Individuals interested in these jobs should possess superior communication skills as well as market
savvy. Analyst Jobs are among the most common in the financial industry and can encompass a variety of
different job descriptions. Portfolio Management Jobs are some of the prestigious roles in the finance
industry and involve directly managing institutional and retail client portfolios. Trading jobs are found at a
variety of institutions including commercial and investment banks, asset management firms and hedge funds.
There are a variety of certifications that are applicable to Financial Management as well such as
Certified Financial Planner, Chartered Financial Analyst, Certified Fund Specialist, and Certified
Management Accountant.

TEN AXIOMS THAT FORM THE BASICS OF FINANCIAL MANAGEMENT

1. The Risk-Return Trade-off

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 - We won’t take on additional risk unless we expect tp be compensated with an additional return
2. The Time Value of Money
- A dollar received today is worth more than a dollar received in the future. (This is further
discussed in a separate module)
3. Cash Flows is King
- This states that Cash flows and not profits is king in terms of financial management
4. Incremental Cash Flows
- Only the cash flows that changes are the ones that count
5. The Curse of Competitive Markets
- Why it’s hard to find exceptionally profitable projects
6. Efficient Capital Markets
- The markets are quick and the prices are right
7. The Agency Problem
- Managers will not work for the owners unless it is in their best interests
8. Taxes Bias Business Decisions
- In evaluating projects, income taxes ply a significant role in the decision-making
9. All Risks are Not Equal
- Some risks can be diversified away and some cannot
10. Ethical Behavior is Doing the Right Thing
- Ethical dilemmas are everywhere in finance

GOAL AND OBJECTIVE OF THE FIRM

Objectives of Financial Management may be broadly divided into:
1. Profit Maximization
2. Wealth Maximization

Profit maximization is basically is a single-period or, at most, a short-term goal, to be achieved within
one year; it is usually interpreted to mean the maximization of profits within a given period of time. A
corporation may maximize its short-term profits at the expense of its long-term profitability. In contrast,
stockholder wealth maximization is a long-term goal, since stockholders are interested in future as well as
present profits.
Wealth maximization is generally preferred because it considers (1) wealth for the long term, (2) risk
or uncertainty, (3) the timing of returns, and (4) the stockholders' return. Timing of returns is important; the
earlier the return is received; the better, since a quick return reduces the uncertainty about receiving the
return, and the money received can be reinvested sooner.
Generally speaking, a firm must set its goals into maximizing its wealth rather than its profits in order
for it to have sustainability in the long-run.

Name Date
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Schedule
Professor: :

EXERCISE 1-1

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 1. In most corporations, the CFO ranks under the CEO.
a. True
b. False

2. The Chairman of the Board must also be the CEO.

a. True
b. False

3. The board of directors is the highest ranking body in a corporation, and the chairman of the board
is the highest ranking individual. The CEO generally works under the board and its chairman, and
the board generally has the authority to remove the CEO under certain conditions. The CEO,
however, cannot remove the board, but he or she can endeavor to have the board voted out and a new
board voted in should a conflict arise. It is possible for a person to simultaneously serve as CEO and
chairman of the board, though many corporate control experts believe it is bad to vest both offices in
the same person.
a. True
b. False

4. As a result of financial scandals occurring during the past decade, there has been a strong push to
improve business ethics.
a. True
b. False

5. There are many types of unethical business behavior. One example is where executives provide
information that they know is incorrect to banks and to stockholders. It is illegal to provide such
information to banks, but it is not illegal to provide it to stockholders because they are the owners of
the firm, not outsiders.
a. True
b. False

6. If a lower level person in a firm does something illegal, like “cooking the books” to understate
costs and thereby increase profits above the correct profits because he or she was told to do so by a
superior, the lower level person cannot be prosecuted but the superior can be prosecuted.
a. True
b. False

7. Managers always attempt to maximize the long-run value of their firms' stocks, or the stocks'
intrinsic values. This is exactly what stockholders desire. Thus, conflicts between stockholders and
managers are not possible. However, there can be conflicts between stockholders and bondholders.
a. True
b. False

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 8. S1: The primary goal of every organization is profit maximization rather than shareholder wealth
maximization.
S2: One of the axioms in financial management states that “all risks are equal”.
a. Both Statements are true
b. Both Statements are false
c. S1 True; S2 False
d. S2 True; S1 False

9. S1: Patent is an example of a physical asset market.

S2: Financial Management is the efficient allocation of a company’s economic resources.
a. Both Statements are true
b. Both Statements are false
c. S1 True; S2 False
d. S2 True; S1 False

10. S1: Capital Markets are where the interest rates of an economy are determined.
S2: Capital Markets, Financial Management and Investments are three different concepts that are very
much NOT related to each other.
a. Both Statements are true
b. Both Statements are false
c. S1 True; S2 False
d. S2 True; S1 False

11. S1: The time value of money means that “a peso today is not worth the peso tomorrow”.
S2: Agency problem exists when the managers won’t work for the owners unless it benefits the
managers.
a. Both Statements are true
b. Both Statements are false
c. S1 True; S2 False
d. S2 True; S1 False

12. S1: The axiom that Cash Flows, not profits is king means that cash flows are given more emphasis in
financial management because they provide liquidity information about the company.
S2: Horizontal Analysis is also known as the Common-Size Financial Statement.
a. Both Statements are true
b. Both Statements are false
c. S1 True; S2 False
d. S2 True; S1 False

13. S1: Working Capital is used to support the company’s day to day operations or the company’s regular
operations. The formula to compute working capital is to add Current Assets and Current Liabilities
S2: EBIT is also the same as Earnings After Taxes.
a. Both Statements are true
b. Both Statements are false
c. S1 True; S2 False
d. S2 True; S1 False

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 14. Financial Managers are engaged in determining the optimal capital structure of a given firm or the
mix of its debt and equity components. What financial management decision pertains to this?
a. Liquidity Decisions
b. Investment Decisions
c. Financing Decisions
d. Dividend Decisions

15. This term pertains to an organization’s act of doing public service or giving back to the public like in
terms of environmental protection and the like.
a. Dividend Declaration
b. Shareholder’s Wealth Maximization
c. Corporate Social Obligation
d. Corporate Social Responsibility

16. This strategy/goal focuses on the short-term returns as opposed to the long-term value of the
company.
a. Profit Maximization
b. Shareholder’s Wealth Maximization
c. Corporate Social Obligation
d. Corporate Social Responsibility

17. In the Philippines, financial statements are prepared in accordance with?

a. Philippine Accounting Standards
b. Philippine Financial Regulating Standard
c. Philippine Financial Reporting Standards
d. Conceptual Framework

18. Which of the following transactions will change the company’s working capital?
a. Declaration of Cash Dividends
b. Cash Purchase of Inventory
c. Credit Purchase of Inventory
d. Depreciation of Equipment

19. A scope of financial management which dicided the company’s profits among the shareholders,
debenture holders, etc and keeps a part of the profits as reserves
a. Assessment
b. Appropriation
c. Allocation
d. Anticipation

20. These jobs generally involve working with the corporations, government and other large institutions
helping them to raise capital or providing them with strategic advice.
a. Portfolio Management Jobs
b. Hedge Fund Jobs
c. Trading Jobs

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 d. Investment Banking Jobs

EXERCISE 1-2
Name Date
: : Score:

Schedule
Professor: :

Match Column A with Column B by writing the letter of your choice from column B on the space provided

COLUMN A
_______1. Decisions made by managers may be in conflict with the best interests of the shareholders
_______2. Competitors may take a controlling interest in the company if the current management is unable to run
the company effectively.
_______3. This is also known as value maximization or net worth maximization.
_______4. The financial manager is concerned with the financed of the business

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 _______5. Decisions related to trade off liquidity and solvency
_______6. Its formulation should lead to profitability, keeping while the image of the organization intact.
_______7. Current funds have to be invested in long-term activities in anticipation of an expected flow of future
benefits spread over a long period of time.
_______8. They give debt financing a definite cost advantage over stock
_______9. It allows good and bad events to cancel each other out, reducing risk.
_______10. Each individual has his own set of values, which forms the basis for his personal judgements about
what is the right thing to do.
_______11. The difference between the cash flows if the project is taken on versus what they will be if the project
is not taken on.
_______12. It is characterized by a large number of profit driven individuals who act independently. In addition,
new information regarding securities arrives in the market in a random manner.
_______13. The corporation responds to pressure from different stakeholder groups.
_______14. It is an extension of responsibility to embrace service to the public interest in such matters as
environmental protection, employee safety, civil rights, and community involvement.
_______15. This should be constructed to also align managers’ interest with those of stockholders as much as
possible.
_______16. Cash received by the firm can be reinvested but nor accrued profits.
_______17. The greater the risk associated with any financial decision, the greater the return expected from it.
_______18. Additional competition and added capacity can result in profits being driven down to the required rate
of return.
_______19. When new information regarding securities arrives in the market, investors adjust to the new
information immediately and buy and sell the security until they feel the price correctly reflects the new
information.
_______20. A peso received at a later time is worth less in buying power.

COLUMN B
A. Efficient market
B. Production management
C. Financing decision
D. Tax laws
E. Liquidity decisions
F. Investment decisions
G. Social responsiveness
H. Risk return trade off
I. Capital budgeting
J. Diversification
K. Corporate social responsibility
L. Agency problem
M. Ethical dilemma
N. Cost control
O. Threat of takeovers
P. Managerial compensations
Q. The curse of competitive markets
R. Pricing policies
S. Time value of money
T. Wealth maximizations
U. Cash flows not profits is king

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 V. Incremental cash flows
W. Efficient capital markets

Reference: Notes as compiled by the Faculty of the Department of Accountancy, Saint Louis
University, Contributed By: Gabriel Santos

Property of and for the exclusive use of SLU. Reproduction, storing in a retrieval system, distributing, uploading or posting online, or transmitting in any form or by any
means, electronic, mechanical, photocopying, recording, or otherwise of any part of this document, without the prior written permission of SLU, is strictly prohibited. 16