Business Finance DIFFERENCE BETWEEN ACCOUNTING AND FINANCE

Mr. Arvin S. Dalida Accounting

2ND Sem = 3rd & 4th Quarter - recordkeeping/bookkeeping function -> all transaction
in the company will be recorded
Intro to financial management - concern of financial reports/statements -> ginagamit
Concept of financial management ng finance to make a decision

Financial institutions

Financial instruments Finance

Flow of funds and role of financial manager - Management of money, funds or resources
Planning of financial tools/funds - Review, analyze and interpret the financial
What is the planning financial tools statements/reports provided in accounting -> ginagamit
ng finance to make a financial decision
how to prepare financial budgets

capital management

ADVANCE STUDY TYPES OF FINANCE

1. Public Finance
- Government perspective
Definition of Finance - Management of a country’s
national budget
1. Accdg. To Gitman & Zutter (2012), finance can
- Focuses on collecting tax revenue
be defined as the science and art of managing
and allocation/spending that money
money.
on national services and programs
- It is important to know how to
such as roads, hospital, and social
manage money effectively by
security
understanding how to compute, the
2. Corporate Finance
laws, the theories, and concept
- Business perspective
because if not, the money that is
- Management of a company’s
supposedly to help you will destroy
funding (sources of revenue, use of
you along the way
capital, and the management of its
2. Management of large amounts of money –
profit and loss statement)
especially by governments or large companies
- Accountants, financial analysts,
3. Giving monetary support for an enterprise
managers, and executives (Chief
- By the word financing, it’s giving
Financial Officer or CFO)
also funds to others who needs it.
3. Personal Finance
Instead na itengga ‘yung pera ng
- Personal perspective
company, why not make an
- Management of one’s income,
investment? Ipa-utang? The money
expenses, investments, and
you gave might grow in the long run
obligations
4. The monetary resources and affairs of a
- Personal banker, investment
government, organization or person
advisor, accountant, mortgage,
broker (THE ONE WHO MANAGES
THEIR FINANCIAL SITUATION)
FINANCIAL MANAGEMENT WITHIN A BUSINESS ADVANTAGES AND DISADVANTAGES OF THE BUSINESS
ORGANIZATION ORGANIZATION

Financial management – how you manage your finances

Business Organization – an entity formed for the

purpose of carrying on commercial enterprise to earn
profit

TYPES OF BUSINESS ORGANIZATION

1. Sole Proprietorship
- Consist of one individual doing the
business
- Owner/Entrepreneur Shareholders Wealth Maximization – objective ng
2. Partnership shareholder/investor
- Consist of two or more individuals - Earn money
doing the business
3. Corporation - Grow money
- Dominant form of business
Company that has very large amount of cash:
organization
- Owned by 5 or more persons - kayang bayaran mga utang
(stockholders)
- kayang bayaran ang day-to-day operations
- PRIVATE CORPORATION – privately
owned which is limited lang sa iilan - kapag naka-imbak lang ang large amount na money,
ang ownership ng business. For hindi mag-grow ‘yon. So, invest.
example, family corporation. ‘yung
stocks nila is binebenta lang within Successful ba ang company if profitable ito?
their family members - Yes, maganda ang signs if ever malaki ang profits ng
- PUBLIC CORPORATION – publicly business. But, hindi porket maraming profits ang
owned which sells stocks in the business is mababayaran na niya ‘yung financial
stock market or in the market. For obligations niya.
example, Jollibee corporation, San
Miguel Corporation, and Coca-Cola
Corporation PROFIT
- Nag-iissue ng stocks para
magkaroon ng funds and kapag - measure of the financial performance of a company
binili ng investors ‘yung proceeds or for a period of time
money will be used by the business
- although it is a major drive for increasing the value of
for their goals
stock, an investor should not rely on profits alone.
- Kapag bumili naman ng share or
Supposedly, positive ang profits, but negative naman
stocks ang investor, magkakaroon
ang cash flow.
siya ng slice of ownership sa
corporation na ‘yon

MEASUREMENT OF THE SHAREHOLDER’S WEALTH

- the shareholder’s wealth is measured based on the 3. Board of Directors (BOD)
current market price of the corporation’s stock
- highest policy making body
- the market price changes across different periods
- ensure that the corporation is operating to serve the
- the value of your investment changes in different best interest of the stockholders
points on time based on the market value at the time
- setting policies

- approving company’s strategies

FACTORS THAT INFLUENCE MARKET PRICE
- appointing and removing members of the top
management including the president

- determining top management’s compensation

4. President
- the role may vary from one company to
another
- overseeing the operations of a company and
Financial Management ensuring that the strategies as approved by the
board are implemented as planned
- to collect fund for the company at a low cost -> kapag - performing all areas of management; planning,
uutang ka ng fund, syempre kailangan hahanap ka ng organizing, staffing, directing, and controlling
bank na mag-offer sa ‘yo ng mababang interest - representing the company in gathering
- to use this collected funds for earning maximum 5. VP for Marketing
profits
- formulating marketing strategies and plans
- to plan and control the finance of the company
- directing and coordinating company sales
- deals with decisions that are supposed to maximize
the value of shareholders’ wealth (Cayanan) - performing market and competitor analysis

- analyzing and evaluating the effectiveness and cost of

marketing methods applied
CORPORATE ORGANIZATION STRUCTURE
- conducting or directing research that will allow the
company identify new marketing opportunities, e.g.
variants of the existing products/services already
offered in the market

- promoting good relationships with customers and

distributors (Cayanan, 2015)

6. VP for Production

- ensuring production meets customer demands

- identifying production technology/process that

1. Shareholders minimizes production cost and make the company cost
- they elect the board of directors (BOD) competitive
- Each share held is equal to one voting right
- coming up with a production plan that maximizes the
- Has a right to vote decisions that the company
utilization of the company’s production facilities
makes
- identifying adequate and cheap raw material suppliers - the company should choose which type of
(Cayanan, 2015) investment.
- it should invest in that would provide an most
7. VP for Administration
optimal risk and return trade off
- coordinating the functions of administration, finance, - long term investment – supported by a capital
and marketing departments budgeting analysis.
- capital budgeting analysis – a tool to assess
- assisting other departments in hiring employees whether the investment will be profitable in the
- aiding in payroll preparation, payment of vendors, and long run
collection of receivables - the lenders should have the confidence that
the investments that management will push
- determining the location and the maximum amount of through with will be profitable kasi kung hindi,
office space needed by the company hindi ka bibigyan ng funds ng lenders
- identifying means, processes, or systems that will 3. Operating
minimize the operating costs of the company (Cayanan, - deal with the daily operations of the company
2015) - determining how to finance working capital
accounts such as accounts receivable and
Objective of vp for finance inventories
- we need to manage our accounts receivables
1. Financing
para masingil ang mga utang ng customers.
- making decisions on how to fund long term
Kailangan ng cash para mabayaran ang mga
investment and working capital which deals
day-to-day operations
with the day-to-day operations of the company
- we need to manage our inventories para
(binabayaran araw-araw -> daily expenses)
malaman or ma-keep track if ang inventories
- determining the appropriate capital structure
natin is naibebenta or nakaimbak lang sa
- dapat alam ng isang vp for finance kung saan
storage room
tayo kukuha ng source for funds
4. Dividend policies
CAPITAL STRUCTURE - determine when the company should declare
cash dividends
- dito malalaman kung saan nanggagaling ang assets or - cash dividends are paid by the corporations to
funds ng isang company existing shareholders based on their
- how much of your total assets is financed by debt and shareholdings in the company as a return on
how much is financed by equity their investment
- DIVIDENDS – portion na makukuha ng
- assets can come from somewhere shareholders kapag may profit ang company
- assets came from our pockets = equity financing - some investors buy stocks because of the
dividends they expect to receive from the
- assets came from our borrowings (utang) = debt company
financing - vp should know when to declare dividends
- dapat balance Two conditions before declaring cash dividends:
2. Investing 1. The company must have enough retained
- dapat alam kung how and where mag-invest earnings (accumulated profits) to support cash
ng money or funds dividend declaration -> as vp, you need to
- if the company has an excess cash, short term explain why you didn’t declare a cash dividend.
investment decisions are needed E.g., may balak mag-expand ang company
- to plan for this, the financial manager should 2. The company must have cash
be able to make use of financial planning tools
such as budgeting and forecasting
FINANCIAL MANAGER (VP of FINANCE) 6. Accounting Standards – systems for keeping
records and documentation must observe
- a person who takes care of all the important financial
functions of an organization

- siya nagiisip kung saan i-allocate ang funds

MAIN FUNCTION OF FINANCIAL MANAGER

1. Raising of funds
- if kailangan ng business ng funds for a certain
reason, dapat alam ng financial manager how
mag-raise ng funds
- it is important to have enough cash and
liquidity
- a firm can raise funds by debt or equity

2. Allocation of funds

- allocating the funds in the right places

- maximizing and utilizing the funds

3. Profit planning

- proper usage of the profit generated by the firm

4. understanding capital markets

- financial manager should know how the capital

markets work

- alam dapat niya kung when magbebenta and bibili ng

stocks

GUIDING PRINCIPLES FOR FINANCIAL MANAGEMENT

SYSTEMS

1. Consistency – financial policies and systems

must remain consistent over time. If ever
magpalit ng policy, ‘yung mga involve sa
decision na ‘yon should be oriented
2. Accountability – must be able to explain and
demonstrate to the stakeholders on how and
where you used the resources and what you
have achieved
3. Transparency – must be open about its work
and its finances making information available to
all stakeholders
4. Integrity – must be open with honesty and
propriety
5. Financial stewardship – must take good care of
the financial resources and ensure that they are
FIRST LESSON – THE CONCEPT OF FINANCIAL
used for the purpose intended since sa atin
MANAGEMENT
ineentrust ang pera ng company
Finance

- science and art of managing money (Gitman & Zutter,

2012)

- science -> related-scientific areas such as statistics and

mathematics

- art -> involves creativity customization and individual’s

behavioral relationship with money

- body of facts, principles, and theories relating to

raising and using money by individuals, business and
governments (Cabrera, 2017)

- management of money

- investing, borrowing, lending, budgeting, saving, and

forecasting

- ways people and organizations raise and allocate

capital, use monetary resources, and account for the
risk involved

We need to study them po if okay po ba sila as

institution po na we could borrow some money. Like,
one factor we can consider po is ‘yung interest nila.

Financial Management (Corporate Finance)

Managerial Finance (Business Finance)

- decision making process that is concerned with

planning acquiring and utilizing funds in a manner that
achieves the firm’s goal which is to maximize the
current value of ownership -> it is important to think
thoroughly when it comes to decision making in this
type of job or situation kasi may involvement ng money.
One wrong move, pwedeng maging cause ng
bankcrupcy.

Current value of ownership

- market price of the corporation’s stock

- maximizing wealth of the business

- base on the current market price of the corporation’s

stocks

An account na madaling i-convert into cash

MARKET PRICE IS INFLUENCED BY: