Chapter 1 Matrix: Comparison of Financial Management with Accounting, Economics, Management, and

Finance.

Particulars Financial Management Accounting Economics Management Finance

Nature / Definition A decision-making process A service activity, Economics is a social Management is the A body of facts, principles,
concerned with planning, whose function is to science that studies the process of guiding the and theories relating to
acquiring, and utilizing funds prepare financial production, development, raising and using money by
in a manner that achieves the reports that will providedistribution, maintenance, and individuals, businesses, and
firm’s desired goals relevant information consumption, and allocation of resources to governments.
about the business. exchange of goods and attain organizational
services goals.
Purpose / Goal To maximize the current To provide relevant and To understand and To make a harmonious To guide individuals on how
value per share of the timely financial know how to respond to relationship among to allocate, manage, and use
existing stock or ownership statements used to make changes in supply, employees that will result their money, and other
in the business firm. informed decisions. demand, price in effective, efficient, and financial instruments.
conditions, and other productive workflow.
factors
Scope Primarily concerned with Recording, classifying, - Microeconomic Involves planning, 1. Financial planning;
acquisition, financing, and summarizing, reporting, s which deals organizing, directing,
management of assets of a and interpreting the with the controlling, and 2. Forecasting cash inflows
business concern to results of business economic monitoring and outflows;
maximize the wealth of the transactions decisions of
firm for its owners. individuals and 3. Raising funds;
firms.
- Macroeconomi 4. Allocation of funds;
cs looks at the
economy as a 5. Effective use of funds; and
whole in which
a particular 6. Financial control
business (budgetary and
concern is non-budgetary)
operating.
Users of information Financial Manager Internal and external Economic-related jobs All internal employees Finance Manager
users such as creditors, such as economic
investors, management, consultant,
employees, management
 government, public, etc. consultant, senior
financial analyst,
statistician, etc.
Materials used Use accounting information, Use accumulated The inflation rate, All related documents in All monetary and financial in
economic principles, etc. to business transactions in changes in supply and the operation of the nature papers, records,
make economic sound preparing financial demand, price, and organization. documents, and other
decisions. statements other economic factors. instrument
 Chapter 2 Matrix: Comparison of Investing, Financing, and Operating Decision Making

Particulars Investing Decision Making Financing Decision Making Operating Decision Making

Function Determine how scarce or limited Assert that the mix of debt and equity Managing the firm’s working capital is
resources in terms of funds of the chosen to finance investments should a day-to-day responsibility that ensures
business firms are committed to maximize the value of investments that the firm has sufficient resources to
projects. made. continue its operations and avoid costly
interruptions.
Purpose Investing Decision Making deals with Financing Decisions Making calls for Operating Decision Making involves
allocating financial resources to obtain good knowledge of costs of raising implementing monitoring, and
the highest possible return. funds, procedures in hedging risk, improving the processes, procedures,
different financial instruments and and tasks that support your strategic
obligations attached to them. goals.
Goal Concerned with maintaining a balance Concerned with funding the Concerned with operational details,
between long-term and short-term goals company's operations. The company daily resource allocation, inventory
so that the company is able to invest for has a number of options available control, and delivery routing to
its long-term growth in addition to when it comes to financing: it can use maximize product flow along
maintaining its liquidity in the short run. earnings generated internally or biomass-based production chains.
In addition, when making long-term borrow from outside. When
investment decisions, the company is borrowing from outside, it has to
faced with a number of choices. decide between diluting the ownership
Investing decisions help managers stake or taking a loan.
choose the investment that will provide
the maximum benefits.
Importance In organizations, investment decisions Financial decision making is Operational decisions breathe life into
are crucial for growth and important to make wise decisions your business strategy and make sure
profitability—impact cash flows—have about when, where and how a that the company operates efficiently,
a long-term impact as many of these business should acquire funds. from top to bottom. This is why these
decisions are irreversible. Even with Because a firm tends to profit most types of decisions have far-reaching
limited funds, individuals can obtain when the market estimation of an implications for the sustainability and
impressive returns if the investment is organization's share expands and this growth of companies.
well-planned. is not only a sign of development for
the firm but also it boosts investor's
wealth.
 Chapter 3 Matrix: Organizational Structures

Organizational Position Operational Functions Corporate Governance Monitor Function

Board of Directors The primary role of a board of directors is that In charge of selecting a qualified management
of a fiduciary, representing the interests of the team at all times, overseeing and evaluating
organization's shareholders. its performance in accordance with
Ensure that the organization is run according established performance standards that
to the organization’s charter and that there is support the company's strategic goals, and
proper accountability conducting routine policy reviews with the
management team.

Chairman of the Board Enables the board to make informed choices facilitates the discussion concerning
by ensuring that it receives accurate, timely, significant issues, including strategic matters,
relevant, insightful, and clear information. the corporation's general risk appetite,
ensuring that the board effectively determines developments in the business and regulatory
and implements out a company's objectives environment, and key governance concerns.
and strategies.

Chief Executive Officer (CEO) . The CEO ensures that the Board is fully
Determine the corporation’s strategic decision informed as it makes decisions and provides
and formulates and implements its strategic timely information to the boards. The CEO
plan on the direction of the business communicates and implements the
Serves as the link between internal operations corporation's vision, mission and values and
and external operations. overall strategy.

President and Chief Operations Officer (COO) In charge of overseeing every aspect of the On the other hand, the President's role is to
company's operations and carrying out its ensure that both short- and long-term goals are
daily objectives. met by daily operations. They create strategies
. to increase operational effectiveness and
ensure that these strategies are implemented.

Vice President Marketing manages and plans the marketing department's lead the improvement and ensure the
 overall strategy. organization’s market position is
Determine and put into action marketing strengthened. In charge of developing the
strategies and materials. Ensure brand brand's standards and strategy, budgeting and
standards and develop plans in line with short- managing the marketing budget, and
and long-term market projections and reports establishing team goals.
based on analysis and research.

Vice President Finance Responsible for taking on more administrative In charge of both investment planning,
functions such payroll setup, financial developing budgeting strategies and in charge
reporting, budgeting, risk management, and of accounting reporting and analysis. Ensures
financial analysis. the consistent transmission of data and
interprets financial statements performance to
be used in decision making.

Treasurer Manages liquid assets oversee and assess financial progress as well
Conducts business with banks and other as manage and identify risk factors affecting
financial institutions the organization's financial performance.
Oversees public issues of stock and debt Treasures also develop financial strategies and
policies

Controller In charge of managing the implementation of Accountable for managing the company's
internal controls, determining cost policies, internal control system and providing
and maintaining accounting records. They management with accounting data for
also ensure compliance with both external and planning, performance evaluation, and
internal accounting reports. decision-making

Vice President Production organizes and oversees product development Responsible for overseeing the overall quality
and production. Implement effective and of the job and the production strategies and
efficient strategies in the production activities. ensures these strategies are in line with the
company’s goal and objective.
 Chapter 4 Matrix: Organizations that make Financing Decisions

Organization Advantages Disadvantages Financial Management Decision

Challenges
Sole Proprietorship ● Easy to form and dissolve ● Unlimited liability of the ● Difficulty in investing or
● Owners have full control over proprietor allocating funds
the business ● Limited capital or funds ● Too much debt
● Taxes ● Lack of continuity ● Inconsistent cash flows
● Freedom with government ● Difficulty to expand ● Mixing business and personal
regulations finances
● Unexpected expenses
Partnership ● Ease in formation ● Unlimited liability ● Proper allocation of funds
● Additional resources and capital ● Lack of continuity ● Issues in profit-sharing
● Efficient management ● Difficulty of transferring ● Difficulties in debts
● Tax implication ownership
● Limitations in raising capital
For-Profit Corporation ● Limited liability ● Time and cost of formation ● Investing in other businesses
● Has perpetual existence ● Government regulations and legal and assets
● Ease in transferring shares or requirements ● Declaring of dividends for the
ownership ● Tax liability shareholders
● Ability to raise capital and ● No active control ● Managing cash flows
profits ● Competition in selling prices
● Skilled management ● Payroll Management
Not-for-profit: ● Open membership ● Fewer investment incentives ● Allocation of capital
Cooperative ● Social benefit to the community ● Legal restrictions to some ● Financial constraints
● Ease in formation countries ● Paying off expenses
● Less Liability ● Not enough profits generated
● Less taxes
Not-for-profit: ● Expanded giving opportunities ● Greater regulatory requirements ● Investment of assets
Foundation ● Tax benefits ● Substantial time commitment and ● Financial instability
● Stronger public relations costs ● Limited funding source
● Greater freedom to take action ● Much detailed record-keeping
for the community requirements