7/27/2019 Filman Alg

http://slidepdf.com/reader/full/filman-alg 1/4

 April 13, 2013

 Algen H. de diosMM-BM

Financial Management

Test I.

1.) What is Finanacial Management? What is the importance?

Financial Management means planning, organizing, directing and controlling the financialactivities such as procurement and utilization of funds of the enterprise. It means applying generalmanagement principles to financial resources of the enterprise. It is largely devoted to the task of creating wealth for the firm's owners or shareholders.

The significance of financial management for the economic growth and development throughinvesting decision, financing decision, dividend decision, and risk management decision, better and more economically viable projects are undertaken by companies. The resultant effect on theeconomy is economic growth and development. Financial management serve as a good guide toonline investing.Improved standard of living, growth and development in the economy that isbrought about by financial management will ultimately translate into improved standard of livingfor all. Improved the health, with good economic condition and improved standard of livingculminates into improved health as a lot of ‘financial stress’ related sicknesses will be completelyeliminated or reasonably reduced. Financial Managment allows for better financial decision, itcreates jobs to those that teach financial management and the jobs that are created as a result of flourishing economy. Better financial decisions will lead to profitability, and profitability willeventually lead to expansion which will in turn mean more jobs. It would alleviate the poverty andpreserves our environment.It promotes efficiency because good financial management does not

give room for wastes and inefficiencies that characterizes poor financial management anddecision making.

2.) Explain each of the roles of the Finance Manager.

 A financial manager is responsible for providing financial advice and support to colleagues andclients to enable them to make sound business decisions. The role of the financial manager ismore than simply accounting; it is multifunctional. Financial managers must understand allaspects of the business so that they are able to adequately advise and support the chief executive officer in decision-making and ensuring company growth and profitability.

Many corporations operate multifunctional teams where the financial manager is responsible for aparticular division or function, or looks after a range of departments and functions. Financial

managers often have specific roles and titles such as;

Controllers prepare financial reports and analyses of future earnings or expenses thatsummarize the organization’s financial position. Controllers are also in charge of preparingspecial reports required by regulatory authorities—especially important because of the Sarbanes–Oxley Act, designed in part to protect investors from fraud.

Treasurers and finance officers direct and oversee budgets, monitor the investment of funds,manage associated risks, supervise cash management activities, execute capital raising

7/27/2019 Filman Alg

http://slidepdf.com/reader/full/filman-alg 2/4

7/27/2019 Filman Alg

http://slidepdf.com/reader/full/filman-alg 3/4

control and elimination of overdue (past-due) receivables. One common w3ay of evaluating thecurrent situation is ratio analysis. The financial manager can determine whether or not accountsreceivables are under control by examining a number of indicators, notably the average collectionperiod, the ratio oof receivables to assets, the ratio of credit sales to receivables (called theaccounts-receivable turn over ratio) and the amount of bad debts relative to sales over time.

 Aging accounts receivable helps determine which customers owe you and for how long, whichmakes it easier to determine whether a customer needs just a simple reminder or needs their account to be written off as bad debt. In doing so, you can effectively determine who to be wary of lending to and who you can trust to repay you in an orderly fashion.

If you’re a new business owner, use common sense before you allow a customer to open acharge account. Really look into his credit payment history and if he doesn't have one or has abad one, make him a cash-only client.

6.) An inventory turm over of X company is 20. Is this a good turn-over? Why or Why not?

 A measure of how long it takes, on average, for a company to sell and replace its inventory.Inventory turnover can help a company or potential investor determine how well the company

manages its inventory. Higher inventory turnover is considered to be desirable.

In this given situation, an inventory turn over of X company is 20, but is not mentioned what kindof goods being sold. There are different types of inventory itemsInferior goods are goods that are low-quality but high-quantity. Goods from Dilao departments, for example, are generally inferior goods that are bought in high quantities. Goods that areperishable is a single-serve good, such as food and drink. With this kind of goods, it is expectedto have a high inventory turn over. Compared to some unperishable and luxury goods, it issomehow expected that they do have a normal to low inventory turn over.

Inventory turnover is a measure of the number of times inventory is sold or used in a time periodsuch as a year. The equation for inventory turnover equals the Cost of goods sold divided by theaverage inventory. Inventory turnover is also known as inventory turns, stockturn, stock turns,

turns, and stock turnover.

Inventory Turnover =Cost of Goods SoldAverage Inventory

7.) Is investment in stocks better that in bonds? Support your answer.

When you buy either bonds or stock, you pay money now with the possibility of getting moremoney later. But a bond represents a debt--the company that issued the bond owes you money tobe paid when the bond is redeemed. A stock represents ownership. As a stockholder, youbecome a part owner of the company.Now, if you ask me which is better? It would basically depend on your investment objectives andtolerence for risk. If you had to pick just one investment, it would depend on how liquid you wantyour funds and how much risk you are willing to take. Stocks are riskier and therefore give ahigher expected return in the long term.

 Also it is important to take into consideration your stage in life, older folks, with little income,should stay conservative and stick to bonds, while younger people can assume more risk.If I were to choose, I would invest on stocks. First, I would examine the porforlio and FinancialStatement of the company that I will be investing, making sure that the company has a goodfinancial stability for many years. I would want my investment to grow with the company I chosedto invest. Also it's very fulfilling to be a part owner of a good standing and dynamic corporation.

7/27/2019 Filman Alg

http://slidepdf.com/reader/full/filman-alg 4/4

Stocks are EQUITY. They represent shares of ownership in a Corporation. A Stockholder isactually one of many owners of a Publicly Owned Corporation. If a Corporation dissolves for anyreason owners of Common Stock (the main type of stock issued) receive the value of the soldassets of the Corporation AFTER everyone else is paid, including the IRS, Employees, Bonds,

 Accounts Payable, etc.Bonds are DEBT. They are sold by the Corporation in order to raise money for various purposesfor use by the company. Bonds offer an interest rate to the Bondholder for the period of time thatthe Bondholder owns the bonds.Since bonds do not represent ownership, the bondholder couldlose their investment if the Corporation dissolves, but are paid BEFORE owners of stock.

II. Synthesis

What have you learned and experienced from the course?

I have learned imperative information in this course that had helped me think and make good andprofitable fiancial decisions. I am very happy to learn about different terminologies, formula andtechniques in accounting. This help me evaluate the Financial forecast I presented to the topmanagement. I learned about the importance of working capital in helping the firm to continuouslysustain its opreration especially during quite periods.

I have learn to appreciate more the Financial statement of our company and helped me evaluatethe past and current financial data. Its deemed important to know the company's performanceand financial position can be evaluated and future risks and potential can be estimated. Financialstatement analysis can yield valuable information about trends and relationships, the quality of acompany's earnings, and the strengths and weaknesses of its financial position.

I would greatly recommend the break-even analysis technique to my own organization. Iunderstood now how important tools it is in business decision making. In the resort that I amcurrently working now, we need to know exactly what the break even occupancy rate is. Thisbreak even occupancy rate can be used in the resort advertising strategy: special packages areoffered during quite periods to keep occupancy levels above the break-even point.