OVERVIEW OF

FINANCIAL
MANAGEMENT
 Money management and the
process of acquiring needed
funds.
A study of money, banking,
The management of credit, investments, assets and
large amounts of liabilities that make up
money by the financial system.
government or large
companies

WHAT IS FINANCE?
FORMS OF BUSINESS ORGANIZATION

SOLE PROPRIETORSHIP PARTNERSHIP CORPORATION COOPERATIVE

S CORPORATION

LIMITED LIABILITY
COMPANY

ONE PERSON
CORPORATION
 The simplest form and most common form of business
ownership.
 The business is owned and run by an individual for their
own benefit.
 The business’ existence is entirely dependent on the
owner’s decision, so when the owner dies, so does the
business.
 The most popular form of business ownership.
o Association of two or more persons to act as co-
owner of a business for profit
o No legal limit on the maximum number of
partner; most have only two
o Firm’s income is usually allocated on a pro-rated
basis.
TYPES OF PARTNERSHIP
CORPORATION
 IS A LEGAL ENTITY, SEPARATE FROM ITS OWNERS
 MOST COMMON TYPE OF CORPORATION IS A “C” CORPORATION
 OWNED BY STOCKHOLDERS
 ARTICLES OF INCORPORATION MUST BE FILED AND CORPORATE BYLAWS ADOPTED
 OWNERS ARE NOT PERSONALLY LIABLE FOR DEBTS OF CORPORATION
 NOT A SEPARATE TAXABLE ENTITY, TAXES ARE FILED THROUGH OWNER’S PERSONAL TAX
RETURN
 CAPITAL IS RAISED THROUGH SALE OF STOCK AND DEBT ISSUE
SPECIAL ELEMENTS OF CORPORATION
 STOCK – SHARES OF OWNERSHIP OF A CORPORATION
 COMMON STOCK – HAS THE VOTING PRIVILEGES
 PREFERRED STOCK – NO VOTING PRIVILEGES; DIVIDENDS PAID FIRST
 STOCKHOLDER – A PERSON WHO OWNS A SHARES OF A CORPORATION’S STOCK
 DIVIDEND – A PORTION OF THE CORPORATION’S PROFIT (EARNING) THAT IS DISTRIBUTED
TO ITS SHAREHOLDERS
 BOARD OF DIRECTORS – GOVERNING BODY OF THE CORPORATION
 CLOSED (PRIVATE) CORPORATION – CORPORATION WHOSE STOCK IS OWNED BY
RELATIVELY FEW PEOPLE AND IS NOT SOLD TO THE GENERAL PUBLIC
 OPEN (PUBLIC) CORPORATION – A CORPORATION WHOSE STOCK IS BOUGHT AND SOLD ON
SECURITY EXCHANGES AND CAN BE PURCHASED BY ANY INDIVIDUAL
 IS A FORM OF CORPORATION
THAT MEETS SPECIFIC
INTERNAL REVENUE CODE
REQUIREMENT.
 S corps are restricted to no more than
100 shareholders,
ONE PERSON CORPORATION

 RA 11232 (REVISED
CORPORATION CODE OF THE
PTHILIPPINES) February 23,
2019
 A corporations with only one
stockholder, and be able to enjoy
the rights and privileges that
traditionally organized corporations
are entitled to.
 hybrid forms of business that have characteristics of both a corporation and a partnership.
 LLC is not incorporated; hence, it is not considered a corporation.
 Nonetheless, the owners enjoy limited liability like in a corporation.
 An LLC may elect to be taxed as a sole proprietorship, a partnership, or a corporation.
  COOPERATIV
E
 is a business organization owned by a group of individuals and is operated
for their mutual benefit.
 The persons making up the group are called members. Cooperatives may be
incorporated or unincorporated.
 SOLE PARTNERSHIP CORPORATION S CORPORATION ONE PERSON LIMITED COOPERATIVE
PROPRIETORSHI CORPORATION LIABILITY
P COMPANY
OWNERSHIP Business is owned and Two or more partners Formed under state and Structured like C Structured like C Created by statute; Owned by group of
operated by one person jointly own and operate federal law; separate Corporation but taxed Corporation but with owned by members individuals (members)
the business entity from owners like a partnership only one stockholder and is operated for
their mutual benefits

START-UP Easiest form to set-up; Easy to form and File article of Article of incorporation Article of Articles of organization Article of
REQUIREMENT no required state or operate; no required incorporation with the is required incorporation; specific is required; specific incorporation; specific
federal filings paperwork; written state in which it is paperwork is required paperwork is required paperwork is required
partnership agreement incorporated; specific by the state by the state by the state
is recommended paper-work required

TAXES Profits are taxed once; Profits are taxed once; Subject to double Each shareholder Same as Corporation Taxed like general Members are taxed
profits and losses profits and losses taxation; profit and reports share of profit partnership or S once on their income
reported on reported on each losses reported on and losses on Corporation from the cooperative
individual’s tax return partner’s tax return corporate tax return individual return. S itself, and not
Corporation doe s not separately on an
pay taxes individual and
corporate level.

LIABILITY The owner’s personal Each partner’s personal Owner’s personal Same as Corporation Same as Corporation Same as Corporation Same as Corporation
asset are at risk assets are at risk assets are not at risk,
unless personal
negligence or fault is
involved

TERMINATION Desire or death of the Terminates by Formal dissolution is Same as Corporation Same as Corporation Same as Partnership Same as Corporation
owner agreement of partners, required; not affected
or death or withdrawal by death or departure
of partner of owner
3 AREAS OF FINANCE
 FINANCIAL MANAGEMENT

 Focuses on the decisions relating to how much and what types of assets to
acquire, how to raise the capital needed to purchase assets, and how to run
the firm so as to maximize its value.
 CAPITAL MARKET

 Relates to the markets where interest rates, along with stock and bond prices,
are determined.
 Studies the financial institutions that supply capital to business.
 INVESTMENT

 Relate to decisions concerning stocks and bonds and include a number of

activities:
 Security Analysis – deals with finding proper values of individual security
 Portfolio Theory – deals with the best way to structure portfolio
 Market Analysis – deals with the issue of whether stock and bond markets are at any
given time are “too high”, “too low” or “about time”.
WHAT IS THE PRIMARY GOAL
OF THE MANAGEMENT?
PROFIT MAXIMIZATION

WEALTH MAXIMIZATION
 PROFIT MAXIMIZATION

 A terms which denotes the maximum profit to be earned by an organization

in a given period of time
 This goal implies that the investment, financing and dividend decisions of the
enterprise should be oriented to profit maximization.
 WEALTH MAXIMIZATION

 When business managers try to maximize the wealth of their firm, they are
actually trying to increase the company's stock price. As the stock price
increases, the value of the firm increases, as well as the shareholders' wealth.
 PROFIT MAXIMIZATION WEALTH MAXIMIZATION
Its main objective is to earn large amount of profits Its main objective is to achieve highest market value of
common stock

It emphasize short term It emphasizes long term

It ignores time value of money It considers time value of money

It ignores risk and uncertainty It recognizes risk and uncertainty

 An estimate of a stock’s “true” value based on accurate risk
and return data.
 Can be estimated but nit measured precisely
 Fundamental analysis
 MARKET PRICE

 The stock value based on perceived but possible incorrect information as

seen by the marginal investor
 Technical analysis
  The situation in which the actual market price equals the intrinsic value, so
investors are indifferent between buying or selling a stock.

EQUILIBRIUM
BUSINESS TRENDS

 Increased globalization
 Improving Information Technology
 Changes in Corporate governance
THANK YOU 