CHAPTER 10 FINANCIAL MANAGEMENT

FINANCIAL MANAGEMENT DEFINED Financial Management refers to activities that are concerned with securing money and using it properly. The entrepreneur as financial manager must define the best ways to raise money.

FINANCING THE ENTERPRISE Many poor Filipinos wish they have seed capital in order to put up their own micro businesses. In the rural areas, some folks like to put up backyard poultry or piggery projects for additional incomes. In the cities, business oriented individuals like to own a sari-sari-store, a small bakery a beauty parlor or a small restaurant.

COOPERATIVE FOR MICRO BUSINESS A credit cooperative usually charges one percent interest plus a nominal service charge. In a cooperative, a portion of the net savings is returned to the members in the form of interest payments for their savings and share capital, and patronage refund for those who patronize their cooperatives.

OTHER SOURCES OF FUNDS Short-term financing (one year or less) A. Trade Credit. Goods are delivered to retailers on consignment basis. B. Promissory Notes. This is a written pledge by a borrower to pay a certain sum of money to a lender at a specified future date. Such loan entails an interest. C. Unsecured Bank Loans. Commercial banks grant unsecured to short term to their customers at interest rates that vary in accordance with their credit ratings. D. Commercial Paper. This is a short-term promissory note issued by big corporations.

Long Term Financing (more than one year) A. Loans. Many firms finance their long-range activities from loans borrowed form banks and other financial institutions. B. Stock. This is a certificate of ownership. A stock is classified as common and preferred. Holders of common stock can elect directors and can decide major corporate actions. C. Bond. This is a certificate of indebtedness. It pledges to repay a specified amount of money with interest. Such certificate indicates also a maturity date.

NEED FOR FINANCIAL MANAGEMENT Money is the most important resource of any business organizations. Without money, there is no business at all. Money is needed to start a business.

Good Financial Management can ensure the ff: 1. Financing priorities are established in accordance with organizational objectives. 2. Spending is planned and controlled in line with established priorities. 3. Adequate funding is available when it is needed, now and in the future. 4. Funds are obtained and used efficiently.

DEVELOPING THE FINANCIAL PLAN A financial plan is a course of action for obtaining and using the money that is needed to implement the goals of the business organizations.

Here are the three steps involved in financial planning: 1. Establishing objectives 2. Budgeting 3. Identifying sources of funds There are four primary types of financing a business enterprise: a. Income from sales b. Owners money and sales of shares of stock c. Borrowing from friends, relatives, and financial institutions and issuing bonds d. Sale of some property of the enterprise as a last resort.

EVALUATING FINANCIAL PERFORMANCE Plans are simply written statements. These are useless if they are not implemented. In the government, there are numerous plans and programs which are very good. But many of them have not been implemented for lack of funds.

THE BALANCE SHEET The balance sheet is composed of three basic parts: 1. Assets Current assets Fixed assets 2. Liabilities 3. Capital Assets = Liabilities + Capital

Basic Books To Keep 1. Purchase Journal 2. Sales Journal 3. Cash Disbursement Journal 4. Cash Receipt Journal

THANK YOU!!! REPORTED BY: Airene Pastrana Sarah Jane Madrona Alyssa Mae Marquez Cyrene Joy Reyes BSBM 302-A