Learning Objectives This module was written for you to accomplish at home. It was carefully designed so that you can work at your own pace and allow self-discovery of the concept through activities that you will perform. After going through the module, you are expected to: » Define Finance » Describe the primary activities of the Financial Manager » Describe how the financial manager helps in achieving the goal of the organizationWhat is Finance? Finance is a term for matters regarding the management, creation, and study of money and investments. Specifically, it deals with activities such as such as investing, borrowing, lending, budgeting, saving, and forecasting. There are three main types of finance: (1) personal. (2) corporate, and (3) publie/government.Finance vs. Accounting Pa cory ‘The main difference between the two is that those who work in finance manage the assets and liabilities as well as planning and directing the financial transactions for the future growth of the organization. While those who work in accounting focuses on recording and reporting the day-to-day flow of money in and out of a company or institution that are used by management.Finance vs. Accounting Personal Finance Personal finance is the financial management in which an individual or a family unit performs to budget, save, and spend monetary resources over time, taking into account various financial risks and future life events.Finance vs. Accounting Corporate Finance Corporate finance is the division of finance that deals with how corporations deal with funding sources, capital structuring, and investment decisions. Corporate finance is primarily concerned with maximizing shareholder value through long and short-term financial term financial planning and the implementation of various strategies.Finance vs. Accounting Public Finance Also known as Government finance, the study of the role of the government in the economy. Itis the deliberate manipulation of revenues and expenditures of the government as fiscal tools to achieve different objectives.Financial Manager Financial managers are responsible for the financial health of an organization. They produce financial reports, direct investment activities, and develop strategies and plans for the long-term financial goals of their organization. Financial managers work in many places, including banks and insurance companies.Financial Manager Skills of Financial Manager 1. Analytical skills - Financial managers increasingly assist executives in making decisions that affect the organization, a task for which they need analytical ability. 2. Communication skills - Excellent communication skills are essential because financial managers must explain and justify complex financial transactions. 3. Ability to think strategically ~ always find the connection between the decisions made and the trends of today and their impacts on the achievement of the overall goals and objectives of an organization.4. Math skills - Financial managers must be skilled in math, including algebra. An understanding of international finance and complex financial documents also is important. 6. Organizational skills - Financial managers deal with a range of information and documents. They must stay organized to do their jobs effectively 6. Ability to use technology ~ technology also helps in safeguarding confidentiality and the integrity of financial information.Financial Manager Qualities of Financial Manager = 1 Integrity - integrity is defined as a strong quality of being honest. It is a strong adherence to moral standards and uprightness. 2, Attention to detail financial information provided to the stakeholders, especially the decision makers have to be complete and accurate. 3. Ability to multitask — must be capable of wearing many hats and still be focused in key issues that affect the financial well-being of the organization.4, Team player ~required to work with other members of the organization; hence, his or her ability to work in a collaborative environment is imperative. 5. Leadership -leading people means teaching, sharing knowledge, motivating other employees to meet or exceed standards, and encouraging everyone to meet targets. 6. Flexibility -needs to be kept abreast with what the competitors are doing. At the same time, the finance professional is expected to know the customers demand and the trends in the global environment.Primary Activities of Financial Manager - 4 Roles of Financial managers: 20 00 oo Oo Prepare financial statements, business reports, and forecasts Assist executives in making decisions that affect the organization Being aware of special tax laws and regulations that affect them Monitor financial details to ensure that legal requirements are met Supervise employees who do financial reporting and budgeting Review company financial reports and seek ways to reduce costs Analyze market trends to find opportunities for expansion or for acquiring other companiesRole in Achieving Goals Financial managers have a complex and challenging job. They analyze financial data prepared by accountants, monitor the firm’s financial status, and prepare and implement financial plans. The main goal of the financial manager is to maximize the value of the firm to its owners. And to be able to do so, the financial manager has to consider both short- and long-term consequences of the firm's actions, Maximizing profits is one approach, but it should not be the only one. Such an approach favors making short-term gains over achieving long-term goals.Role in Achieving Goals Investment Decision Capital investment decisions are long-term corporate finance decisions relating to fixed assets and capital structure. Decisions are based on several inter-related criteria. Corporate management seeks to maximize the value of the firm by investing in projects which yield a positive net present value when valued using an appropriate discount rate in consideration of risk. Management must allocate limited resources between competing opportunities. Making this, investment decision requires estimating the value of each opportunity or project, which is a function of the size, timing and predictability of future cash flows.Role in Achieving Goals Short-term Investment Short term investment decisions are needed when the company is in an excess cash position. To plan for this, the Financial Manager should be able to make use of Financial Planning tools such as budgeting and forecasting. Moreover, the company should choose which type of investment it should invest in that would provide a most optimal risk and return trade off.Role in Achieving Goals Long-term Investment ¥ 4 if Long term investments should be supported by ¢ capital budgeting analysis which is ameng the responsibilities of a finance manager. Capital budgeting analysis is a tool to assess whether the investment will be profitable in the long run. This is a crucial tunction of management especially if this investment would be financed by debt. The lenders should have the confidence that the investments that management will push through with will be profitable or else they would not lend the company any money.