 Job Opportunities

FINANCIAL MANAGEMENT o Broker

o Branch Manager
Topic: Introduction
o Insurance Advisor
Basic Areas of Finance International Finance

1. Corporate Finance: Finance in large  This is an area of specializations

corporations (Treasury Department) within each of the areas discussed
2. Investments: Banking Institutions, so far.
Insurance  It may allow you to work in other
3. Financial Institutions: Banking countries or at least travel on a
Institutions regular basis.
4. International Finance o Example: If a Filipino CPA
decided to enter the field of
Investments International Finance, they
can be an ASEAN Certified
 Work with financial assets such as Public Accountant wherein
stocks and bonds (Important for this they can adopt the
to generate HIGH returns) International Finance
o You can invest directly (BDO because of the ASEAN
Nomura) or indirectly (banks) integration.
 Value of financial assets, risk versus  Need to be familiar with exchange
return, and asset allocation rates and political risk
 Job opportunities  Need to understand the customs of
o Stockbroker or financial other countries; speaking a foreign
advisor language fluently also helps.
o Portfolio manager
o Security analyst Why Study Finance?

Financial Institutions  Marketing

o Budgets, marketing research,
 Companies that specialize in marketing financial products
financial matters  Accounting
o Banks: commercial and o Dual accounting and finance
investment, credit unions, function, preparation of
savings and loans financial statements
o Insurance Companies:  Management
insurance innovations such o Strategic thinking, job
Variable Universal Life performance, profitability
Insurance or VUL (wherein  Personal Finance
you invest with that insurance o Budgeting, retirement
“2-in-1”) planning, college planning,
o Brokerage Firms: stocks day-to-day cash flow issues
Business Finance o How do we manage the day-
to-day finances of the firm?
 Important questions answered by Forms of Business Organization
finance:
o What long term investments  Sole Proprietorship (under DTI)
should the firm take on?  Partnership (under SEC)
o Where will we get the long o General
term financing to pay for the o Limited
investments?  Corporation (mandated by law)
o How will we manage the  Cooperative
everyday financial activities
of the firm? Goal of Financial Management

Financial Manager 1. Maximize profit

2. Minimize cost
 They try to answer some, or all, of 3. Maximize market share
the questions presented above. 4. Maximize the current value of the
 Chief Financial Officer (CFO): the company’s stock
top financial manager within a firm
 Under the CFO are the ff.: Sarbanes-Oxley Act
o Treasurer: oversees cash
management, credit  Purpose: to protect investors,
management, capital employees, and the public from
expenditures, and financial fraudulent financial reporting by
planning corporations.
o Controller: oversees taxes,  Passed in the year 2002
cost accounting, financial  Key provision: disclosure
accounting, and data
The Agency Problem
processing
o Accountant
 Agency relationship
o Principal hires an agent to
Financial Management Decisions
represent its interest
 Capital Budgeting o Stockholders (principal) hire
o What long term investments managers (agent) to run the
or projects should the company
business take on?  Agency problem
 Capital Structure o Conflict of interest between
o How should we pay for our principal and agent
assets?  Management goals and agency cost
o Should we use debt or
Managing Managers
equity?
 Working Capital Management
 Managerial compensation
 o Incentives can be used to o Capital Market: where long
align management and term capital funds in debt
stockholders interest and equity are transacted
o The incentives need to be o Money Market: where short
structured carefully to make term capital is obtained
sure that they achieve their  Specific Classifications:
goals o Debt/Bond market (Domestic
 Corporate control & Foreign)
o The threat of takeover may o Equities market
result in better management o Futures market (part of
 Other stakeholders derivatives)
o Forwards market (part of
Financial Management in a Nutshell derivatives)
o Options market
 What is the cost and benefit of
 Major Players:
operating, investing, and financial
o Institutional players and
management decisions? Statement
of Cash Flow investors
o Investment banker and
 What are the risks and returns
associated with these management underwriters
decisions? o Banks and Insurance
companies
Understanding Financial Markets o Fund managers
 In summary,
 What is the financial market?
 What are the structures of the
market?
 What are its functions?
 What are the determinants of
financial market conditions?

Financial Market

 Venue for financial exchange

between suppliers of capital and
users of capital. Users may be
suppliers and suppliers may be user
 Determinants of Market
of capital.
Condition:
 Financial Institutions (Banks,
o Environmental Factors:
Insurance Companies)
political/regulatory,
 Price discovery mechanism
economic, social,
 Reduces cost of information and technological,
research environment, legal
 Structures:
 (PESTEL Analysis, more  IPO Model
on external) o Emphasis on the Corporate
o Industry factors: rivalry Value which is the
among firms, threat of Stakeholders.
new entrants, threat of o Corporate Value (or Firm
substitutes, bargaining Value Creation): tangible and
power of the buyers, and intangible objects to create
bargaining power of the value. (due care)
suppliers (Porter’s 5
Forces)
 External Factors that Affects
Financial Markets:
o Global Issues
 Geopolitics
o International finance &
trade
 Capital and fund
transfers
 International trade
o Government intervention  Functional Chart Model
 Government fiscal  Intermediation Model
policy
 Taxation
 Gov’t.
spending
 Government
monetary policy
 Interest
 ForEx
 Inflation
 Impact of Factors on Financial
Market
o Risks  CAM Model
o Returns and cash flow
o Liquidity
o Cost of financing
o Access to financing
o Types of financial
products
o Price and valuation

Financial Models and Frameworks

Financial Management Objectives

Corporate Value

 Components of Goodwill
o Brand equity
o Future earning potential
o Market dominance
o Location
o Track record
o Organizational capital
o Human/intellectual capital