St. Vincent College of Cabuyao: Answer

ST.
VINCENT COLLEGE OF CABUYAO

Brgy. Mamatid, City of Cabuyao
Laguna 4025
MELGAREJO, JOYCELYN D
BSA 2B
Assignment #1 - Chapter 1 Nature, Purpose and Scope of Financial Management

ANSWER:
1. Financial management is the process of making decisions for the acquisition, use, and repayment of capital. Also,
dealing with the planning, organizing, and controlling of financial activities like the procurement and utilization of
funds. Decisions for the acquisition of capital can include how the business is organized, what type of capital should
be obtained, and how much capital should be obtained. Decisions for the uses of capital include what new business
projects to invest in, what capital to retain to fund ongoing projects, and to reduce taxation. Decisions for the
repayment of capital involve paying capital back to its providers
2. The planning of financing activities for the optimum utilization of financial resources and generating profits through
investing in shares and bonds is known as financial management. Financial managers are appointed for planning
financial activities. While, Accounting is simply an art of record keeping. It may be defined as the process of
recording, classifying, summarizing, analyzing and interpreting the financial transactions and communicating the
results thereof to the persons interested in such information.
3. 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. Why it is
a better goal than maximizing profit? One of the reasons is that profit maximization does not take the concepts of
risk and reward into account as shareholder maximization does. The goal of profit maximization is, at best, a short-
term goal of financial management.
4. (1) Investor, The owner of a business. Investors have the right to accurate and timely information such as regular
financial statement. (2) Creditors, a business typically has right such as access to accurate and timely financial
statement. (3) Communities that are impacted to your business. (4) Employees and other individual contribution to
your organization. (5) Partners such as supplier and distribution partners. (6) Trade Union maybe informed and
consulted about things such as workers safety. (7) Customer who depend on your product or service.
5. Managers do what the board instructs them to do, and the board acts in the interests of stakeholders, with
shareholders as one important group of stakeholders. So, the interests ought to be aligned. While attempting to
benefit shareholders, managers often encounter conflicts of interest. The chief goal of current corporate governance
is to eliminate instances when shareholders have conflicts of interest with one another. Advocates of governance
typically encourage corporations to respect shareholder rights, and to help shareholders learn how and where to
exercise those rights. Disclosure and transparency are intertwined with these goals.
6. (1) Investment Decision - It is more important than the other two decisions. It begins with a determination of the
total amount of assets needed to be held by the firm. In other words, investment decision relates to the selection of
assets, on which a firm will invest funds. (2) Financing Decision- After estimation of the amount required and the
selection of assets required to be purchased, the next financing decision comes into the picture. Financial manager is
concerned with makeup of the right-hand side of the balance sheet. It is related to the financing mix or capital
structure or leverage. Financial manager has to determine the proportion of debt and equity in capital structure. (3)
Dividend Decision - which relates to dividend policy. Dividend is a part of profits, which are available for distribution
to equity shareholders. Payment of dividends should be analyzed in relation to the financial decision of a firm.
7. The main goal that always motivates all actions of a financial manager is the uninterrupted financial health of the
company. The board of directors is in charge of setting direction and performance goals for the CEO to carry out.
II.
1. C
2. B
3. B
4. C
5. D
Assignment #2 – Chapter 2 Relationship of Financial Objectives to Organizational Strategy and other

Organization Objectives
1. Many different goals are conceivable. One of example is revenue minimization because providing their goods and
services to society at the lowest possible cost. Another might be to observe that even a not-for-profit business has
equity. Therefore, the goal may be to maximize the value of the equity.
2. Managers are not motivated towards long-term profits because their employment compensation is attached to
short-term results. A company's profit is not necessarily tied to the value of its stock. It is much more complicated
than that. Managers shouldn't pay much attention at all to stock value unless they own stock in the company.
3. The basis of compensation for CEO’s and way of measuring performance if based on the performance, it is easier to
measure the growth rate in reported profits than the intrinsic value, although reported profits can be manipulated
through aggressive accounting procedures and intrinsic value cannot be manipulated. One of the tools to motivate
the managers to work on the behalf of the stockholders and to protect the stockholder’s interest.
4.
5. Actions that the stockholders may take to ensure management and stockholders interest are aligned. Create a fair
and effective executive compensation plan, Direct stockholder interventions regarding management decision and
Fire underperforming managers and executives.
6.
7.
II.
1. C
2. C
3. B
4. B
5. D
Assignment #3 – Chapter 3 Functions of Financial Management
1. The treasurer’s office and the controller’s office report directly to the chief financial officer. The treasurer’s office is
responsible for cash and credit management, capital budgeting, and financial planning.
2. An argument can be made either way. At one extreme, we could argue that in a market economy, all of these things are
priced. This implies an optimal level of ethical and/or illegal behavior and the framework of stock valuation explicitly
includes these. At the other extreme, we could argue that these are non-economic phenomena and are best handled
through the political process. Maintaining and Controlling what's inside the business affects it growth, because the people
and environment inside it is the foundation of the company and avoiding unethical behavior for the goodwill of the firm can
attract mor investors.
3. The goal will be the same, but the best course of action toward that goal may require adjustments due different
social, political, and economic climates.
4. Executive compensation is the price that clears the market. A primary reason of executive compensation has grown
so dramatically is that companies have increase moved to stock-based compensation.
5. Corporate governance is about enabling organizations to achieve their goals, control risks and assuring compliance.
But, to avoid mismanagement, good corporate governance is necessary to enable companies operate more
efficiently, to improve access to capital, mitigate risk and safeguard stakeholders.
6. The difference between the two of this are the internal auditors work within an organization and report to its audit
committee and/or directors. They help to design the company’s organizing systems and help develop specific risk
management policies. They also ensure that all policies implemented for risk management are operating effectively.
The work of the internal auditor tends to be continuous and based on the internal control systems of a business of
any size. While, external auditors are independent of the organization they are auditing. They report to the
company’s shareholders. They provide their experienced opinion on the truthfulness of the company’s financial
statements and perform work on a test basis to monitor systems in place.
7. The controller is more involved in the presentation of financial statements, while the treasurer takes over to decide
how to handle the money. While the treasurer builds relationships with investment banks to agree on the best
ventures to grow the company’s funds, while the controller discusses the best interest for loans.
II.
1. D
2. D
3. C
4. D
5. B

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ST.

VINCENT COLLEGE OF CABUYAO

Assignment #1 - Chapter 1 Nature, Purpose and Scope of Financial Management

Assignment #2 – Chapter 2 Relationship of Financial Objectives to Organizational Strategy and other

Assignment #3 – Chapter 3 Functions of Financial Management

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