6.1.

Chapter 1 Matrix: Comparison of Financial Management with Accounting,

Economics, Management, and Finance.

Particulars Financial Accounting Economics Management Finance

Management
Definition/Natur It is a decision A systematic recording A branch of the A set of activities It is a study on how to
e making process of transactions relating social sciences that (including manage large amount of
concerned with to the firm’s activities is concerned with planning and money, more particularly
planning, acquiring in the books of the production, decision making, in large company and
and utilizing funds accounts and consumption, and organizing, governments.
in a manner that summarizing the same transfer of leading, and
achieves the firm’s for presentation in the resources. controlling)
desired goals. financial statements. directed at an
organization's
resources with
the aim of
achieving
organizational
goals in an
efficient and
effective manner.
Scope Mainly concerned Process of identifying, Macroeconomics The purpose of Finance functions
with acquisition, classifying, recording, and having good primarily involve
financing and summarizing and microeconomics. management in a activities like raising
management of analyzing of firm is to funds and investing them
assets. transactions to prepare coordinate the in a company's various
financial statements business assets. Another scope of
that is useful for activities to the financial function is to
making economic desired goa's and balance the inflow and
decision. objectives of the outflow of cash. Finance
company. function primarily
includes decisions –
investment decision,
financing decisions, and
dividend decisions.
Purpose in the Through decision It is to provide financial Understanding To coordinate To help individuals,
organization making it helps to statements to the users economics can give and organize an businesses, and the
maximize the of the company investors the tools organization's government save,
current value per through presentation to predict many operations manage, raise, and
share of the existing of financial information macroeconomic so that those efficiently use the money
stock or ownership of the entity to make a conditions and actions may to the best of its ability to
in a business firm. In decision. understand the contribute to the maximize cash flows or
other words, to implications of company maximize profit.
make money and those predictions on achieving its
add value for companies, stocks, goals. Using a
owners. and financial company's
markets. resources most
effectively and
productively is
one of the most
important
aspects of good
 business
management.
Users of The Finance Internal and External Finance Managers The top level of External users such as
Information Managers of the Users the management Stakeholders,
Firm such as Board of regulatory bodies and the
Directors. public.
Goal It is to maximize the It is to accurately are necessary to be Proper It covers the need of
wealth of the record and report an pursued to achieve management to fund arises in order to
shareholders, organization’s financial the profit objective, meet the meet the expenses of
making profit while performance that is which include, objectives of the establishment of
not engaging in essential to decision creation of organization. business in order to
unethical practice. makers. customers, operate.
regular innovations
and best possible
use of available
resources.
Importance/Sig It helps a business To maintain a It enables people to It helps in Finance plays a vital role
nificant to organize its systematic, accurate understand people, Achieving Group in the success of
finances and and complete record of businesses, markets Goals - It businesses. It provides
acquire the all financial and governments, arranges the companies with the
necessary capital. It transactions of a and therefore factors of necessary funds to start,
is crucial for business. These records better respond to production, operate and expand their
efficient and are the backbone of the threats and assembles and operations. Without
effective use of the accounting system. opportunities that organizes the adequate finance,
borrowed money. Business owners should emerge when things resources, businesses cannot pay
Businesses need be able to retrieve and change. integrates the for essential resources
financial review the transactions resources in such as employees,
management to whenever required. effective manner supplies or equipment
make financial to achieve goals. needed to maintain daily
decisions. It directs group operations.
efforts towards
achievement of
pre-determined
goals.
 6.2. Chapter 2 Matrix: Comparison of Investing, Financing, and Operating Decision
Making

Particulars Investing Decision Making Financing Decision Making Operating Decision Making

Function Determine how scarce or limited Assert that the mix of debt and Managing the firm’s working
resources in terms of funds of equity chosen to finance capital is a day-to-day
the business firms are investments should maximize responsibility that ensures
committed to projects. the value of investments made. that the firm has sufficient
resources to continue its
operations and avoid costly
interruptions.
Purpose Investing Decision Making deals Financing decisions call for good Operating Decision Making
with allocating financial knowledge of costs of raising involve in implementing
resources to obtain the highest funds, procedures in hedging monitoring, and improving
possible return. risk, different financial the processes, procedures,
instruments and obligation and tasks that support your
attached to them. strategic goals.
Goal Concerned with maintaining a Concerned with funding the Concerned with operational
balance between long-term and company's operations. The details, daily resource
short-term goals so that the company has a number of allocation, inventory control,
company is able to invest for its options available when it comes and delivery routing to
long-term growth in addition to to financing: it can use earnings maximize product flow along
maintaining its liquidity in the generated internally or borrow biomass-based production
short run. In addition, when from outside. When borrowing chains.
making long-term investment from outside, it has to decide
decisions, the company is faced between diluting the ownership
with a number of choices. stake or taking a loan.
Investing decisions help
managers choose the
investment that will provide the
maximum benefits.
Importance In organizations, investment Financial decision is Operational decisions breathe
decisions are crucial for growth important to make wise life into your business
and profitability—impact cash decisions about when, where strategy and make sure that
flows—have a long-term impact and how should a business the company operates
as many of these decisions are acquire fund. Because a firm efficiently, from top to
irreversible. Even with limited tends to profit most when the bottom. This is why these
funds, individuals can obtain market estimation of an types of decisions have
impressive returns if the organization's share expands far-reaching implications for
investment is well-planned. and this is not only a sign of the sustainability and growth
development for the firm but of companies.
also it boosts investor's wealth.
 6.3. Chapter 3 Matrix: Organizational Structures
Organizational Position Operational Function Corporate Governance Monitor
Function

Tasked to monitor the day-to-day operations Oversight of the company; ensures that the
Board of Directors of the firm: sets company-wide policies and management acts based on the
advises the CEO and other executives shareholder's best interest
A chairperson operates with the board of Leading the Board and overseeing the
Chairman of the Board directors, which assesses the company but company with its compliance with good
doesn't operate within it or implement corporate governance standards.
strategies.
Chief Executive Officer The CEO is within the company and They are accountable to the board of
experiences the daily operations and directors or stakeholders of the company
functions and responsible for making major and are often the public face of the
corporate decisions, managing overall organization.
operations, and setting the company's
strategic direction.
This person manages and handles the daily They oversee the various departments and
business operations of the company, ensure that everything is running smoothly
President and Chief Operations Officer working closely with department heads and includes managing employees, setting goals
supervisors to support the day-to-day and objectives, and monitoring progress.
activity of employees. Also,responsible for implementing the
strategic vision of the company and
executing plans to achieve it.
Take charge of a company's marketing team. Developing and implementing a cohesive
They handle strategic brand management, marketing plan to increase brand awareness.
Vice President for Marketing review budgets, set goals, conduct market Setting current and long-term goals for
research, and help maintain an appropriate internal teams. Designing and reviewing the
image of the company. Marketing department's budget.
Ensuring clear roles and responsibilities on
Directly reports to the president or CEO the team, segregation of duties, and tight
Vice President for Finance regarding the internal controls that can stand up to
testing.
Primarily tasked to manage the cash and Oversees the general financial management
Treasurer credit of the firm, tasked to monitor of an organizing committee.
investments financing, and asset
management
Its function involves accounting wherein cost Safeguarding assets: internal controls help
Controller accounting budgeting and forecasts are prevent asset loss due to mistakes or fraud.
involved Minimizing errors: internal controls ensure
that financial information is carefully
reviewed to reduce errors.
Plans and directs the development and Ensuring the compliance of the franca
Vice President for Production manufacture of goods produced by that statements to it corresponding standards
company. It is their responsibility to ensure
that the best and most efficient methods are
used in the production of their company's
products.
 6.4. Matrix of Organizations that make Financing Decisions:

Organization Advantages Disadvantages Financial Management Decision

Challenges

Sole  Ease of entry and exit  Unlimited liability  Small amount of capital
Proprietorship  Full ownership and control  your capacity to raise capital is  Less profitable
 Tax savings limited  Unlimited Liability
 Few government  Limitation in raising capital  Lots of expenses
regulation  Lack of continuity

Partnership  Ease of formation  Unlimited liability  Fairness in sharing profits

 Additional sources of  Lack of continuity  Too much debt (especially
capital  Difficulty of transferring for a general partnership
 Management base ownership
whose personal assets can
 Tax implication  Limitations in raising capital
be used to pay to the
creditors)
 Proper allocation of
funds?
For-Profit  Limited liability  Time and cost of operation  Investing in other
Corporation  Unlimited life  Regulation businesses and assets
 Ease in transferring  Taxes  Declaring of dividends for
ownership
the shareholders
 Ability to raise capital

Not-for-profit:  Able to Receive Grants  Limit on Revenue Generation  Allocation of capital

Cooperative and Offer Tax Deduction  No Ability to Take Equity  Payment of debts
to Donors Investments
 tax-exempt status
 Insufficient funds
 No Unique Branding
 Open membership  Legal Restrictions to some
 Social Benefit countries
 Less Liability  Not enough profit generated

Not-for-profit:  Expanded giving  Greater regulatory  Investment of Assets

Foundation opportunities requirements  Long term sustainability
 Tax benefits  Substantial time  Stability of availability of
funds
 Stronger public and commitment and costs
 Limited funding source
community  More detailed
relationships record-keeping
 Greater freedom to requirements
take action