lecture presentation for DA

1. Financial
Management
September18-20,2019
HotelAriana,Bauang,LaUnion
Arlenne C. Espinoza
CDS II

2. Its
Meaning

3. Its
Meaning
The planning, organizing,
directing and controlling the
financial activities of an
enterprise.
Concerns with procurement,
allocation and control of
financial resources.
It refers the efficient and
effective management of money
(funds) in such a manner as to
achieve the goals of the
organization.

4. Some
definitions
“Financial management is the activity
concerned with planning, raising,
controlling and administering of funds
used in the business.” – Guthman and
Dougal
“Financial management is that area of
business management devoted to a
judicious use of capital and a careful
selection of the source of capital in
order to enable a spending unit to
move in the direction of reaching the
goals.” – J.F. Brandley

5. Some
definitions
“Financial management is the
operational activity of a
business that is responsible for
obtaining and effectively
utilizing the funds necessary
for efficient operations.”-
Massie

7. Scope/
Elements
1. Investment decisions
(capital budgeting);
2. Financial decisions
(type of source, and period,
cost & returns of financing;
and
3. Dividend decision –
(shareholders or members
and retained profits)

9. Objectives
1. To ensure regular and adequate
supply of funds;
2. To ensure adequate returns to the
shareholders ;
3. To ensure optimum funds utilization;
4. To ensure safety on investment
(funds should be invested in safe
ventures so that adequate return can
be achieved); and
5. To plan a sound capital structure
(sound and fair composition of
capital-balance is maintained
between debt and equity capital).

11. Functions
1. Estimation of capital requirements
(make estimation with regards to
capital requirements);
2. Determination of capital composition
(involves short-term and long-term debt
equity analysis);
3. Choice of sources of funds (shares,
loans, deposit, bond);
4. Investment of funds (decide to allocate
funds into profitable ventures);
5. Disposal of surplus (dividend & retained
profits);
6. Management of cash; and
7. Financial controls (control over
finances).

13. Importance
 Helps organisations in financial planning;
 Assists organisations in the planning and
acquisition of funds;
 Helps organisations in effectively utilising
and allocating the funds received or
acquired;
 Assists organisations in making critical
financial decisions;
 Helps in improving the profitability of
organisations;
 Increases the overall value of the firms or
organisations;
 Provides economic stability;
 Encourages employees to save money,
which helps them in personal financial
planning.

14. FINANCIAL
PERFORMANCE
STANDARDS
FOR
COOPERATIVES
STEPS for sustainability
1. STABILITY
1.1 Liquidity
Measures the cooperative's ability to
service its members' deposit liabilities
on time or as the members so requires.
1.2 Quick Asset Ratio
Measures the cooperative's ability to
pay its current liabilities using its quick
assets.

15. FINANCIAL
PERFORMANCE
STANDARDS
FOR
COOPERATIVES
1.3 Solvency
Measures the degree of protection that
the cooperative has for members
savings and share capital contribution
in the event of liquidation of the
cooperative's assets and liabilities
1.4 Net Institutional Capital
Measures the level of institutional
capital to absorb potential losses
1.5 Capital Adequacy Rate
Measures the sufficiency of the capital
to cover the risk assets

16. FINANCIAL
PERFORMANCE
STANDARDS
FOR
COOPERATIVES
2. TURN-OVER RATIO
2.1 Asset turn over
Measures how efficiently the cooperative
uses its asset to generate revenue
2.2 Receivable turn-over
2.2.1 Accounts Receivable turn-over
Measures the number of times accounts
receivables are collected within the
reporting period
2.2.2 Loan ReceivableTurn Over
Measures the number of times loans
receivables are collected within the
reporting period

17. FINANCIAL
PERFORMANCE
STANDARDS
FOR
COOPERATIVES
2.2.3 Service ReceivableTurn Over
3. EFFICIENCY
3.1 Administrative Efficiency
Measures the cost of efficiently
managing the cooperative's assets
3.2 Cost of Borrowing Rate
Measures the efficiency of borrowings
in financing its operation
3.3 Cost per volume of Business
Measures the efficiency in managing
the cooperative's business

18. FINANCIAL
PERFORMANCE
STANDARDS
FOR
COOPERATIVES
3.4 Extent ofVolume of Business
Measures the ability of the cooperative
to use the assets to generate business
3.5 Growth in Members' Contribution
Measures the ability of the cooperative
to encourage members to increase
their capital contribution
3.6 Delinquency Rate
Measures the risk of default in the
portfolio or the rate of uncollectible
accounts

19. FINANCIAL
PERFORMANCE
STANDARDS
FOR
COOPERATIVES
3.7 Adequacy of Provisioning of APLL
(over 12 months past due)
Measures the adequacy of the
allowance for expected losses on loans
3.8 Adequacy of Provisioning of 1 to 12
months past due
4. PROFITABILITY
4.1 Return on Assets
To measure the capacity of assets to
generate income

20. FINANCIAL
PERFORMANCE
STANDARDS
FOR
COOPERATIVES
4.2 Return on Member's share
Measures the earning capacity of
member's share capital
4.3 Rate of Net Surplus
Measures the capacity of the
cooperative to generate surplus
5. STRUCTURE OF ASSETS
5.1 Percentage of non-earning asset
over total assets
Measures the percentage of total assets
that are not producing income.

21. FINANCIAL
PERFORMANCE
STANDARDS
FOR
COOPERATIVES
5.2 Percentage of Investment
Measures the degree of assets devoted
to investment
5.3 Extent of Assets financed by
obligations
Measures the extent of assets financed
by external and internal borrowings
5.4 Extent of External Borrowings
Measures the percentage of external
borrowings over total borrowings

22. FINANCIAL
PERFORMANCE
STANDARDS
FOR
COOPERATIVES
5.5 Extent of Assets financed by
Members' Share Capital
Measures the degree of participation of
members' share to total assets

23. References
 https://www.managementstudyguide.com/financial-
management-articles.htm
 freepik.com
 humentum.org
 businessjargons.com
 businessdictionary.com
 startupaplan.com
 https://www.lsbf.org.uk/blog/news/importance-of-financial-
management/117410
 https://www.toppr.com/guides/business-environment/business-
functions/financial-management/
http://www.yourarticlelibrary.com/financial-management/definition-
financial-management/financial-management-definition-nature-
and-objectives-financial-management/69606
 google.com