ACTS COMPUTER COLLEGE OF INFANTA

General Luna St. Infanta, Quezon Province

SENIOR HIGH SCHOOL DEPARTMENT
_____________________________________________________________________________________

Subject: Learning Module in Business Finance

Program: Accounting, Business & Management (ABM)
Prepared by: Joven R. Barnedo (Instructor)

Lesson 4: IDENTIFYING THE ROLES IN A CORPORATE ORGANIZATION

Learning Outcomes:
At the end of the lesson, you will be able to:

 Explain the major roles of financial management and the different individuals involved.
 Explain the flow of funds within an organization – through and from the enterprise—and the role of

 Understand the key positions in a corporate organization and identify the roles of each.
 Identify the primary activities of the financial manager.
 Write a reflective essay and share good ideas on smartest thing students can do in their money.
 Illustrate and define the organizational structure of Bangko Sentral ng Pilipinas.

Discussion Board:

The Corporate Organization Structure

Every organization has corporate structure to illustrate the roles and functions of each employee. It also
shows the corporate organization structure and inform them that this particular set of people each play a
role in the decision making of the company.

From the diagram presented, each line is working for the interest of the person on the line above them.
Since the managers of the company are making decisions for the interest of the board of directors and the
board of directors do the same for the interests of the shareholders, it follows that the goal of each
individual in a corporate organization should have an objective of shareholders’ wealth maximization.
(Cayanan, A. 2015)

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 ACTS COMPUTER COLLEGE OF INFANTA
General Luna St. Infanta, Quezon Province
SENIOR HIGH SCHOOL DEPARTMENT
_____________________________________________________________________________________

Let us discuss briefly the roles of each position identified. Enjoy learning.
Shareholders: The shareholders elect the Board of Directors (BOD). Each share held is equal to one
voting right. Since the BOD is elected by the shareholders, their responsibility is to carry out the objectives
of the shareholders otherwise; they would not have been elected in that position.

Board of Directors: The board of directors is the highest policy making body in a corporation. The board’s
primary responsibility is to ensure that the corporation is operating to serve the best interest of the
stockholders.

The Responsibilities of a Board of Directors

 Setting policies on investments, capital structure and dividend policies.
 Approving company’s strategies, goals and budgets.
 Appointing and removing members of the top management including the president.
 Determining top management’s compensation.
 Approving the information and other disclosures reported in the Financial statements (Cayanan
2015)

The Responsibilities of a President or Chief Executive Officer (CEO)

 Overseeing the operations of a company and ensuring that the strategies as approved by the
board are implemented as planned.
 Performing all areas of management: planning, organizing, staffing, directing and controlling.
 Representing the company in professional, social, and civic activities.
 Carries out the decision making for all functions

VP for Marketing: The following are among the responsibilities of VP for Marketing
 Formulating marketing strategies and plans.
 Directing and coordinating company sales.
 Performing market and competitor analysis.
 Analyzing and evaluating the effectiveness and cost of marketing methods applied.
 Conducting or directing research that will allow the company identify new marketing opportunities,
e.g. variants of the existing products/services already offered in the market. 6. Promoting good
relationships with customers and distributors. (Cayanan, A. 2015)

VP for Production: The following are among the responsibilities of VP for Production:
 Ensuring production meets customer demands.
 Identifying production technology/process that minimizes production cost and make the company
cost competitive.
 Coming up with a production plan that maximizes the utilization of the company’s production
facilities.
 Identifying adequate and cheap raw material suppliers. (Cayanan, A. 2015)

VP for Administration:
 Coordinating the functions of administration, finance, and marketing departments.
 Assisting other departments in hiring employees.
 Providing assistance in payroll preparation, payment of vendors, and collection of receivables.
 Determining the location and the maximum amount of office space needed by the company.

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 ACTS COMPUTER COLLEGE OF INFANTA
General Luna St. Infanta, Quezon Province
SENIOR HIGH SCHOOL DEPARTMENT
_____________________________________________________________________________________

 Identifying means, processes, or systems that will minimize the operating costs of the company.
(Cayanan, A. 2015)
Flow of Funds within an Organization through and from Enterprise
and the Role of the Financial Manager

Functions of a Financial Manager

The four functions of a VP for finance (CFO) are as follows:
 Financing
 Investing
 Operating
 Dividend Policies

Recall from the previous lesson that there are situations when we are faced with lack of funds. Financing
decisions include making decisions on how to fund long term investments (such as company expansions)
and working capital which deals with the day to day operations of the company (i.e., purchase of inventory,
payment of operating expenses, etc.).

The role of the VP for Finance of the Financial Manager is to determine the appropriate capital structure of
the company. Capital structure refers to how much of your total assets is financed by debt and how much is
financed by equity. To illustrate, show/draw the figure below:

Recall that Assets = Liabilities + Owner’s Equity. To be able to acquire assets, our funds must have come
somewhere. If it was bought using cash from our pockets, it is financed by equity.

On the other hand, if we used money from our borrowings, the asset bought is financed by debt. In the
figure above, the total assets is financed by 60% debt and 40% equity.
Accordingly, the capital structure is 60% debt and 40% equity. Try to analyse. Are there ideal mixture of
debt and equity across corporations? Try to express inner understanding as a manager. Explain your
answer.

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 ACTS COMPUTER COLLEGE OF INFANTA
General Luna St. Infanta, Quezon Province
SENIOR HIGH SCHOOL DEPARTMENT
_____________________________________________________________________________________

The answer is None.

The mix of debt and equity varies in different corporations depending on management’s strategies. It is the
responsibility of the Financial Manager to determine which type of financing (debt or equity) is best for the
company.

Recall that, investing is where to put your excess cash to make it more profitable. We expand that
definition by including cash held taken from funds as a result of financing decisions. Investments may either
be short term or long term.

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. https://int.search.myway.com/search/AJimage.jhtml?

Long Term Investments should be supported by a capital

budgeting analysis which is among 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 function 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.
https://int.search.myway.com/search/AJimage.jhtml?

Operating Decisions deal with the daily operations of the company. The role of the VP for finance is
determining how to finance working capital accounts such as accounts receivable and inventories. The
company has a choice on whether to finance working capital needs by long term or short term sources.
Why does a Financial Manager need to choose which source of financing a company should use? What do
they need to consider in making this decision?

Short Term sources are those that will be payable in at most 12 months. This includes short-term loans
with banks and suppliers’ credit. For short-term bank loans, the interest rate is generally lower as compared
to that of long-term loans. Hence, this would lead to a lower financing cost. Suppliers’ credits are the
amounts owed to suppliers for the inventories they delivered or services they provided.

Long term sources, on the other hand, mature in longer periods. Since this will be paid much later, the
lenders expect more risk and place a higher interest rate which makes the cost of long term sources higher
than short term sources. However, since long term sources have a longer time to mature, it gives the
company more time to accumulate cash to pay off the obligation in the future.

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 ACTS COMPUTER COLLEGE OF INFANTA
General Luna St. Infanta, Quezon Province
SENIOR HIGH SCHOOL DEPARTMENT
_____________________________________________________________________________________

Dividend Policies. Recall that cash dividends are paid by corporations to existing shareholders based on
their shareholdings in the company as a return on their investment. Some investors buy stocks because of
the dividends they expect to receive from the company. Non-declaration of dividends may disappoint these
investors. Hence, it is the role of a financial manager to determine when the company should declare cash
dividends.

Before a company may be able to declare cash dividends, two conditions must exist:
1. The company must have enough retained earnings (accumulated profits) to support cash dividend
declaration.
2. The company must have cash.

What do you think will be the effect of the decision of management in paying dividends? Remember that
dividends come from the company’s cash and availability of unrestricted retained earnings.

Recall that one of the functions of a finance manager is investing and its available cash may be used to
invest in long term investments that would increase the profitability of the company. Some small enterprises
which are undergoing expansion may have limited access to long term financing (both long term debt and
equity). This results to these small companies reinvesting their earnings into their business rather than
paying them out as dividends.

Answer Key:
 Availability of financially viable long-term investment
 Access to long term sources of funds
 Management’s Target Capital structure

On the other hand, companies which have access to long term sources of funds may be able to declare
dividends even if they are faced with investment opportunities. However these investment opportunities are
financed by both debt and equity. The management usually appropriates a portion of retained earnings for
investment undertakings and this may limit the amount of retained earnings available for dividend
declaration. Examples of these companies are companies such as PLDT, Globe Telecom, and Petron.
(information as of 2014).

Message from the CFOs Reflect on the quotes cited and mention how critical and dynamic working in
the finance field is. Share the following quotes from the Chief Financial Officers (CFOs) of the
respective corporations.

Unilever: ―Finance plays a critical role across every aspect of our business. We enable the business to
turn our ambition and strategy into sustainable, consistent and superior performance‖
- Jean-Marc Huët (Unilever)

Jollibee: ―It’s very exciting because you are not just thinking of today but what the company will need in
the future‖ - Ysmael V. Baysa Morales,(2013)

SM Corporation: ―Now, we don’t go out because we need funds. We go out because it’s an opportunity.‖
– Jose T. Sio (Montealegre, 2015)

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 ACTS COMPUTER COLLEGE OF INFANTA
General Luna St. Infanta, Quezon Province
SENIOR HIGH SCHOOL DEPARTMENT
_____________________________________________________________________________________

Additional/Further Studies
E-site
To explore more about the topic please go to this link:
https://smallbusiness.chron.com/business-financing-problems-292.html

Learning Development#4:

Using Microsoft Word, Arial Narrow font and 12 as a font size, answer the following questions concisely
and correctly. You will send your response in our google classroom by uploading your document and to
back up your file, you need to send it to my direct email account at jovenbarnedo@gmail.com . Ensure that
the following details below are included in your document:

Date: ___________________________________________
Name: ___________________________________________
Student Number: ___________________________________________
Subject: ___________________________________________
Lesson/LD #: ___________________________________________

1. Why should shareholder wealth maximization be the overriding objective of management?

2. What other positions can you think of that are related to financial management?

3. Discuss briefly the roles of each position identified. Write your answer on the space provided for
each item.

a. Shareholders

b. Board of Directors

c. President (CEO)

d. VP for Marketing

e. VP for Production

f. VP for Administration

g. VP for Finance

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 ACTS COMPUTER COLLEGE OF INFANTA
General Luna St. Infanta, Quezon Province
SENIOR HIGH SCHOOL DEPARTMENT
_____________________________________________________________________________________
Remember
 A Financial Manager is part of a management team whose ultimate goal is to maximize shareholders wealth.
 The president cannot manage the company on his own, especially when the corporation has become too big. To assist
him are the vice presidents of different functional areas: finance, marketing, production and administration.
 Financing decisions include making decisions on how to fund long term investments (such as company expansions)
and working capital which deals with the day to day operations of the company (i.e., purchase of inventory, payment of
operating expenses).
 Before a company may be able to declare cash dividends, two conditions must exist:
1. The company must have enough retained earnings (accumulated profits) to support cash dividend
declaration.
2. The company must have cash.
 One of the functions of a finance manager is investing and its available cash may be used to invest in long term
investments that would increase the profitability of the company.

4. Why does a Financial Manager need to choose which source of financing a company should use?
What do they need to consider in making this decisions?

5. Globe Telecom: ―Yesterday’s solutions are never adequate for the future‖ – Albert De Larrazabal
(Klobucher, 2015). Analyse and explain briefly.

Learning Activity Progression:

After reading the discussion board, by coming next meeting, expect for an item activity quiz. Your activity
quiz will be held only during our schedule and will live the set of quiz during the online session. Goodluck!

Learning Outcome Activity#4:

Date: ___________________________________________
Name: ___________________________________________
Student Number: ___________________________________________
Subject: ___________________________________________
Lesson/LOA #: ___________________________________________

Activity A. Have you ever wondered what the best things are that you can do for your money and your
financial future? What's the Smartest Thing You Do for Your Money? You probably have bright ideas
about smart things to do for your money and finances that others would like to know about too. Write an
200-reflective essay and share your good ideas with the title highlighted and underlined.

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 ACTS COMPUTER COLLEGE OF INFANTA
General Luna St. Infanta, Quezon Province
SENIOR HIGH SCHOOL DEPARTMENT
_____________________________________________________________________________________

Activity B. Search in the internet the Bangko Sentral ng Pilipinas and illustrate the organizational structure
and defining their roles of each in the organization.

You will be guided by the following criteria RUBRIC:

CATEGORY 5 3 1 SCORE
DESCRIBE Provide a Provide a partial but Provide an incomplete
complete and mostly accurate and unclear description of
accurate description of the subject the subject matter with
description of the matter, with few some key many key components
subject matter components overlooked, overlooked
ANALYZE Accurately Relates with limited Has trouble relating the
relates the information of the subject information of the
situation on the matter financial institution in the
subject matter Philippines
INTERPRET Suggested a Suggested an Finds it difficult to
logical and unsupported solution to interpret the situation of
financial solution the current financial the financial institutions in
of the current instructions in the the Philippines
situation of the Philippines.
financial
institutions in the
Philippines
EVALUATE Uses different Use a limited range of Uses personal knowledge
sources to justify sources to justify the and did not research
the information information. thoroughly
by citing the
source.
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 ACTS COMPUTER COLLEGE OF INFANTA
General Luna St. Infanta, Quezon Province
SENIOR HIGH SCHOOL DEPARTMENT
_____________________________________________________________________________________

References:

Cayanan, A. & Borja (forthcoming). Business Finance. Quezon City. Rex Bookstore.

Gitman, L. J. & Zutter C. J. (2012), Principles of Managerial Finance (13th Ed), USA: Prentice-Hall

https://smallbusiness.chron.com/business-financing-problems-292.html. Retrieved June 17, 2020

https://www.investopedia.com/terms/c/corporatefinance.asp. Retrieved June 17, 2020

https://corporatefinanceinstitute.com/resources/knowledge/finance/corpora te-finance-industry/. Retrieved

June 17, 2020

https://www.cleverism.com/corporate-finance-essentials

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