Chapter 10 Regine Presentation..

7/31/2019 Chapter 10 Regine Presentation..

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Chapter 10


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FinancialManagement


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qFinancial capital or funds are essentialresources to the entrepreneur. These arethe lifeblood of the enterprise. Theentrepreneur needs money in starting

his business. He also needs money instarting his business. He also needsmoney for the development and growthof his business. In many cases, small

entrepreneurs have inadequate capital.Thus, it is important for them to be ableto identify the sources of funds.


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This Chapter presents topics such asfinancing the enterprise and the need

for financial management. Inaddition, developing the financial

plan and evaluating the financial

performance are explained.


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FinancialManagement

Definition


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q It refers to activities that are concerned with

securing money and using it properly. Theentrepreneur as financial manager needs todetermine the best way to raise money.However, it is also important that the moneyshould be used effectively in realizing thegoals of the enterprise. Clearly, good financialmanagement requires planning.

q Basically, finance is the art and science of

managing money. This means it includes bothindividual skills and methods of getting andusing financial resources.


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qTo be an effective financial manager, agood knowledge of economics is essential.

qThe good example of this Henry Sy, Hestarted as a door to door salesman ofshoes. Afterwards, he put up a shoe storeon Rizal Avenue. He is now the owner of

SM, a chain of department stores.Evidently, he knows how to use hisfinancial resources.


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Financing the

Enterpriseq Many poor Filipinos wish they have seed

capital in order to put up their own micro

businesses. In rural areas, some folks like toput up backyard poultry or piggery projectsfor individuals like to own a sari-sari store, asmall bakery, a beauty parlor, or a smallrestaurant. But they have no funds to starttheir modest business.

q For the poor, cooperatives are the bestsources of funds with very minimal interest.

Other good sources of seed capital are thenon- overnment or anizations (NGOs) and


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Cooperatives for Micro

Businessq Successful Cooperatives have been responsible for the economic @ socialupliftment of poor people in all countries. In the Philippines, we have severalsuccessful cooperatives. One is the farmers cooperative in Tarlac organizedby Ka Dante Buscayno. Another is the san Dionisio Credit Cooperative in

Paranaque. It started in July 1961 with 28 members and P380

capital. Today it is the biggest community credit cooperative in thecountry. It has 15,000 members(including special depositors) andp75 million assets.

q Many members of the credit cooperative in San Dionesio were ableto put up their micro businesses. Others were able to purchase

tricycles. Before, they had paid boundaries. Many young people gottheir college and vocational education. All these benefits were madepossible through the assistance of the San Dionisio CreditCooperative.

q Even giant institution like PLDT, CB and SMC have Creditcooperatives.

q Credit Cooperatives are effective in driving away usurers or the loan


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Sources of Fundsq There are government @ non-governmentorganizations that extend both financial @technical assistance to small entrepreneurs.

We have PNB, DBP, @ LBP. They have theirown programs for small @ medium-scaleenterprises.

qFor entrepreneurs who are not really poor,they put up their business with their ownfunds. If these are not enough, they borrowfrom friends, relatives, and ultimately fromfinancial institutions. In case of big firms, theysell shares of stock to the public. Or they


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Here are somesources of

funds:


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1.Short-term financing (one year or less)

a. Trade Credit

b. Promissory Notes

c. Unsecured Bank Loans

d. Commercial paper

2.Long-term financing ( More than a year)

a. Loans

b. Stock

c.Bond


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The Need For FinancialManagement


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qNext to people, money is the mostimportant resource of any businessorganization. Without money, thereis no business at all. Money needs tostart a business. Money is need tosustain activities like production @

marketing.


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Good FinancialManagement Can

ensure the following:


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Financing priorities areestablished in accordance withorganizational objectives.

Spending is planned andcontrolled in line with established

priorities.

Adequate funding is availablewhen it is needed, now and in thefuture.


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Developing the

Financial Plan


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Chapter 10 Regine Presentation..

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