The Organization of a Business Firm

The Firm and the Financial Manager

The Organization of a Business
Source: https://www.businessfinancestore.com/wp‐content/uploads/2012/03/business‐card.png

Functions of Finance and Financial Manager
 Business firm is an entity designed to utilize raw 
Activity materials, labor, and machines, which produces goods 
and/or services

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The Organization of a Business Firm The Organization of a Business Firm

 Legal forms of business organization
Sole Proprietorship

Advantages: Disadvantages:
 Ease of entry and exit × Unlimited liability
Sole  Partnership Corporation  Full ownership and control × Limitation in raising capital
Proprietorship
 Tax savings × Lack of continuity
 Few government regulations
Source: http://smallbusiness.chron.com Source:http://hrtechnordic.com Source: http://wagingnonviolence.org

*Property of STI I0040 *Property of STI I0040

   
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 The Organization of a Business Firm The Organization of a Business Firm

Partnership Corporation

Advantages: Disadvantages: Advantages: Disadvantages:

 Ease of formation × Unlimited liability  Limited liability × Time and cost of formation
 Additional sources of capital × Lack of continuity  Unlimited life × Regulations
 Management base × Difficulty of transferring   Ease in transferring  × Taxes 
ownership ownership
 Tax implication
× Limitation in raising capital  Ability to raise capital

*Property of STI I0040 *Property of STI I0040

   
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Functions of Finance and Financial Manager Functions of Finance and Financial Manager

Source: http://capital‐loans.com/wp‐content/uploads/2013/09/Working‐Capital‐journals.gif

Source: http://blog.inomics.com/wp‐contents/uploads/2013/07/Finance.jpg  Functions of finance in the company
 Allocation of financial resources
 Finance is the art and science of managing money
 Procurement of funds
 Efficient and effective utilization of financial resources
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 Functions of Finance and Financial Manager Functions of Finance and Financial Manager

 Financial Manager must ensure that:

Funds are allocated
Funds are sourced
Source: http://www.bls.gov/ooh/images/p02‐to‐p03/p022‐2‐jpg.jpg Sufficient but not excessive

 Financial Manager is the one responsible for a 
significant corporate investment or financing decision

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Functions of Finance and Financial Manager Functions of Finance and Financial Manager

 Other roles of Financial Manager:  Other roles of Financial Manager:

Treasurer ‐ looks after 
the firm’s cash, raises  Controller ‐ prepares 
new capital and  the financial 
maintains relationships  statements, manages 
with banks and other  the firm’s internal 
investors who hold the  accounting, and looks 
firm’s securities after its tax affairs
Source: https://www.udemy.com

Source: http://cindyratzlaff.com

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 Functions of Finance and Financial Manager Activity

 Other roles of Financial Manager: Juan and Pedro went to a business 
school together 10 years ago. A 
corporation that wants to bring in 
new Financial Managers has just 
The Chief Financial 
hired them. Juan studied finance, 
Officer (CFO) oversees 
with an emphasis on financial 
both the Treasurer 
markets and institutions. Pedro 
and Controller
majored in accounting and became 
a CPA 5 years ago. 
Q: Who is more suited to be the 
Source: http://www.imaginethereisno.org
Treasurer and the Controller?
Source: http://www.ideafaktory.com
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