FINMGMT Reviewer Finance Department Organizational Chart

Suppliers from inventory, employees for services

Govt for taxes Lenders for interest, others for expenses

b. Investing activities Cash Inflow: Fr sale of property, equipment and plant Financial Statements Income Statement a. Multiple-step = net income/net loss Fr sale of debts or equity of other entities Fr collection of principal on loans to other entities Cash outflow: To purchase property, plant and equipment To make loans to other entities To purchase debts or equity securities of other entities c. Balance Sheet assets, liabilities and equity Cash inflows Cash Flow Statement cash receipts and cash payments; cash inflow and outflow a. Operating activities Cash outflow Cash inflow: Fr sale of goods and services Returns on interest and dividends(loans/equity securities) Working Capital = current assets current liabilities Cash outflow: Cash most liquid asset to stockholders as dividends To redeem long term debt or reacquire capital stock Fr.sale of equity securities(own stock) Fr issuance of debts(bonds/notes) Financing activities

b. Single-step = revenue expense = net income/net loss c. Departmental = income derived from various hotel departments d. Consolidated = overall income statement of the hotel

Internal Factors: Over the counter receipts Mail receipts

the financial activities and resources of an organization. Tools in Financial Statement Analysis Horizontal Analysis trend analysis; determine the

Cash Disbursement Objectives of Financial Management a. Set up company goals

increase or decrease of the financial data over a period of time expressed in amount or percentage FORMULA: %= x 100

b. sources of funds and capital are available c. allocation of funds

Goals of Financial Management Give a statement for its current market position Identify customers for its target on the market plan Give guidelines for allocation of resources. Identify when the growth of the company will be Provide indicators how your product will differ from your know competitor. Focus managements attention on marketing strategies to conform with its mission statement Give basis for internal communication Give directions to employees on what action to take in the attainment of company objectives Give basis for control and evaluation

Vertical Analysis common-size analysis; evaluate the financial data by expressing each item in a financial statement as a percentage of a base amount FORMULA: BASE AMOUNT % = Ratio Analysis - relationship among selected items of financial statement data TYPES: LIQUIDITY RATIO - measures the short term ability of the company to pay its maturing or due obligations and to meet the need for unexpected need for cash. EFFICIENCY RATIO shows the companys productivity PROFITABILTY RATIO - Measures of the income or operating success of a company for a given period

Financial Management Definition Financial management is a managerial function that involves directing, controlling, planning, organizing,

of time. This is the ultimate test of managements operating effectiveness. This will tell if the company will be granted credit or equity financing.

SOLVENCY RATIO - Measures of the ability of the company to survive over a long period of time. Long term creditors and stockholders are interested to know if the company can pay their interest charges or repay the face value of their loans on maturity time. FORMULAS: LIQUIDITY RATIO and EFFICIENCY RATIO Current ratio =

Asset turnover = Use: measures how efficiency assets are used to generate sales Return on assets = Use: measures overall profitability of assets Return on common stockholders equity =

Use: measures profitability of owners investments Use: measures short term debts paying ability Acid (quick) test ratio = Use: measures immediate short term liquidity Receivables turnover = Use: measures liquidity of receivables Inventory turnover = Use: measures liquidity of inventory Average Receivables Collection Period =

SOLVENCY RATIO Debt to assets = Use: measures the percentage of total assets; provided by creditors Times interest earned =

Use: measures ability to meet interest payments as they come due MARKET-VALUE RATIO shows how the firm is valued by investors; overvalued/undervalued

Average Inventory Period = PROFITABILITY RATIO

Price-earnings Ratio = CREDIT COLLECTION

Profit margin = Use: measures net income generated by each peso of sales

A journal entry recording an increase in assets; recorded when income is received; recorded and recognized when income is earned

A contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some later date

CLEARING AND SETTLEMENT IMPORTANCE: Controls the cash flow of the hotel Eliminates bad debts Ensures that the Accounts Receivables of the hotel will be collected on time with minimal cost Reduces credit risk and improves collection

Borrowing capacity of an individual or company

CREDIT LINE - arrangement in which a bank or vendor extends a specified amount of unsecured credit to a specified borrower for a specified time period CREDIT TERMS - length of time a consumer has to repay the amount of debt owed on an obligation; can also include interest payments AGED DEBTOR ANALYSIS - list which analyses a company's debtors, showing the number of days their payments are outstanding ACCOUNTS RECEIVABLE AGING - periodic report showing all outstanding receivable balances, broken down by customer and month due KINDS OF CREDIT PERSONAL - credit-borrowing by an individual on his own personal capacity such as with credit card companies, or lending institutions or friends and relatives for that matter

FEASIBILITY STUDY - a study that will let you know if the business you like to do is viable or not; identifies the potential problems of the business and it will let you know if you will proceed or not IMPORTANCE: It lists all the details of all things needed by the business including location, business near you, spaces etc. Identifies the logical and other business problems and solutions Marketing strategies to make your business a success and convincing the bank and your investors that your business is good It is the foundation of your business plan COMPONENTS:

COMMERCIAL - borrowing by companies with secured collaterals such as real estate or secured bank deposits with the purpose of financing the business PROCESS IN CREDIT CARD AUTHORIZATION Market feasibility knowing your products, sales, competitors Financial feasibility knowing your working capital, sources of capital, ROI Comparative feasibility legal, corporate structure