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Input Process Output Two financial function of a company consist of the acquisition of
funds and the optimal use of funds.
10 Guiding Principles
Resource Inputs (5Ms) 1. Risk Return Trade Off
1. Materials – semi processed goods that will be subjected to 2. Time Value Money
further transformation in the production goods 3. Cash not Profit is King
2. Manpower – human resource input used in the production 4. Incremental Cash Flow
process 5. The Curse of Competitive Markets
3. Machinery – all man-made physical capital used in the 6. Efficient Capital Markets
production process 7. The Agency Problem
4. Method – denotes the process of combining raw materials 8. Taxes
and how these are going to be transformed using the other 9. All risks are not equal
factor inputs of production 10. Ethical Behavior
5. Money – a financial resource used to purchase all the
resources needed by the firm for its operations Challenges on Financial Management
Need to convince the lenders and investors that the firm is a
Process refers to the various forms of transformation that factor creditworthy business enterprise
inputs perform on the material A business venture should recognize the perspective and
Various forms of Transformation interests of lenders and investors
Physical Transformation – occurs when the processing of Need to understand alternative venues for financial
raw materials convert them into significantly altered new intermediation
product
Locational Transformation – arises when product changes Crowdfunding makes use of social ties, connections, and networks
its location through various means of transportation and
in raising funds for an emerging company
communication
Donations – the crowd contributed money to support a
Information Transformation – happens when knowledge
worthwhile program
and specialized skills of providers are transmitted to their
Reward-based – the crowd puts money into the company in
customers
exchange for a product or service
Equity-based – contributions from the crowd make them part Integral Human Development – anchored on the principles of
owners of the business venture human dignity and the common good
Credit-based - the crowd extends loans to the firm with the Common Good – the sum total of social conditions which allow
expectation of being repaid in the future people, either as groups or as individuals, to reach their fulfillment
Main advantage of equity financing: huge amount of money more fully and more easily (as defined by Second Vatican Council)
that can be accumulated
Disadvantage: the complexities of preparing and issuing bonds,
Various facets of IHD
securities, stocks, and other commercial papers in the capital
1. Bodily development
market
2. Cognitive development
3. Emotional development
Sources of Capital for Entrepreneurs 4. Social development
o Self-financing 5. Aesthetic development
o Borrowing from local credit market 6. Moral development
o Borrowing from commercial banks 7. Spiritual development
o Governments grants, credit, and incentives
o Venture and capital and business angles Training – helps employees to do their current work better
Business Angel – uses his own personal funds to acquire
Development – prepares individuals for future positions or
private equity in the company
responsibilities within the business
Venture Capitalist – uses the funds of a group of
individuals or a company to purchase equity in a start-up
company Three Kinds of Organizational Commitment
1. Continuance Commitment – refers primarily to the costs of
Social Bricolage – refers to the behavior of social enterprises leaving. (second thoughts because he will be away from
friends)
that improvise in an environment of merge resources
2. Affective Commitment - refers to the person’s positive
feeling towards the company and its core values
Functions of Human Resources Management
3. Normative Commitment – refers to an employee’s feeling of
Managerial Functions Operative Functions obligation to others (a manager who served as a mentor)
Planning Procurement
Organization Development
Ansoff Matrix – guide in charting the growth for their companies.
Staffing Compensation
Direction Maintenance
Controlling Motivation Growth Strategies (According to Ansoff Matrix)
Mitigation a. Market penetration
b. Market development
Selected Tasks of HRM c. Product development
Recruitment – involves activities related to the development of d. Diversification
a pool of applicant for jobs in the organization
Selection – related to the decisions on who to hire from the pool Market Penetration Strategy – selling more of the company’s
created by recruitment task existing products or services to its customers on a more frequent
Training and Development – involves the continuous basis, through discounts, aggressive promotion, and distribution
development of the workforce efforts, or modest product improvements
Performance Appraisal – the measurement of an employee’s
performance Market Development Strategy – selling the company’s existing
Reward System Design – includes the plans for monetary and products to new markets
fringe benefits of employees New geographical market – selling existing products to
customers in new locations
Job Analysis – the procedure through which the duties of a given job New demographic market – offering the same product to a
positions and the characteristics of people who should fill them are segment of a market that has a different set of characteristics
determined Demographics – statistical characteristics of human
Job Description – list of what the job entails populations
Job Specification – list of the kind of people for the job Expanding to industrial buyers – selling their products to
Work activities Performance standards individuals, but later graduate to servicing industrial buyers
Human Behavior Job Context
Tools Human requirements Product Development Strategy – creating new products and
services targeted at the firm’s existing markets
o Job analysis information is used to decide or determine:
1. The person to hire Diversification Strategy – growing the business by introducing new
2. The compensation for the job products in new markets
3. Job standards as basis for actual performance Vertical Integration – expanding the scope of business
4. Training and Development Programs operations by either moving backward or forward the value chain
5. Unassigned tasks and duplication of assignments Horizontal Integration – occurs at the same level of the
value-added chain
Exit Strategies
A. Succession in a family-owned business – transfer of ownership
of their business to family members
B. Selling the business
Management buyout – offering the business to top
managers, who are not co-owners of the business
Employee stock ownership (ESOP) – giving employees
shares in the company as a bonus, depending on the
profitability of the company
Sale to outsiders – sold to people not involved in the
company
C. Bankruptcy – happens when a company cannot pay its debts. It
lacks to resources to meet its existing obligations.
Signs of bankruptcy
1. Sudden departure of top people
2. Supplies and materials needed are lacking
3. Large and increasing discounts to customers
4. Payroll taxes are not promptly paid
5. Demands from creditors that payments be made in cash
6. Growing complaints from customers about poor service
and product quality