CHAPTER 1: INTRODUCTION TO FINANCIAL ENVIRONMENT

HTM755

FINANCIAL MANAGEMENT AND ANALYSIS

FOR HOSPITALITY AND TOURISM

MOHD SAFUAN ASMI BIN KHALID 2014428276

ZULKARNAINE BIN BOHARI 2014659774

WHAT IS FINANCE

• The management of money from individual to large company.• Finance fields divided into 3 sub categories that are :

PERSONAL FINANCE

CORPORATE FINANCE

PUBLIC FINANCE

FINANCE

BANKING LEVERAGE

CREDIT

CAPITAL INVESTMEN

T

MONEY

INVESTMENTS

FINANCE AND EMPLOYMENT OPPORTUNITY

DEFINING INVESTMENT• The purchase of plant, equipment or inventory.

• Investment in layman term indicates acquisition of an asset such as a stock or a bond.

• The actions or process of inventing for profit or materials result.• An expectation of future return towards certain purchase of financial

product.• Investment value indicates a present value of future benefit.

DEFINING FINANCIAL MANAGEMENT

• Financial management refers to the efficient and effective management of money (funds) in such a manner as to accomplish the objectives of the organization. It is the specialized function directly associated with the top management.

OBJECTIVES OF FINANCIAL MANAGEMENT

• To ensure regular and adequate supply of funds to the concern.• To ensure adequate returns to the shareholders which will

depend upon the earning capacity, market price of the share, expectations of the shareholders.

• To ensure optimum funds utilization. Once the funds are procured, they should be utilized in maximum possible way at least cost.

• To ensure safety on investment, i.e, funds should be invested in safe ventures so that adequate rate of return can be achieved.

• To plan a sound capital structure-There should be sound and fair composition of capital so that a balance is maintained between debt and equity capital.

FUNCTIONS OF FINANCIAL MANAGEMENT

• Estimation of capital requirements• Determination of capital composition• Choice of sources of funds• Investment of funds• Disposal of surplus• Management of cash• Financial controls• http://www.managementstudyguide.com/financial-management.htm

WHAT IS SOLE PROPRIETORSHIP

• A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one natural person and in which there is no legal distinction between the owner and the business.

• There is no separate legal entity created by a sole proprietorship.• The benefit of the sole proprietorship is the tax advantage

SOLE PROPRIETOR (ACTIVITY 1)ADVANTAGES

• Individual cost setting and finance management.

• The business legal requirements and standard operation procedure are set up by the individual and can be change.

• No corporate tax payments.• A sole proprietor have the sole

power of the business.• Changing business structure

DISADVANTAGES

• Personally responsible for the debts and liabilities incurred by the business.

• The business life is limited and depends on the individuals.

• Lower tax payments.• Investor usually not invest on

sole proprietor, unless have opportunity.

• Minimal business strategy in terms of cost and financial status.

PARTNERSHIP

• A business of firm runs by two or more partners, it’s a individual pool money, skills and share P&L in accordance with the terms agreement.

• In absence of such agreement, a partnership is assumed to exit where the participants in an enterprise agree to share the associated risks and rewards.

• Two basic forms of partnership, limited and normal partnership.• Limited partnership: must have one general partnership and one limited

partnership. It is usually set up by companies that invest money in other businesses or real estate.

• Normal partnership: partners participate to some extent in the day-to-day management of the business

ACTIVITY 2LIABILITIES, PROFIT SHARING, LIFE SPAN, ROLE IN MANAGEMENT

LIMITED PARTNERSHIP

• to the original amount of investment made by partners.

• Distribution of business profit among partners is based on the CONTRACTED AGREEMENT.

• The organization can STILL OPERATE and REMAIN IN EXISTENCE even one of the partner perish or decides to withdraw completely from the business.

• Partners are NOT INVOLVED in the very day management activity.

NORMAL PARTNERSHIP

• the original amount of investment made by partners. They could suffer from unlimited liability.

• Distribution of business profit among partners is based on the AMOUNT INVESTED by each partner.

• The organization is required to CEASE THEIR OERATIONS and CAN NO LONGER REMAIN IN EXISTENCE.

• Partners are INVOLVED directly in the every day management activity.

YOUTUBE ACTIVITY : ADVANTAGE OF DISADVANTAGE OF PARTNERSHIP

• https://www.youtube.com/watch?v=om1ktTbK3d4

CORPORATIONS• It a legal entity that is separate and distinct from its owners.• It have the right and responsibilities that an individual possesses.• It has the right to enter into contracts, loan and borrow money, sue and

be sued, hire employees, own assets and pay taxes.

TYPES OF CORPORATIONS

CLOSE CORPORATIONS GENERAL

CORPORATIONS

PROFESSIONAL CORPORATIONLIMITED

LIABILITY COMPANY

S CORPORATIONS

C CORPORATIONS

AGENCY RELATIONSHIPS• The principal-agent relationship is an arrangement in which one entity legally

appoints another to act on its behalf. In a principal-agent relationship, the agent acts on behalf of the principal and should not have a conflict of interest in carrying out the act.

• For example, when an investor buys shares of an index fund, he is the principal, and the fund manager becomes his agent. As an agent, the index fund manager must manage the fund, which consists of many principals' assets, in a way that will maximize returns for a given level of risk in accordance with the fund's prospectus.

MERGER

• A combination of two or more firms into single firms.• WHAT IS THE MOTIVES OF MERGER?

ACQUISITION

• A purchase by company to another company through none new company establishment forms.

• It can be in a friendlier approach or event hostile approach.

• Usually done by tender offer. Example in the newspaper.

WHAT THE BENEFIT OF MERGER AND ACQUISITIONS?

COST DRIVER

• Technology• Economic• Learning• Capacity utilization• Communication• Outsourcing• Bargaining• Incentives scheme• Input cost saving• Supply chain

UNIQUE DRIVER

• Quality control• Sales and marketing• Customer service• Technology and communication• Employments skills• Product future• Input quality