BUSINESS FINANCE

LECTURES
 Finance can be defined as the science and art
of managing money. (Gitman & Zutter, 2012)
Budgeting is the act of estimating revenue and
expenses over a period of time.
 Investments come in many forms that will
generate income or appreciate in the future.
Source of funds refer to individuals or
company that lends money to those who need
it, especially businesses.
Finance is concerned with decisions
about:
-How much of their earnings they spend
-How much they save or how much they
need
-How they invest their savings
-How they raise additional funds they
need (Gitman)
Forms of business organizations:
-Sole Proprietorship - A business owned
by one person and operated for his or her
own profit.
-Partnership - A business owned by two or
more people and operated for profit.
-Corporation – An entity created by law
owned by shareholders.
 Corporations may either be privately
owned or publicly owned.
Privately owned corporations are often
owned by family members whose stocks
may not be offered to outsiders unless
consent by the family members is
secured.
Companies which are publicly listed are
owned by unrelated investors and are
traded in organized exchanges
 Prices of stocks of listed corporations
are driven by several factors such as
the earnings of the companies, the
prospects of the industry where these
companies operate, the general
market sentiment, and the economic
prospects of the country, among
others.
Do you think a profitable
company is a successful company?
Why?
Do you think is it good if a
company has a very large amount
of cash? Why?
What is the overall objective of a
shareholder?
How do we measure shareholders
wealth?
 Shareholders’ wealth is measured based
on the current market price of the
corporation’s stocks. The market price
changes across different periods. Hence,
the value of your investment changes in
different points on time based on the
market value at that time.
Factors that Influence Market Price
CONTROLLABLE BY MANAGEMENT

Profitability
• Profit is a measure of the financial
performance of a company for a period
of time.
CONTROLLABLE BY MANAGEMENT
 CONTROLLABLE BY MANAGEMENT

Good liquidity and reasonable leverage

position
• Liquidity and leverage refers to the
company’s management of the type and
amount of assets and liabilities that it will
hold in the course of its operations. This will
further be discussed in Lesson 2.
 CONTROLLABLE BY MANAGEMENT

Dividends
• Holders of shares receive dividends from a
corporation as returns on their investments
in form of cash or other properties.
Companies which have better dividend
policies are generally more attractive than
companies who do not pay out dividends.
 CONTROLLABLE BY MANAGEMENT

Competent management
• Competent managers may have any of
the following attributes: 1) visionary 2)
decisive 3) people-oriented, 4) inspiring,
5) innovative, 6) respected and 7)
experienced/seasoned manager.
 CONTROLLABLE BY MANAGEMENT

Corporate plans that improve the

business prospects.

Which of the 2 companies presented on

the next slides has a better company
prospects? Why?
 Company A which is in the business of
selling Halo-halo in the Dapitan area for
5 years. Company A is consistently
earning profits and has a positive cash
flow. When asked how Company A sees
itself after 5 more years, Company A
answered that it would continue to sell
Halo-halo in Dapitan.
On the other hand, Company B sells Buko
Juice in Katipunan area for 5 years. Company
B is consistently earning profits and has a
positive cash flow. When asked how
Company B sees itself after 5 more years,
Company B answered that it has generated
enough cash to expand its business to Cubao
area to take advantage of the growing
demand of Buko Juice in Cubao.
External Factors
- These factors influences the general reaction
of investors in making an investment decision.
- Its effect is not only to a specific company
but on all companies or a group of companies
under similar circumstances. - Such factors are
a result of the environment a company
operates in rather than the decisions of the
company’s management.
Given the factors that influence market price, how will the
company ensure that such objectives will be achieved?
•Financial management deals with decisions that are supposed
to maximize the value of shareholders’ wealth. (Cayanan)
-These decisions will ultimately affect the markets perception
of the company and influence the share price.
-The goal of financial management is to maximize the value of
shares of stocks.
- Managers of a corporation are responsible for making the
decisions for the company that would lead towards
shareholders’ wealth maximization.
 Aside from the factors
mentioned, what other factors
can influence the investor’s
perception on the company’s
performance which would
ultimately affect share price?
THE CORPORATE ORGANIZATION STRUCTURE
Shareholders: The shareholders elect
the Board of Directors (BOD). Each
share held is equal to one voting right.
Since the BOD is elected by the
shareholders, their responsibility is to
carry out the objectives of the
shareholders otherwise, they would
not have been elected in that position.
Board of Directors: The BOD is the highest policy making
body in a corporation. The board’s primary responsibility is
to ensure that the corporation is operating to serve the
best interest of the stockholders. Setting policies on
investments, capital structure and dividend policies.
-Approving company’s strategies, goals and budgets.
-Appointing and removing members of the top
management including the president.
-Determining top management’s compensation.
-Approving the information and other disclosures reported
in the financial statements (Cayanan, 2015)
President (Chief Executive Officer): The roles of a
president in a corporation may vary from one company
to another. Among the responsibilities of a president
are the following:
-Overseeing the operations of a company and ensuring
that the strategies as approved by the board are
implemented as planned.
-Performing all areas of management: planning,
organizing, staffing, directing and controlling.
- Representing the company in professional, social, and
civic activities.
VP for Marketing
-Formulating marketing strategies and plans.
-Directing and coordinating company sales.
-Performing market and competitor analysis.
-Analyzing and evaluating the effectiveness and cost of
marketing methods applied.
-Conducting or directing research that will allow the
company identify new marketing opportunities, e.g. variants
of the existing products/services already offered in the
market.
-Promoting good relationships with customers and
distributors. (Cayanan, 2015)
VP for Production:
-Ensuring production meets customer demands.
-Identifying production technology/process that
minimizes production cost and make the company
cost competitive.
-Coming up with a production plan that maximizes
the utilization of the company’s production
facilities.
-Identifying adequate and cheap raw material
suppliers. (Cayanan, 2015)
VP for Administration:
-Coordinating the functions of administration,
finance, and marketing departments.
-Assisting other departments in hiring employees.
-Providing assistance in payroll preparation, payment
of vendors, and collection of receivables.
- Determining the location and the maximum amount
of office space needed by the company.Identifying
means, processes, or systems that will minimize the
operating costs of the company. (Cayanan, 2015)
Unilever: “Finance plays a critical role across every aspect of
our business. We enable the business to turn our ambition and
strategy into sustainable, consistent and superior
performance” - Jean-Marc Huët (Unilever)
Jollibee: “It’s very exciting because you are not just thinking of
today but what the company will need in the future” - Ysmael
V. Baysa (Morales, 2013)
Globe Telecom: “Yesterday’s solutions are never adequate for
the future” - Albert De Larrazabal (Klobucher, 2015)
SM Corporation: “Now, we don’t go out because we need
funds. We go out because it’s an opportunity.” – Jose T. Sio
(Montealegre, 2015)
 Functions of a Financial
Manager
-Financing
-Investing
-Operating
-Dividend Policies
Financing decisions include making
decisions on how to fund long term
investments (such as company
expansions) and working capital which
deals with the day to day operations of
the company (i.e., purchase of
inventory, payment of operating
expenses, etc.).
Financing – to determine the appropriate
capital structure of the company and to raise
funds from debt and equity.
 In the figure, the total assets is
financed by 60% debt and 40%
equity. Accordingly, the capital
structure is 60% debt and 40%
equity.
 Is there an ideal mix of debt and
equity across corporations?
Investments may either be short term or long
term.
Short term investment decisions are needed when
the company is in an excess cash position. To plan
for this, the Financial Manager should be able to
make use of Financial Planning tools such as
budgeting and forecasting. Moreover, the
company should choose which type of investment
it should invest in that would provide a most
optimal risk and return trade off.
Long term investments should be supported by a
capital budgeting analysis which is among the
responsibilities of a finance manager.
Capital budgeting analysis is a tool to assess whether
the investment will be profitable in the long run. This
is a crucial function of management especially if this
investment would be financed by debt. The lenders
should have the confidence that the investments that
management will push through with will be profitable
or else they would not lend the company any money.
Operating decisions deal with the daily operations of
the company. The role of the VP for finance is
determining how to finance working capital accounts
such as accounts receivable and inventories. The
company has a choice on whether to finance working
capital needs by long term or short term sources.
Short term sources pose a trade-off between
profitability and liquidity risk. Because this source
matures in a short period, there is a possibility that the
company may not be able to obtain enough cash to pay
their obligation.
Long term sources, on the other hand, mature
in longer periods. Since this will be paid much
later, the lenders expect more risk and place a
higher interest rate which makes the cost of
long term sources higher than short term
sources. However, since long term sources
have a longer time to mature, it gives the
company more time to accumulate cash to pay
off the obligation in the future.
Dividend Policies. Recall that cash dividends
are paid by corporations to existing
shareholders based on their shareholdings in
the company as a return on their investment.
Non-declaration of dividends may disappoint
investors. Hence, it is the role of a financial
manager to determine when the company
should declare cash dividends.
Before a company may be able to declare
cash dividends, two conditions must
exist:
1. The company must have enough
retained earnings (accumulated
profits) to support cash dividend
declaration.
2. The company must have cash.
QUIZ #1
1. It is the act of estimating revenue/and
or expense over a period of time.
2. It is the art of managing money.
3. It comes in many forms that generates
income in the long run.
4. Refer to individuals/company that
lends money.
QUIZ #1
4. It is a form of business wherein the owners are
called shareholders.
5. How do you become a shareholder?
6. - 8. Give atleast 3 factors controllable by the
management that affect the market price.
9. - 10. Give atleast 3 factors uncontrollable by
management that affect the market price.
QUIZ #1
11. The body that appoints the president (CEO) of
a corporation.
12. One of his role is to formulate marketing
strategies and plans for the company.
13. His primary role is regarding finance decisions
of the company.
14. It is the primary objective of a shareholder.
QUIZ #1
True or False.
15. To achieve the goal of profit maximization for
each alternative being considered, the financial
manager would select the one that is expected
to result in the highest monetary return.
16. The wealth of corporate owners is measured by
the share price of the stock.
17. Dividend payments change directly with
changes in earnings per share.
QUIZ #1
True or False.
18. Stockholders expect to earn higher rates of return on
investments of lower risk and lower rates of return on
investments of higher risk.
19. When considering each financial decision alternative or
possible action in terms of its impact on the share price of
the firm's stock, financial managers should accept only
those actions that are expected to maximize shareholder
value.
20. Your Math teacher is gorgeous.
INTRODUCTION TO FINANCIAL
MANAGEMENT
Private Placements
It is the sale of a new
security directly to an
investor or group of
investors.
Financial Markets
These are organized
forums in which the
suppliers and users of
various types of funds can
make transactions directly.
Financial Institutions
These are intermediaries
that channel the savings of
individuals, businesses,
and governments into
loans or investments.
Public Offering
It is the sale of either
bonds or stocks to the
general public.
Financial Instruments
These are real or virtual documents
representing legal agreement
involving some sort-of monetary
value. These can be debt securities
like corporate bonds or equity like
shares of stock.
FINANCIAL INSTRUMENTS
A Financial Asset is any asset that is:
• Cash
• An equity instrument of another entity
• A contractual right to receive cash or another financial
asset from another entity.
• A contractual right to exchange instruments with another
entity under conditions that are potentially favorable.
Examples: Notes Receivable, Loans Receivable, Investment
in Stocks, Investment in Bonds
FINANCIAL INSTRUMENTS
A Financial Liability is any liability that is a contractual
obligation:
• To deliver cash or other financial instrument to
another entity.
• To exchange financial instruments with another entity
under conditions that are potentially unfavorable.
Examples: Notes Payable, Loans Payable, Bonds
Payable
FINANCIAL INSTRUMENTS
An Equity Instrument is any contract
that evidences a residual interest in the
assets of an entity after deducting all
liabilities.
• Examples: Ordinary Share Capital,
Preference Share Capital
FINANCIAL INSTRUMENTS
Debt Instruments generally have fixed returns due
to fixed interest rates. Examples:
•Treasury Bonds and Treasury Bills are issued by
the Philippine government. These bonds and bills
have usually low interest rates and have very low
risk of default since the government assures that
these will be paid.
FINANCIAL INSTRUMENTS
Corporate Bonds are issued by publicly listed
companies. These bonds usually have higher
interest rates than Treasury bonds. However, if
the company which issued the bonds goes
bankrupt, the holder of the bonds will no longer
receive any return from their investment and even
their principal investment can be wiped out.
FINANCIAL INSTRUMENTS
Equity Instruments generally have varied
returns based on the performance of the
issuing company. Returns from equity
instruments come from either dividends or
stock price appreciation. The following are
types of equity instruments:
FINANCIAL INSTRUMENTS
Preferred Stock has priority over a common stock in terms of
claims over the assets of a company. This means that if a
company were to be liquidated and its assets have to be
distributed, no asset will be distributed to common
stockholders unless all the claims of the preferred
stockholders have been given. Moreover, dividends to
preferred stockholders are usually in a fixed rate. No cash
dividends will be given to common stockholders unless all the
dividends due to preferred stockholders are paid first.
(Cayanan, 2015)
FINANCIAL INSTRUMENTS
Holders of Common Stock on the other hand are
the real owners of the company. If the company’s
growth is spurring, the common stockholders will
benefit on the growth. Moreover, during a
profitable period for which a company may decide
to declare higher dividends, preferred stock will
receive a fixed dividend rate while common
stockholders receive all the excess.
FINANCIAL MARKETS
These are organized
forums in which the
suppliers and users of
various types of funds can
make transactions directly.
FINANCIAL MARKETS
Primary vs. Secondary Markets
• To raise money, users of funds will go to a primary
market to issue new securities (either debt or equity)
through a public offering or a private placement.
• The sale of new securities to the general public is
referred to as a public offering and the first offering
of stock is called an initial public offering. The sale of
new securities to one investor or a group of investors
is referred to as a private placement.
FINANCIAL MARKETS
Primary vs. Secondary Markets
• However, suppliers of funds or the holders of
the securities may decide to sell the securities
that have previously been purchased. The sale
of previously owned securities takes place in
secondary markets.
• The Philippine Stock Exchange (PSE) is both
a primary and secondary market.
FINANCIAL MARKETS
Money Markets vs. Capital Markets
•Money markets are a venue wherein securities
with short-term maturities (1 year or less) are sold.
They are created because some individuals,
businesses, governments, and financial
institutions have temporarily idle funds that they
wish to invest in a relatively safe, interest-bearing
asset. At the same time, other individuals,
businesses, governments, and financial
institutions find themselves in need of seasonal or
temporary financing.
 FINANCIAL MARKETS
Money Markets vs. Capital Markets
• On the other hand, securities with
longer-term maturities are sold in
Capital markets. The key capital market
securities are bonds (long-term debt)
and both common stock and preferred
stock (equity, or ownership).
FINANCIAL MARKETS
Secondary market - Financial market in
which preowned securities (those that are
not new issues) are traded.
Money market - A financial relationship
created between suppliers and users of
short-term funds.
Capital market - A market that enables
suppliers and users of long-term funds to
make transactions.
FINANCIAL INSTITUTIONS
These are intermediaries
that channel the savings of
individuals, businesses, and
governments into loans or
investments.
FINANCIAL INSTITUTIONS
Commercial Banks - Individuals
deposit funds at commercial banks,
which use the deposited funds to
provide commercial loans to firms
and personal loans to individuals,
and purchase debt securities issued
by firms or government agencies.
 FINANCIAL INSTITUTIONS
Insurance Companies - Individuals
purchase insurance (life, property and
casualty, and health) protection with
insurance premiums. The insurance
companies pool these payments and
invest the proceeds in various securities
until the funds are needed to pay off
claims by policyholders.
FINANCIAL INSTITUTIONS
Mutual Funds - Mutual funds are owned by
investment companies which enable small investors
to enjoy the benefits of investing in a diversified
portfolio of securities purchased on their behalf by
professional investment managers. When mutual
funds use money from investors to invest in newly
issued debt or equity securities, they finance new
investment by firms. Conversely, when they invest in
debt or equity securities already held by investors,
they are transferring ownership of the securities
among investors.
FINANCIAL INSTITUTIONS
Pension Funds - Financial institutions that
receive payments from employees and invest
the proceeds on their behalf.
*Other financial institutions include pension
funds like Government Service Insurance
System (GSIS) and Social Security System
(SSS), unit investment trust fund (UITF),
investment banks, and credit unions, among
others.
FINANCIAL INSTITUTIONS
Question for reflection:
How would you relate the
role of financial managers,
role of financial markets
and role of investors?
 FINANCIAL STATEMENT
PREPARATION, ANALYSIS, &
INTERPRETATION
1. Exchanges of goods or
services between/among
two or more entities or
some other event having an
economic impact on a
business enterprise.
2. An accounting record used
to list a particular type of
frequently recurring
transaction.
3. A record used to classify
and summarize the effects of
transactions.
4. An entry on the right side
of an account.
5. A record used as the basis
for analyzing and recording
transactions. Examples
include invoices, check stubs,
and receipts.
6. A collection of accounts
maintained by a business.
7. Procedures used for analyzing,
recording, classifying, and
summarizing the information to
be presented in accounting
reports.
8. An entry on the left side of
an account.
9. Procedures and methods
used, including data
processing equipment, to
collect and report accounting
data.
10. An accounting record used to
record all business activities for
which a special journal is not
maintained.
11. The process of summarizing
transactions by transferring
amounts from the journals to
the ledger accounts.
12. The grouping of supporting
accounts that in total equal the
balance of a control account in
the general ledger.
13. The general ledger account
that summarizes the detailed
information in a subsidiary
ledger.
14. A collection of all the
accounts used by a business that
could appear on the financial
statements.
15. A system of recording
transactions in a way that
maintains the equality of the
accounting equation.
16. Records in which transactions are
first entered, providing a
chronological record of business
activity.
17. The recording of a transaction in
which debits equal credits. It usually
includes a date and an explanation of
the transaction.
FINANCIAL STATEMENT
PREPARATION
A financial statement is basically
a summary of all transactions
that are carefully recorded and
transformed into meaningful
information. It also shows the
company’s permanent and
temporary accounts.
 Income Statement
• These are also known as the Profit/Loss
Statement, Statement of Comprehensive
Income, or Statement of Income.
• This is a summary of the revenue and
expenses of a business entity for a
specific period of time, such as a month
or a year.
Statement of Owner’s Equity
• These are also known as the Statement of
Changes in Equity.
• This reports the changes in the owner’s
equity over a period of time.
• It is prepared after the income statement
because the net income or net loss for the
period must be reported in this statement.
Statement of Owner’s Equity
• Similarly, it is prepared before the balance
sheet since the amount of owner’s equity at
the end of the period must be reported on
the balance sheet.
• Because of this, the statement of owner’s
equity is often viewed as the connecting
link between the income statement and
balance sheet.
 Balance Sheet
• Formerly known as the
Statement of Financial Position.
• This provides information
regarding the liquidity position
and capital structure of a
company as of a given date.
Balance Sheet
• It must be noted that the information
found in this report are only true as of a
given date.
• It shows a list of the assets, liabilities,
and owner’s equity of a business entity
as of a specific date, usually at the close
of the last day of a month or a year.
 Statement of Cash Flows
• The statement of cash flows reports
a company’s cash inflows and outflows
for a period.
• This is used by managers in
evaluating past operations and in
planning future investing and
financing activities.
 Statement of Cash Flows
• It is also used by external users such
as investors and creditors to assess a
company’s profit potential and ability
to pay its debt and pay dividends.
 MEASUREMENT LEVELS OF
FINANCIAL STATEMENTS
LIQUIDITY, PROFITABILITY, EFFICIENCY, & LEVERAGE
LIQUIDITY
Liquidity refers to the company’s ability to
satisfy its short-term obligations as they come
due.
PRACTICE (20 MINUTES)
• Current assets is PHP2,000, current liabilities is
PHP3,500. What is current ratio?
• Inventory is PHP150. Accounts payable is
PHP450. Cash and accounts receivable total
PHP800. What is the current ratio? Quick ratio?
• If current ratio is 1.7, what is the total accounts
receivable if cash is PHP20,000, inventory is
PHP7,500, and accounts payable is PHP30,000.
PROFITABILITY
 Profitability refers to the company’s ability to
generate earnings. It is one of the most
important goals of businesses.
Return on equity measures the amount of net
income earned in relation to stockholders’
equity.
ROE (return on equity) = Net income ÷
Stockholders’ equity
PROFITABILITY
Return on assets measures the ability of a company to
generate income out of its resources/assets.
ROA (return on asset) = Operating income ÷ Total assets
Gross profit margin shows how many pesos of gross profit
is earned for every peso of sale. It provides information
regarding the ability of a company to cover its
manufacturing cost from its sales. Remember that gross
profit is just sales less cost of goods or cost of services.
Gross profit margin = Gross profit ÷ Sales
PROFITABILITY
Operating profit margin shows how many pesos of
operating profit is earned for every peso of sale. It
measures the amount of income generated from the
core business of a company.
Operating profit margin =Operating income ÷ Sales
 Net profit margin measures how much net profit a
company generates for every peso of sales or revenues
that it generates.
Net profit margin = Net income ÷ Sales
EFFICIENCY
Efficiency refers to a company’s ability to be efficient in
its operations. Specifically, it refers to the speed with
which various current accounts are converted into
sales, and ultimately, cash.
EFFICIENCY

Cost of goods sold

Accounts Payable
EFFICIENCY
LEVERAGE
Financial leverage refers to the
company’s use of debt. It defines the
company’s capital structure which
indicates how much of the total
assets are financed by debt and
equity.
LEVERAGE
LEVERAGE
Pam has a small restaurant business with current equity of
PHP60,000. She is planning to expand her restaurant space. After
much analysis she determined that an initial investment of
PHP50,000 in fixed assets is necessary. These funds can be
obtained in either of two ways. The first is the no-debt plan, under
which she would ask a relative to become an investor (owner) by
investing the full PHP50,000. The other alternative, the debt plan,
involves borrowing PHP50,000 from the nearby rural bank at 8%
annual interest. Pam expects PHP 30,000 in annual sales,
PHP18,000 in operating expenses, and a 30% tax rate.
 Analysis and Interpretations of
Financial Statements
To guide different users of financial
statements, i.e. creditors, investors, regulators
and managers, in their decisions, financial
statement analysis tools can be used.
These are financial ratios, common size
financial statements, and trend or horizontal
analyses.
 Analysis and Interpretations of
Financial Statements
To be more specific, financial statement analysis is
undertaken to serve the following purposes:
To assess the current profitability and operational
efficiency of the firm as a whole as well as its different
departments so as to judge the financial health of the
firm.
To ascertain the relative importance of different
components of the financial position of the firm.
 Analysis and Interpretations of
Financial Statements
 To identify the reasons for change in the
profitability/financial position of the firm.
To judge the ability of the firm to repay its debt and
assess the liquidity and solvency position of the firm.
Vertical Analysis (Common Size)
 This is a technique for evaluating the data of
financial statements that express each item
within a financial statement in terms of a
percent of a base amount.
For the Statement of Financial Position or
Balance Sheet, all accounts are presented as a
percentage of total assets.
Vertical Analysis (Common Size)
 For the Income Statement, all accounts are
presented as a percentage of net sales.
In using this type of analysis, attention must be
focused on items with significant changes from
one period to another. Depending on the nature
of the business, it is possible that even a slight
change in the percentage may warrant the
attention of top management.
 Horizontal Analysis (Trend Analysis)

 This allows the learners to see the trend

for the different accounts in the Financial
Statements.
To establish the trend, percentage
changes of accounts from one period to
another have to be made.
 Horizontal Analysis (Trend Analysis)

To compute:
Amount of change = Current year
amount – Base (earlier) year amount
Percent of change = Amount of
change/Base (earlier) year amount
FINANCIAL PLANNING
TOOLS AND CONCEPTS
Planning is an important aspect of the
firm’s operations because it provides road
maps for guiding, coordinating, and
controlling the firm’s actions to achieve
its objectives (Gitman & Zutter, 2012).
Management planning is about setting
the goals of the organization and
identifying ways on how to achieve them
(Borja& Cayanan, 2015).
Long-term goals
Short-term goals
Financial planning starts with
long term plans which would
then translate to short term
plans.
 Long-term financial plans - These are a
set of goals that lay out the overall
direction of the company. A long-term
financial plan is an integrated strategy
that takes into account various
departments such as sales, production,
marketing, and operations for the
purpose of guiding these departments
towards strategic goals.
 Short-term financial plans - Specify short-
term financial actions and the anticipated
impact of those actions. Part of short term
financial plans include setting the sales
forecast and other forms of operating and
financial data. This would then translate into
operating budgets, the cash budget, and
pro forma financial statements (Gitman &
Zutter, 2012).
PLANNING PROCESS
1. Set goals or objectives.
 For corporations, long term and short term objectives are usually
identified. These can be seen in the company’s vision and mission
statements. The vision statement states where the company
wants to be while the mission statement states the plans on how
to achieve the vision.
 Jollibee Foods Corporation (JFC) Vision: To excel in providing great
tasting food that meets local preferences better than anyone; To
become one of the three largest and most profitable restaurant
companies in the world by 2020. Mission: To serve great tasting
food, bringing the joy of eating to everyone.
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2. Identify Resources
Resources include production
capacity, human resources who will
man the operations and financial
resources (Borja & Cayanan, 2015).
3. Identify goal-related task
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4. Establish responsibility centers for accountability
and timeline
5. Establish the evaluation system for monitoring
and controlling
For corporations, the management must establish a
mechanism which will allow plans to be monitored.
This can be done through quantified plans such as
budgets and projected financial statements. The
management will then compare the actual results to
the planned budgets and projected financial
statements.
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6. Determine contingency plans
In planning, contingencies must be
considered as well.
Budgets and projected financial statements
are anchored on assumptions. If these
assumptions do not become realities,
management must have alternative plans
to minimize the adverse effects on the
company (Borja & Cayanan, 2015).