METRO

MANILA
UNIVERSITY
Group 3:
Krista Jarolan
Daneruth Lao
Nerine Lo

METRO MANILA
UNIVERSITY

On April 2, 1990, Mr. Rene Roces, Vice

President for Finance of Metro Manila
University (MMU), was reading the
Balance Sheet of March 1990. This was
the first time that quarterly financial
statements were prepared for MMU- a
handiwork of Mr. Aragon, recently
appointed
Vice
President
for
Administration.

METRO MANILA
UNIVERSITY

While reviewing the financial statements,

however, Mr. Roces noticed that the cash
balance was about 50 million so he
immediately called Mr. Aragon to a meeting.
Why should the University hold such a
large amount of cash? Shouldnt we invest
more in Treasury bills that yield at least 5%
more than savings accounts, Mr. Roces
asked. Mr. Aragon was surprised by this
question and being relatively new on the
job, requested some time to study the
matter

METRO MANILA
UNIVERSITY

MR. ARAGON Roy Aragon, 32 years old,

was a graduate of MMU. He had been
teaching in the College of Engineering for
ten years until he was appointed VP for
Administration upon the retirement of the
previous incumbent in December, 1989.

METRO MANILA
UNIVERSITY

During the meeting, the Cashier explained

that funds were kept in savings accounts
and not in higher yielding securities like
Treasury Bills because the latter felt that
he needed to keep cash for unforeseen
payments. According to the Cashier, the
academic units are allocated their budgets
at the start of the year. Once they get
their budgets, they assume that we have
the cash to be spent by them anytime,
the Cashier continued.

METRO MANILA
UNIVERSITY

The Chief Accountant, however, informed

Mr. Aragon that cash disbursements for
certain accounts had a more or less
regular pattern. For example, Trust funds
for Scholarships and Professorial Chairs
should be invested in higher yielding
securities because these funds have
definite schedules for payment, the Chief
Accountant said.

METRO MANILA
UNIVERSITY

Central Problem
How should Mr. Aragon handle the 50
million cash balance of the university?

METRO MANILA
UNIVERSITY

Objectives
To

settle the conflict between Mr. Aragon,

the newly-appointed Vice President for
Administration, and the Cashier and the
Chief Accountant, Mr. Aragons
subordinates.
To make Mr. Aragon become more decisive
about the right actions he should take.
To help the university make the most out
of its cash balance.

METRO MANILA
UNIVERSITY

Alternative Courses of Action

METRO MANILA
UNIVERSITY

#1:
Disregard the Cashiers suggestion and carry
on with the plan of investing a huge amount
of the universitys funds in Treasury Bills.

METRO MANILA
UNIVERSITY

Advantages:
Higher interest returns will be yielded.
Funds will be protected from rush spending.
Theft will somehow be avoided.
Unnecessary spending will have lesser chances
of occurring
Disadvantages:
The Cashier might not feel important in the
management given that he/she is more
experienced in dealing with the financial
matters of MMU.
The Cashier might feel misunderstood.

METRO MANILA
UNIVERSITY

#2.
Mr. Aragon, the Cashier and the Chief
Accountant could agree to divide the
cash balance into two portions wherein
the large fraction of it would be
invested in Treasury Bills and the
smaller fraction would be kept in
savings accounts for unexpected
expenses.

METRO MANILA
UNIVERSITY

Advantages:
Easy access to the small portion of the 50 million
will be possible.
High interest returns will be yielded
Mr. Aragon will be showing that he can exercise his
power fairly by putting his suggestion into action.
The Cashier will feel valued now that his/her
suggestions will be considered.
Disadvantages:
The Cashier will not be easily convinced.
It will require a lot of time for the department to get
used to this new system.

METRO MANILA
UNIVERSITY

#3.
Mr. Aragon, the Cashier and the Chief
Accountant should hold another
meeting to explain their individual
plans with their colleagues and have a
casting of votes on what to do with the
cash balance.

METRO MANILA
UNIVERSITY

Advantages:
More ideas will be brought out in the open.
The staff of the Administration department will
feel important and valued because their opinions
on what shall be done with the cash balance will
actually be considered.
Disadvantages:
More disagreements may arise.
The process is time-consuming.

METRO MANILA
UNIVERSITY

Recommendation
The group recommends ACA #2.

METRO MANILA
UNIVERSITY

Conclusion
ACA #2 is the most beneficial to Mr. Aragon, his colleagues
and, most of all, the university. Mr. Aragon would be able to
show everyone in the management that he takes his job
seriously, exercises his power fairly and is capable of making
decisions for the good of the university. The Cashier would
feel recognized and important because his/her suggestion
was considered. The university would be able to maximize its
benefits because of the fact that part of the funds is growing
while the other fraction is being prepared to pay off expenses,
unexpected or not. Making others feel better is not required
when it comes to making business decisions but heeding the
advices of loyal and more experienced employees is
advantageous to a company.

METRO MANILA
UNIVERSITY

What are the possible reasons

for the Cashiers resistance to
the idea of investing the
universitys funds in higher
yielding securities?