BUSINESS FINANCE

MODULE

Module No. 1: Week 1: 1st Quarter

TOPIC: Introduction to Financial Management

Learning Competency (Essential Competencies)

Explain the major role of financial management and the different
individuals involved

Code: ABM_BF12-IIIa-1

Objectives
After going through this module, you are expected to:
1. Describe the role financial management.
2. Differentiate the different individuals involved in financial management.

Let’s Recall (Review)

Words to Ponder

Finance The science and art of managing money. (Gitman & Zutter, 2012)
Budgeting The allocation of your income and expenses over a span of time.
Investments An acquisition of monetary asset purchased with the idea that the
asset will provide income in the future or will be later be sold at a
higher price for a profit (Investopedia)
Sources of funds Includes credit, venture capital, donations, grants, savings, and taxes.
Profits The financial gain from business activity minus expenses.
Shareholders A person, company, or institution that owns at least one share of a
company stock.
Savings Putting money aside for future use.
Decisions The act of considering something carefully.
Planning The process of thinking about the activities required to achieve a
desired goal.
Maximization To increase to the greatest possible amount.
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

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 Let’s Understand (Study the Concept)
Financial Management

planning organizing directing controlling

Financial Management is all about strategic:

(1) Planning involves laying the company’s goals and taking course of action in order for the
company to reach its goals. It also involves in making sure that the company is always
pushing forward its marketing strategies.
(2) Organizing requires the company to have an organizational structure to make sure that
each component in the organizational chart does its part for the overall welfare of the
company.
(3) Directing means quality leadership of the managers in every department of the company.
Managers are expected to set good work ethics so that employees will do their part to achieve
the company’s goals.
(4) Controlling refers to the performance of the company that it adheres to its standard
operating procedures and should be in compliance with company policies, rules and
regulation as well as government standards and the law.
These financial activities do not only apply to small and big businesses but also to all
individuals in their everyday life.
Making a list for your allowances is called Finance. Making a list will be able you
to manage or make use of your allowances adequately. If your expenses exceed your
allowance and when you take out the least item that you need to buy or spend for a day or
week, then this is what we call Budgeting. When you use your savings to buy an item to sell
in your neighborhood, friends or school, so that you can earn money this is called
Investment. If you ask more money from your parents/guardians or lend money from your
friend this is what we call Sources of funds.
The activity in managing your allowance is also done by small and big companies
where your allowance would be their Capital. A finance manager has to think of ways on
how to utilize its capital. Other function of a finance manager is choosing the right sources of
funds, like obtaining loans from banks or financial institutions. The finance manager also has
to decide on the right investments to be made in order for the company to have a stable
income.
Once you are done with school and venture out in the real world to make a living,
you may be involved or inter-act with different forms of business organizations whether it be
sole proprietorship, partnership, or corporation. Thus, you may end up being a single owner
of a business that is sole proprietorship, or you might collaborate in business with other
people which is called partnership, or you may end up working for a company or
corporation.

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The Financial System

FINANCIAL
SAVERS USERS OF FUNDS
INTERMEDIARIES
(BORROWERS/
Households Banks
INVESTORS )
Individuals Insurance companies
Households
Corporations/ Stock exchange
Individuals
Companies Stock brokerage firms
Corporations/Companies
Government Agencies Mutual Funds
Government Agencies
Other Financial
Institutions
(Cayanan & Borja, 2017)

The above figure illustrates the overview of the financial system. It shows the
different individuals and/or institutions involved in the system. As the figure shows, the
system permits the transfer of money efficiently and effectively between savers to financial
intermediaries and to borrowers or investors. The financial system supports both savings and
investments and ultimately creates wealth.

Shareholders Wealth Maximization

Involves not only the shareholders but also other stakeholders who may be employees,
suppliers, customers, creditors, regulatory bodies and of course the community where the
company has its business. The company should always make sure that the investment of their
present stakeholders is profitable or earning so that they will be encouraged to invest more
and, in this way, the company can also attract new investors.

E-search (optional)

Additional resources on the topic may be found on the following links:

https://doingbusinessinthephilippines.com/list-of-banks-in-the-philippines/
https://www.bworldonline.com/philippine-financial-system-grows-in-2018-as-lenders-assets-expand/
https://www.managementstudyguide.com/financial-management.htm
https://www.investopedia.com/terms/i/investment.asp

References
Business Finance – Teaching Guide for Senior High School
By: The commission on Higher Education in collaboration with the Philippine Normal
University
Business Finance By: Arthur S. Cayanan and Daniel Vincent H. Borja

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 Let’s Apply

To better understand how you manage your finances, below is a chart where you can
list your expenses as against your allowances.

Directions:
Fill the chart by listing the items that you plan to buy or use for the week with the
corresponding amount and also your allowance per day. Let’s see if your expenses are less or
if it exceeds your allowance allotted for the day. Encircle the word “Over” if your expenses
are over your allowance and savings if your expenses is less than your allowance.

MONDAY TUESDAY WEDNESDAY

ITEMS PHP ITEMS PHP ITEMS PHP

Allowance Allowance Allowance

(EXPENSES) (EXPENSES) (EXPENSES)
OVER/SAVINGS OVER/SAVINGS OVER/SAVINGS

THURSDAY FRIDAY
ITEMS PHP ITEMS PHP

Allowance Allowance
(EXPENSES) (EXPENSES)
OVER/SAVINGS OVER/SAVINGS
Questions:
1. What must be the most important goal in having a plan?
2. Why do you think there is a need for financial management?
3. What are the factors that you have considered in planning your allowance? Explain
each briefly.

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 Let’s Analyze
Directions: Please read all questions carefully. Write your answer legibly on your
activity notebook and be as concise as possible.

1. Kindly give five (5) examples of Sole proprietorship, Partnership and a

corporation.

2. What are the advantages and disadvantages of Sole proprietorship, Partnership

and Corporation? Please give at least four (4) of each.

3. From the three (3) business organization which do you think would best fit your
plans for the future?

Let’s Try (Evaluation)

Below are jumbled words that you need to arrange. Then match column A to column B
for the meaning. Write your answer on your activity notebook.
A B
a. the science and art of managing
money
_____ 1. GEGBDINUT b. a business owned by two or more
__________________ people and operated for profit
_____ 2. TMTENIVSEN c. setting money aside for future use
__________________ d. to increase to the greatest
_____ 3. EFNICNA possible amount
__________________
e. financial gain from business
4. STPFRIO
activity minus expenses
__________________
_____ 5. NCOTPROAOIR f. is the act of estimating revenue and
__________________ expenses over a period of time
_____ 6. NXIAMZATIOMI g. the process of thinking about the
__________________ activities required to achieve a desired
_____ 7. GSSVNAI h. an entity created by law owned by
__________________ shareholders
_____ 8. GLNANINP i. to consider something carefully
__________________ j. the act of putting money to work to
_____ 9. PPRARNESTIH start or expand a business or project
__________________ or the purchase of an asset, with the
_____ 10. CISDNOSIE goal of earning income or capital
__________________ appreciation
k. A business owned by one person and
operated for his or her own profit.

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Choose the letter of the best answer. Encircle the letter of your answer.

1. Which of the following statement is TRUE?

a. Financial management is all about investments.
b. Financial management deals about strategic planning, organizing, directing and
controlling of financial activities
c. Financial management is all about providing business opportunities
d. Financial management is applied only for corporation.

2. These are business with two or more owners.

a. Sole Proprietorship
b. Corporations
c. Partnerships
d. Banks

3. Credit, venture capital, donations, grants, savings, subsides, and taxes are
a. Decisions
b. Sources of funds
c. Planning
d. Banking

4. Which of the following is a monetary asset purchased with the idea that the asset
will provide income in the future or will later be sold at a higher price for a profit?
a. Shareholders
b. Budget
c. Funds
d. Investments

5. The activities that involved decisions on where to use your allowance is called
a. Finance decision
b. Investment decision
c. Procurement decision
d. Profit decision

6. These are business owned by a person and operated for its own profit.
a. Sole Proprietorship
b. Corporations
c. Partnerships
d. Banks