Business Finance

Week 1- Module 1
Activity 1: Read Me! Understand ME!
Direction: Read the text about finance below. Understand what you are reading.

Have you ever tried to budget your money for a week or for a month? Have you ever
asked yourself how do companies and individuals acquire money needed such as capital?
All of this involved what we called finance.

FINANCE is a term for matters regarding the management, creation and study of
money and investments. Specifically, it deals with a term or broadly describing the study
and system of money, investments and other financial instruments.

Finance can be broadly divided into three categories, a.) public finance,
b.) corporate finance and c.) personal finance.

a. Public Finance includes tax systems, government expenditures, budget

procedures stabilization policy and instruments, debt issues and other
government concerns. Federal government helps prevent market failure by
overseeing the allocation of resources, distribution of income and
stabilization of money.
b. Corporate Finance involves managing assets, liabilities, revenues and
debt for a business. Business obtain financing through a variety of means
ranging from equity investments to credit arrangements.
c. Personal Finance defines all financial decisions and activities of an
individual or households including budgeting, insurance, mortgage
planning, savings and retirement planning. Personal finance depends
largely on one’s earnings, living requirements, and individual goal desire.
As a specialized field, personal finance is a recent development, through
the forms it has been taught in universities and school as “home
economics” or “consumer economics”.

Financial Managers perform data analysis and advise senior managers on profit-
maximizing ideas. The role of financial manager, particularly in business, is changing in
response to technology advances that have significantly reduce the amount it takes to
produce financial reports.

Direction: Read carefully and answer the following questions. Encircle the letter your
answer.

1. What do you call the study of money and investment?

A. Finance B. Accounting C. Budgeting D. Money Management

2. How many categories do finance have?

A.1 B.2 C.3 D. 4

3. What type of finance deals with tax systems and government expenditures?
A. Corporate Finance C. Personal Finance
B. Finance System D. Public Finance

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4. What type of finance deals with financial decisions?
A. Corporate Finance C. Personal Finance
B. Finance System D. Public Finance

5. Which of the following terms deals with corporate finance?

A. Budgeting B. Insurance C. Revenues D. Stabilization Policy

THE BASICS OF FINANCE

Finance, as a distinct branch of theory and practice from economics, arose in

1940’s and 1950’s with the work of Markowitz, Tobin, Sharpe, Treynor, Black and Scholes
to name just a few. Today “finance” is typically broken down into three broad categories:
a.) public finance includes tax systems, government expenditures, budget procedures,
stabilization policy and instruments, debt issues and other government concerns. b.)
Corporate finance involves managing assets, liabilities, revenues, and debts for a business.
c.) Personal finance defines all financial decisions and activities of an individual or
household including budgeting, insurance mortgage planning savings and retirement
planning.

THE FINANCIAL MANAGERS

The success of an operation of firms and markets can be achieved with the help of
the person involved in financing which is called financial managers.
Financial managers perform data analysis and advise senior managers on profit-
maximizing ideas. Financial managers are responsible for financial health of an
organization. They produce financial reports, direct investment activities and develop
strategies and plans for the long-term financial goal of their organization.
There are two types of Financial manager the controllers which direct the
preparation of financial reports and summarize and forecast the organizations financial
position such as income statement and credit managers who oversee the firms credit
business.

THE ROLE OF FINANCIAL MANAGERS

The role of financial manager, particularly in business, is changing in response to

technology advances that have significantly reduce the amount it takes to produce
financial reports. Financial managers typically perform different roles in the company
such as:
• Prepare financial statements, business activity reports and forecasts
• Monitor financial details to ensure that the legal requirements are met
• Supervise employees who do financial reporting and budgeting
• Review company financial report and seek ways to reduce cost
• Analyze market trends to find opportunities for expansion or acquiring other
companies.
• Help management make financial decision.

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IMPORTANT SKILLS FOR FINANCIAL MANAGER

Analytical Skills- Financial mangers increasingly assist executives in making

decisions that affect the organization, a task for which they need analytical ability.
Communication Skills- Excellent communication are needed to explain and justify
complex financial transactions.
Attention Detail- in preparing and analyzing report such as balance sheet s and
income statements, financial manager must pay attention to detail.
Math Skills- Financial managers must be skilled in math including algebra. An
understanding of international finance and complex financial documents also is
important.
Organizational Skills Financial managers deal with a range of information and
documents they must stay organized to do their jobs respectively

OTHER FINANCIAL MANGERS

In Entrepreneurship the entrepreneurs are the CEO and in Business Management

we also have what we called Business managers. In a company we also have our different
managers.

1. BOARD OF DIRECTORS - They set policies on investment, capital structure and

dividends. They also approve company’s strategies, goals, and budget and appoint and
remove members of the top management including president. They determine top
management’s compensation.
2. PRESIDENT – they are responsible for overseeing the operations of the company
and ensuring that the strategies as approved by the board are implemented as planned.
They perform all areas of management and represent the company in professional, social,
and civic activities

3. VP FOR SALES AND MARKETING – they are responsible for formulating marketing
strategies and plan, directing and coordinating company sales and performing market
and competitor analysis. They are also involved in analyzing and evaluating effectiveness
and cost of marketing methods applied, conducting or directing research and promoting
good relationship with customers and distributors.

4. VP FOR PRODUCTION - Ensuring production meets demand and Identifying

production technology/process that minimizes production cost and makes the company
cost competitive is the main role of VP for production. They are also responsible for
Coming up with a production plan and identifying adequate and competitively priced raw
products.

5. VP FOR ADMINISTRATION- The main role of VP for Administration is coordinating

the functions of administration, finance, sales and marketing departments. VP for
Administration assist in other departments in hiring employees and provide assistance in
payroll preparation.

6. VP FOR FINANCE- VP for Finance has the four following main role Financing,
Investing, Operating and Dividend policies.

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 Explore

Here are some enrichment activities for you to work on to master and
strengthen the basic concepts you have learned from this lesson.

Enrichment Activity 1: CROSSWORD PUZZLE

DIRECTIONS: Fill in the cross word puzzle with the correct answers identified in
the statements below. Match the number of the question with the given boxes
placed across and down the grid. If answered correctly the words will fit neatly
into the puzzle.
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4 6

ACROSS
1. It is the study and system of money.
3. Financial manger that direct preparation of financial reports
5. Skills that need excellent communication which are needed to explain and justify
complex financial transaction
7. financial manager must understand mathematical concepts and ideas including
algebra
DOWN
2. It is a type of finance that defines all financial decisions and activities of an
individual.
4. Financial managers who oversee the firms credit business.
6. Financial managers deal with a range of information and documents they must stay
organized to do their jobs
respectively

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 Deepen
You have learned about finance and one type of finance is personal
finance which includes budgeting. At this point, make a personal or
household financial budget plan. Personal or household budget is a
summary that compares and tracks your income expenses for a defined
period.

What you need

Clean sheet of Pad Paper and a pen

What you have to do

To know how much you save, answer the activity. Suppose you have
PhP15,000 as a monthly income. Make a budget plan such that the following
items will be included in the budget.
1. food
2. transportation
3. electric bill
4. savings
5. clothing
You may include other items. Write your budget plan as simple as the picture
below.
MONTHLY BUDGET

EXPENSES

ITEM COST TOTAL COST

SAVINGS

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 Gauge
Directions: Read carefully each item. Use separate sheet for your answers.
Write only the letter of the best answer for each test item

1. Which of the following is not a role of VP for finance?

A. Financing C. Production
B. Investing D. Operating

2. Which of the following is a role of a president?

A. Ensuring production meets demand
B. Set policies on investment
C. Represent the company in civic activities
D. Formulating marketing strategies

3. Which of the following is the main role of the VP for Production?

A. Ensuring production meets demand
B. Set policies on investment
C. Represent the company in civic activities
D. Formulating marketing strategies

4. Who is the person involved in data analysis and profit- maximizing

ideas?
A. CEO C. Finance Manager
B. Department Heads D. Supervisors

5. What financial skill is shown in the statement “financial

statement must focus on details”?
A. Attention to detail C. Math skills
B. Communication Skills D. Organizational skills

6. What financial skill is shown in the statement “Excellent

communication are needed to explain”?
A. Attention to detail C. Math skills
B. Communication Skills D. Organizational skills

7. Which of the following is a responsibility of a financial manager?

A. Prepare financial statements
B. Monitor financial details
C. Help management make financial decision

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 D. All of the above
8. What aspects affects the role of financial manager?
A. Consumers B. Market C. Technology D. All of the above

9. When does finance arose?

A. 1940’s B. 1980’s C. 1990’s D. 2000 onwards

10. What type of financial manger directs the preparation and

making of financial reports?
A. Controllers C. Production Manager
B. Credit Manager D. Sales Manager

Great job! You are almost done with this

module.