1 (Module Week 1)
1 (Module Week 1)
1 (Module Week 1)
1st Quarter
Module 1
BUSINESS FINANCE – Grade 12
Alternative Delivery Mode
Quarter 1 – Module 1: Introduction to Business Finance First Edition,
2020
Republic Act 8293, section 176 states that: No copyright shall subsist
in any work of the Government of the Philippines. However, prior approval
of the government agency or office wherein the work is created shall be
necessary for exploitation of such work for profit. Such agency or office
may, among other things, impose as a condition the payment of royalties.
Illustrators: Writers
Management Team :
Malcolm S. Garma, Regional Director Name of Regional Director
Genia V. Santos, CLMD Chief Name of CLMD Chief
Dennis M. Mendoza, Regional EPS In Charge of LRMS
Maria Magdalena M. Lim, CESO V, Schools Division
Superintendent
Aida H. Rondilla, CID Chief
Lucky S. Carpio, EPS In Charge of LRMS
Division ADM Coordinator
Name of Division ADM Coordinator
Telefax:
E-mail Address:
Introductory Message
This learning resource hopes to engage the learners into guided and
independent learning activities at their own pace and time. Furthermore,
this also aims to help learners acquire the needed 21st century skills
while taking into consideration their needs and circumstances.
In addition to the material in the main text, you will also see this
box in the body of the module:
What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in
the module.
1. Use the module with care. Do not put unnecessary mark/s on any
part of the module. Use a separate sheet of paper in answering the
exercises.
2. Don’t forget to answer What I Know before moving on to the other
activities included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your
answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through
with it.
This module was carefully prepared and designed for you to perform at
your own pace. Useful activities on the concept of demand, quantity
demanded, and the laws of demand and supply, demand and a supply curves
including solving problems on equilibrium, equilibrium price, and equilibrium
quantity were provided for you to accomplish. These will help develop your
creativity and critical thinking skills to solve problems independently. It is also
expected that upon accomplishing these activities, you can communicate
confidently and collaborate with other people to solve problems, intelligently.
And most importantly, your character and initiative to handle situations which
you cannot control will be developed.
By the end of this session, you will be able to determine the concept of
demand, quantity demanded, and the laws of demand and supply, demand
and a supply curves and solve problems equilibrium, equilibrium price, and
equilibrium quantity
What I know
Instruction: I. Fill in the blanks and identify the following terms.
1. 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.
2. Dividend payments change directly with changes in earnings per share.
3. The wealth of corporate owners is measured by the share price of the stock.
4. Financial markets are intermediaries that channel the savings of individuals,
businesses, and government into loans or investments.
5. The money market involves trading of securities with maturities of one year or
less while the capital market involves the buying and selling of securities with
maturities of more than one year.
III. MULTIPLE CHOICE
Instruction: Choose the letter corresponding to the correct answer for each of the
questions provided below.
2. Firms that require funds from external sources can obtain them from .
A. financial markets.
B. private placement.
C. financial institutions.
D. All of the above.
Based on the profit maximization goal, the financial manager would choose .
A. Asset 1.
B. Asset 2.
C. Asset 3.
D. Asset 4
MODULE 1 INTRODUCTION TO BUSINESS FINANCE
As a high school student, you ask for your baon by asking money from someone,
like from your mother, father, sister, brother or guardian. Budgeting your own
baon indicates that you are practicing on how to manage your finances.
How much allowance is given to you and how often do you receive it (daily,
weekly, etc.) List them down and indicate the amount.
From the many activities you have done in a day like getting to school, to
attending flag ceremony, classroom discussions, lunch breaks, end of classes,
occasional meriendas or going out with friends and playing computer games,
going back home and going back out to a nearby store to buy autoload because
you realized that you can‗t end the day without texting your crush.
Can you identify the expenses you have incurred (i.e. jeepney/tricycle fare, lunch,
merienda, computer games)? List them down and indicate the amount.
At the end of the day, a week, or a month, do you still have savings left out of the
allowance you get from your parents?
Do you have any idea on what to do if you have savings left from your baon?
Enumerate them below.
Do you know that most of the activities you do involving decisions on where to use
your allowance is a finance decision?
What’s In
From the activities you have done above, recall that you were able to get the total
amount of your ―baon‖ in getting to school for the entire week or month. You then
subtracted the total amount of your expenses and you were also able to get the
remaining amount or ―savings‖ of your ―baon‖, if any.
Go back to the activity and focus your attention on the surplus resulting from your
budgeting.
If you are going to save it, how and where are you going to save it?
Investments come in many forms that will generate income or appreciate in the future.
Between hiding your cash under your bed and depositing it in the bank, it would be
better to keep your money in bank deposits because these will earn interest.
Suppose that in your previous activity the total amount of the expenses you have
listed exceeds the total amount of your ―baon‖, in this case you are in a situation
where you are short of cash, what would you do? Where will you get extra cash?
What other sources of cash do you know?
What Is It
What’s More
LESSON 2: ACTIVITIES OF THE FINANCIAL MANAGER
Who among you wants to own their own business? What type of business
organization you want to operate?
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.
Companies which are publicly listed are owned by unrelated investors and are
traded in organized exchanges like the Philippine Stock Exchange (PSE).
Let us assume that you are the biggest shareholder in a corporation. The
objectives you want to achieve as owners of the corporation are: to be profitable
and have a lot of cash.
What do you think of a company who has very large amount of cash? You
may say that this is good because the company will always have enough cash to
pay its obligations. But even though having a lot of cash has its advantages, it also
signals unhealthy company practices. It may tell them that management has not
been putting the company‗s resources into good use. Also, keeping too much cash
in the books is like hiding your extra allowance under your bed. You will be missing
out on investment opportunities.
Computation:
September 30, 2010 – 10 shares x P2,600 per share = P26,000 (increased by P900)
September 30, 2010 – 10 shares x P2,300 per share = P23,000 (decreased by P2,100)
Therefore, the 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.
Now, at this point, let us start discussing the factors which can affect prices. What are the
factors that can change the market price?
Factors that Influence Market Price
Let us group the factors into two: Factors that the Management can control and
external factors that cannot be controlled by management.
COMPANY A
Income Statement Cash Flows
Sales P100,000 Collection from Customers P0
Less: Costs 50,000 Payment of Expenses 50,000
Profits P 50,000 Net Cash Flow (P 50,000)
COMPANY B
Income Statement Cash Flows
Sales P 100,000 Collection from Customers P100,000
Less: Costs 150,000 Payment of Expenses 50,000
Profits (P 50,000) Net Cash Flow P 50,000
COMPANY C
Income Statement Cash Flows
Sales P 100,000 Collection from Customers P 100,000
Less: Costs 70,000 Payment of Expenses 70,000
Profits P 30,000 Net Cash Flow P 30,000
Company A is profitable but generated negative cash flows which resulted from
the uncollected accounts receivable of PHP100,000. Without adequate cash
inflows to meet its obligations, the company will face liquidity problems, regardless
of its level of profits.
Company B on the other hand has a positive cash flow but is unprofitable. This is
a result of the company‗s delay in payment of its costs. Accordingly, the Company
will soon have to pay the remaining PHP100,000 liability and its cash will no longer
be sufficient. Again, without adequate cash inflows to meet its obligations, the
company will face liquidity problems.
Company C is profitable and has a positive cash flow. Based on the information
provided, Company C seems to be the best.
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. Take note that there may be times that companies do not pay out
dividends because of future expansions. Same with the other factors affecting
share price, dividend policies should go hand in hand with other factors in
determining market price.
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 or seasoned manager.
On the other hand, Company B sells Buko Juice in Antipolo area (or any other
area different from Company A‗s 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 (or any other area) to take advantage of the
growing demand of Buko Juice in Cubao.
External Factors
These factors influence 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? This is achieved through financial management.
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.
What I Have Learned
Managers of a corporation are responsible for making the decisions for the
company that would lead towards shareholders‘ wealth maximization. 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 or
seasoned manager.
The shareholders‘ wealth is measured based on the current market price of the
corporation‘s stocks. Profit is a measure of the financial performance of a
company for a period of time.
Knowing the importance of managing the money, you will be able to save more
for the future.
Did you find our topic enjoyable and interesting? Write something about it.
You may use the box below.
What I Can Do
1. Aside from the factors mentioned in the module, what other factors do you think can
influence the investor‘s perception on the company‘s performance which would
ultimately affect share price?
Websites
https://www.investopedia.com/financial-term-dictionary-4769738
https://corporatefinanceinstitute.com/resources/knowledge/finance/what-is-
finance-definition/
https://www.careerexplorer.com/careers/financial-manager/
https://courses.lumenlearning.com/boundless-
business/chapter/introduction-to-financial-management/
https://www.investopedia.com/ask/answers/061615/what-are-major-
categories-financial-institutions-and-what-are-their-primary-roles.asp
http://teachtogether.chedk12.com/teaching_guides/view/436#section3
Answer Key
What I know
Test I
1. Finance
2. Financial Manager
3. Financial Institutions
4. Personal Finance
5. Budgeting
Test II
1. True
2. False
3. False
4. True
5. True
Test III
1. A
2. C
3. A
4. C
5. D
Assessment
1. Cash Flow
2. Budget
3. Profit and Loss Statement
4. Balance Sheet
5. Business Finance