BUSINESS

FINANCE

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 BUSINESS FINANCE
MODULE

Module No. 1: Week 1: First Quarter

Introduction to Financial Management

Learning Competency
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
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 Include 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.

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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.

Let’s Understand (Study the Concept)

Financial Management

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

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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.

The Financial System

(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.

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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 are less than your allowance.

MONDAY TUESDAY WEDNESDAY

ITEMS PHP ITEMS PHP ITEMS PHP

1. 1. 1.
2. 2. 2.
3. 3. 3.
4. 4. 4.
5. 5. 5.
6. 6. 6.
7. 7. 7.
8. 8. 8.
9. 9. 9.
10. 10. 10.
Allowance Allowance Allowance
(EXPENSES) (EXPENSES) (EXPENSES)
OVER/SAVINGS OVER/SAVINGS OVER/SAVINGS

THURSDAY FRIDAY
ITEMS PHP ITEMS PHP

1. 1.
2. 2.
3. 3.
4. 4.
5. 5.
6. 6.
7. 7.
8. 8.
9. 9.
10. 10.
Allowance Allowance
(EXPENSES) (EXPENSES)
OVER/SAVINGS OVER/SAVINGS

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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.

Let’s Analyze

Directions: Please read all questions carefully. Write legibly and be as

concise as possible.

1. Kindly give five (5) examples of sole proprietorship, partnership and 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)

I. Below are jumbled words that you need to arrange. Then match column A
to column B for the meaning. Write your answer on the space provided.

A B
_____ 1. GEGBDINUT a. the science and art of managing
__________________ money
_____ 2. TMTENIVSEN b. a business owned by two or more
__________________ people and operated for profit
_____ 3. EFNICNA c. setting money aside for future use
__________________ d. to increase to the greatest
_____ 4. STPFRIO possible amount
__________________ e. financial gain from business
_____ 5. NCOTPROAOIR activity minus expenses
__________________ f. is the act of estimating revenue and
_____ 6. NXIAMZATIOMI
expenses over a period of time
__________________
_____ 7. GSSVNAI g. the process of thinking about the
__________________ activities required to achieve a desired
_____ 8. GLNANINP h. an entity created by law owned by
__________________ shareholders
_____ 9. PPRARNESTIH i. to consider something carefully
__________________ j. the act of putting money to work to

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_____ 10. CISDNOSIE start or expand a business or project
__________________ or the purchase of an asset, with the
goal of earning income or capital
appreciation
k. A business owned by one person and operated
for his or her own profit.

II. 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 it’s own profit.
a. Sole Proprietorship
b. Corporations
c. Partnerships
d. Banks

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 The content of this module is adapted and taken from the different websites and
books. The module writer is in a heartfelt gratitude to the following references and
its authors:

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
The Commission on Higher Education in collaboration with the Philippine Normal
University: Business Finance – Teaching Guide for Senior High School: 2016
Business Finance By: Arthur S. Cayanan and Daniel Vincent H. Borja

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BUSINESS FINANCE (Grade XII)
Self-Learning Module
Quarter 1 - Module 1: Introduction to Financial Management
First Edition, 2020

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Published by the Department of Education

Secretary: Leonor Magtolis Briones
Undersecretary: Diosdado M. San Antonio

Development Team of the Module

Writer: Charissa D. Mendoza
Editors: Pastor Valcorza, CPA, Ph.D.
Eden M. Papa
Reviewer: Emma R. Cunanan, EdD. – EPS in Mathematics
Illustrator: Charissa D. Mendoza
Layout Artist: Christian Jake T. Laspiñas
Eden M. Papa
Management Team: Wilfredo E. Cabral, Director IV
Genia V. Santos, CLMD Chief
Dennis M. Mendoza, Regional EPS In Charge of LRMS
Evangeline P. Ladines, CESO V, Schools Division Superintendent
Bernardo N. Mascariña, Curriculum Implementation Division Chief
Rodel C. Apostol, Division EPS In Charge of LRMS

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