FOREWORD

Amid the spread of the Covid – 19 pandemic, the faculty of Royal British
College Inc. deemed it necessary that the health and safety of its students are kept
safe, while administering the suitable methods of maintaining quality education to
produce globally competitive individuals. It was through this sole idea that the learning
modules were created to enrich its students’ academic needs while being safe in the
comfort of their own homes.
This learning module contains all the lessons, complete with activities and
exercises, which will help the learner to gain understanding of the concepts of each
Royal British College, Inc.
Brgy. Marawoy, Lipa City, Batangas
subject matter efficiently. The content of this module is divided into weeks and Email: rbccollege07@yahoo.com/royalbctesda@gmail.com
quarters, with one or two lessons contained weekly. This is to ensure that the learner, COLLEGE DEPARTMENT
through self – paced learning, along with the possible assistance of his/her parents,
takes time in learning the topics thoroughly and effectively.
The Royal British College Inc. wishes you, dear learner, to be honest with
your heart and take time and continue studying at home in the midst of the Pandemic.
BUSINESS FINANCE
Your teachers will also be there to give guidance and assistance any time you need it (Learning Module)
so.
Keep safe, and happy learning Royals!
Student Name : __________________________________
God bless!
Course & Year : __________________________________

-Royal British College Inc.


OVERVIEW OF FINANCIAL MANAGEMENT
Learning Objectives:
1.Describe what Finance is
2. Explain the subfields of Finance
3. Explain the role of Financial Management
FINANCE
It is a body of facts, principle, and theories relating to raising
and using money by individuals, businesses, and governments.
This concerns both financial management profit-oriented business
organizations particularly the corporate form of business, as well
as, concepts and techniques that are applicable to individuals and to
governments. Finance involves the ways people and organizations raise and
allocate capital, use monetary resources, and account for the risks involved. It
is also the study of how to value all sort of things such as valuation of a
business enterprise, the payments left on a mortgage of property, the purchase
of an entire company or a personal decision to retire early.
The Subfields of Finance include the
a. Study of corporate finance or financial management
b. Study of investments
c. Study of financial institutions and markets.
Financial management involves the process of planning, organizing,
directing and controlling the financial activities of the firm. This includes
obtaining and utilizing funds for the operations of the enterprise. It also deals
with the application of general management principles and capitalizes on the
financial resources of the enterprise.
Specifically, financial management utilizes the principles of the time value of
money, leverage, diversification, and an investment's expected rate of return
versus its risk, with the goal of maximizing the shareholder wealth.
Major Role of Financial Management
Resources of a business entity with the following objectives:
1. To ensure regular and adequate supply of funds;
2. To ensure adequate returns to the share holders through capital gains
which are dependent upon the earning capacity and the market price of
the share;
3. To ensure optimum funds utilization at least cost;
4. To ensure investment of funds in safe ventures so that adequate rate
of return can be achieved; and
5. To design a sound capital structure by maintaining a fair composition of
capital through a balance between debt and equity capital.
Financial management has the following functions:
1. Estimation of capital requirements: One of the major functions of
financial management is to make estimation with regard to capital
requirements of the company. This is dependent upon expected costs
and profits and future programmes and policies of a business entity.
Estimations have to be made in an adequate manner which increases
the earning capacity of the enterprise.
2. Determination of capital composition: After the estimation has been
made, a decision on the capital structure follow so this involves short-
term and long-term debt analysis. This results to an acceptable
proportion of the company's equity capital and additional funds to be
raised from external creditors and interested parties.
 3. Choice of sources of funds: For additional funds to be procured, a
company has many choices like:
3.1. Additional issuance of shares of stock
and/or issue bonds:
3.2. Loans from banks or any willing financial institutions; and
3.3. Investments from the public in the form of bonds
The advantages and disadvantages of each source and period of
financing is the basis of the choice of sources of funds.
4. Investment of funds: The excess funds have to be decided for
allocation into profitable ventures so that there is safety on
investment and regular returns are possible.
5. Disposal of surplus: The net profits has to be made and can be done
in two ways:
5.1. Divided declaration- it includes identifying the rate of dividends and
other benefits like Bonus
5.2. Retained Earnings- The amount of earnings to be retained will
depend on the expansion plans,introduction of innovation, and diversification
strategies of the company.
6. Management of cash: Cash management is one of the important
decisions in financial management. Maintaining enough cash is
required for continuous operation and working capital like payment of
salaries and wages, payment of utilities (e.g., electricity and water
bills), payment to creditors for maturing obligations, maintaining
enough inventories, purchase of raw materials, etc.
7. Financial controls: Financial management involves not only planning,
procurement and utilization of funds but also exercising control over
finances. This can be done through many techniques like ratio
analysis, financial forecasting, cost and profit control etc.
Individuals Involved in Financial Management
1. The senior leaders of an organization are responsible for all aspects of its
financial health. They are the ones who understand the unit’s financial
situation and do not allow unintended deficits to occur.
2. Unit heads are responsible for internal financial management and to
develop budgeting, financial reporting and management practices. Units
are encouraged to develop an oversight process that builds on best
practices.
EXERCISE 1: WHAT TO DO
Determine the three types of financial management decisions. For each type of
decision, give an example of a business transaction that would be relevant.
Note:
a) Create a gmail or a yahoo mail. Better if you have existing one
b) E-mail your answer at mmcaguimbal@gmail.com
c) Send your answer with your full name and TITLE/SUBJECT as PerDev
Exercise 1.1
For example:
From: harrypotter083101@gmail.com (your email address)
To: mmcaguimbal@gmail.com
Subject: Harry Potter- PerDev Exercise 1.1
EXERCISE 2: WHAT TO DO
Answer the following:

1. What is the difference between finance and financing?

2. What is the importance of the finance function in a business firm?
3. How has financial, management changed over the past several
decades?
Note:

a) Create a gmail or a yahoo mail. Better if you have existing one

b) E-mail your answer at mmcaguimbal@gmail.com
c) Send your answer with your full name and TITLE/SUBJECT as PerDev
Exercise 1.2
For example:
From: harrypotter083101@gmail.com (your email address)
To: mmcaguimbal@gmail.com
Subject: Harry Potter- PerDev Exercise 1.2