Ara Joyce B.

Arinque Business Finance

ABM 12 – ALIGHIERI March 10, 2018

Business Finance is one of our specialized subject under the academic track and

Accountancy, Business and Management strand. Finance is a pretty broad area and it’s

talks about how money moves around the economy and businesses. It covers also the

basic framework and tools for financial analysis, financial planning and control and

some basic concepts and principles. Eventually, Finance involved a lot of calculation, it

relates to how you raise and invest money. This subject engaged us to explore all

stages of learning process from knowledge, analysis, evaluation, and application to

preparation and development of financial plans and programs related to business.

On the first quarter, we defined first the word Finance, described who are the

responsible for financial management, areas of finance, the role of financial institutions

and markets and general accounting principles. As we all knew, Finance is the study of

how money is managed. It takes money to make money and businesses must consider

their finances for so many purposes, ranging from survival in bad times to bolstering the

next success in good ones. In terms of responsible of financial management, they are

the one that monitoring accounts, preparing reports and financial forecast. Likewise,

they investigate ways to improve profitability, analyze markets for business

opportunities and develop strategies and plans for the long-term financial goals. They

might be seen working in many places including banks and insurance companies.

However, there are also people who are in a big role and have a huge responsibility, the

secretary of Department of Finance Mr. Carlos “Sonny” Domiguez III and the Bangko

Sentral ng Pilipinas Governor Mr. Nestor Espenilla Jr. Based on what I’ve learned, Mr.
Carlos Dominguez III is the government’s steward of sound fiscal policy. Department of

Finance formulates revenue policies that will ensure funding of critical government

programs and the Bangko Sentral ng Pilipinas Governor focused on banking

supervision in bank or non-bank financial institution, capital market development, credit

policy and financial inclusion. They are both promote welfare among our people and

accelerate economic growth and stability. Moreover, as to have a successful financial

management, Finance is divided into three areas. The first area is Public Finance, it

portrays the allocation of resources, distribution of income, stabilization of economy and

the fiscal and monetary policy. Next is Corporate Finance, it is relatively about

managing debt properly, asset and liability management, and risk management. Last,

the Personal Finance, analyzing an individual’s and family’s current financial position

and executing a plan to fulfill the needs without financial contains. Apparently, it has

been discussed about the dealing with monetary transactions, such as deposits, loans,

investments and currency exchange, in short, the role of financial intermediaries. There

are a lot of financial intermediaries that has been defined during the discussion, such as

commercial banks for depository, thrift institution a place for savors, life insurance

companies receive funds from savors and lend funds to borrowers, pension plans role

to accumulate assets for workers that they will have for retirement and last, the money

market mutual fund for investing on behalf of individuals. The importance of those

intermediaries are they have a related advantage in offering financial services, which

not only enables them to make profit, but also raises the overall efficiency of the

economy. Apart from this, there are also different key concepts that has been tackled,

the source of finance whereas summarizes the sources and the assets that a firm owes,
risk and return that investment are made because the individual or management

anticipate earning a “return” and there is an uncertainty that an expected return may not

be achieved, financial leverage occurs when you borrow funs in return for agreeing to

pay, valuation process of determining what on asset is currently worth, and relationship

changes in interest rate and risk.

We also talked about the general accounting principles, even though it is part of

fundamentals of accounting, business and management subject but somehow there is a

relation between the finance and accounting. So, we’ve focused on the financial

statements that presents the results of operations and the financial position of the

business or company. There are three types of financial statement that has been

tackled in class. The first one is balance sheet that summarizes the company’s assets,

liabilities, and shareholder’s equity. As Sir Rowie said, balance sheet gives an investor

an idea as is what the company owns and owes. Next, is the Income Statement that

shows performance from operations of a business, the company’s sales, expenses and

profit. The last one is Statement of Cash Flows that describes the cash flows in and out

of the company. It is also known as Cash Flow Statement and it is divided into three

sections, operating, investing, and financing activities. It shows in every section if there

is an increase and decrease in assets, liabilities, and equity.

In every discussion, we learned also the different abbreviation that is related to

Finance, such as BTR as Bureau of Treasury, RTB defined as Retail Trade Bond,

COGS meaning Cost of Goods Sold, CFO – Chief Finance Officer, EBIT defined as

Earning Before Interest and Taxes, NPAT as Net Profit After Tax, DoL, meaning Degree
of Leverage, RRR - Reserve Require Ratio, TRAIN as Tax Reform for Acceleration and

Inclusion and many more.

In start of Second Semester’s last Quarter, Ratio Analysis of Financial Statement

has been discussed. This will serve as my favorite part in this subject and yes, indeed.

In this lesson it needs now a calculator to solve the ratios. There are five types of ratios.

First is the liquidity ratio, attempt to measure a company’s ability to pay off its short-term

debt obligation. Under the liquidity ratio there is a calculation of Current and Quick

Ratio. In Current Ratio, is mainly used to give an idea of a company’s ability to pay back

its liabilities with its current assets while in Quick Ratio is a measure of how well a

company can meet its short-term financial liabilities and it is also known as Acid Test.

Second, the Activity Ratio that is used to measure a business or company’s ability to

convert its assets into cash. Under the Activity Ratio there are four different calculation

such as, Inventory Turnover, Receivables Turnover, Fixed-Asset Turnover and Total

Assets Turnover. Inventory Turnover is a measure of number of times inventory is sold

or used in a time period such as a year. However, Receivable Turnover is an activity

ratio measuring how efficiently a firm uses its assets. Then Fixed-Asset Turnover, is the

ratio of sales to the value of fixed-assets. It indicates how well the business is using its

fixed assets to generate sales while the Total Assets is an efficiency ratio that measures

a company’s ability to generate sales from its assets. The third type of ratio is

Profitability Ratio that measure the performance, ability to generate earnings as

compared to its expenses and other relevant costs incurred during a specific period.

Under the profitability ratio are in calculation of Operating Profit Margin, Net Profit

Margin, Return on Total Assets and Return on Equity. The Operating Profit Margin, is a
measurement of what proportion of a company’s revenue is left over after paying for

variable costs of production while Net Profit Margin is the percentage of revenue left

after all the expenses have been deducted from sales. The measurement reveals the

amount of profit that a business can extract from its total sales. Then Return on Total

Assets, is a ratio that measures a company’s earning before interest and taxes while the

Return on Equity is the amount of net income returned as a percentage of shareholder’s

equity. It reveals how much the profit of a company or business generates with the

money shareholders have invested. The fourth type of ratio analysis is Leverage Ratio

whereas it is the financial ratio that helps to determine the company’s debt repayable

capacity. Under the Leverage Ratio are Debt-to-Equity Ratio and Debt-to-Total Asset.

The Debt-To-Equity indicating the relative proportion of shareholder’s equity and debt

used to finance a company’s assets and it is also known as risk gearing while Debt-To-

Total Assets tells the percentage of total assets that were finance by creditors. Last but

not the least type of ratio is Coverage Ratio that has the ability of a company to meet its

financial obligations and liabilities. Then under this ratio is the Times Interest Earned

that measures the ability of the company to honor its debt payment. Luckily, I’m always

passed the quiz or seatworks that I took that is relevant to Ratio Analysis topic even if

there is a computation.

Aside from the lessons or topics that has been formulated by the DepED for this

subject, I learned a lot also when it comes to Business News in every meeting. It helps

me to understand more about money, economy and the whole society. Thanks to our

subject teacher for sharing some facts and trivias that gave a big impact to myself and I

will surely instill it.

 I would like take the opportunity to express my gratitude to our beloved subject

teacher Mr. Rowie Valencia, thanks for all the patience, guidance and effort that is truly

appreciated for all of us.