BUSINESS FINANCE Financial Management is the process of Sectors/ Factors involved in the financial FINANCIAL INSTITUTIONS – are the
FINANCIAL INSTITUTIONS – are the firms
DLP 1
Finance – as a branch of economics
concerned with resource allocation as
well as resource management, acquisition
and investment.
Finance deals with matters related to
money and the markets
Finance means management of money,
the monetary support for an enterprise,
or the money resources of a government,
company, or person.
Finance means to provide capital for a
person or enterprise.
Finance concerned with the decisions
about money from the perspective of a
finance manager,
finance decisions deals with how money
is raised or acquired to spending money
in a form of various investments.
Firms executed sound decision and
maximizing their funds is more able to:
provide customers with better products
at a lower prices
pay higher salaries to employees
provide greater returns to investors who
put up funds needed to form and operate
the Business
Financial Management
integrating management principle in
finance like planning, organizing, leading
and controlling
Surplus person – an individual who have
extra funds
Deficit person – an individual who lack
funds or funds sourcing in the form of
issuance of stocks,bonds and loans
Financial Institution, Financial Instrument
and Financial Market
Surplus – firms who have funds to invest
because their incomes are greater than
their current expenditures
Financial Institutions can be describe as a
place where person who have excess
funds bring their funds in a form of
deposit or savings meet the person who
lack funds and acquire funds in a form of
loans.
Financial institutions/intermediaries
bridge the gap between investors/lenders
(surplus) and borrowers (deficit)
DLP 2
FINANCIAL MARKET in the FINANCIAL
SYSTEM
Financial System - is a set of institutions
that exist on firm, regional and global
levels which permits the exchange of
funds. It is normally composed of the ff;
system that bridge the gap between the surplus
units or investors/lenders and the deficit
 Users of Funds * Suppliers of
units or borrowers which issue own
Funds * Financial Market
financial instruments.
 Financial institution * Financial
instrument * Private placement
FINANCIAL MARKET- organized forums in
which the suppliers and users of various
types of funds can make transactions
directly, a place where the selling-buying
activity occurs to trade equity securities.
Classification of Financial Markets
As to term or Maturity
1. Money Market- cover markets for
short-term
debt instruments (debt securities)
2. Capital Market – are markets for long-
term
securities, (> 1 year). (Debt and Equity
Securities)
As to type of Issue
1.Primary Market- consists of issuance of
new security
2. Secondary market – are markets for
currently outstanding securities.
DLP 3
FINANCIAL INSTITUTION in the FINANCIAL
SYSTEM
Financial Planning is the process of
estimating the amount of financing
period to continue a company’s
operations, and deciding when and
how the needed funds should be
financed.
Liquidity Crisis a shortage of cash to
pay financial obligation, it always
threatens a company.
A BUDGET is a detailed statement of
financial results expected for a given
future period.
TYPES OF BUDGET
Capital Budget- Reflects a business’s
plans for obtaining, expanding, and
replacing physical facilities.
Operating Budget- Is based on profit
plans for the budget period.
Cash Flow Budget- a forecast of
expected cash receipts and expected
cash payment.
Managing Current Assets, Account
Receivable, Inventory -Current assets
usually fluctuate from month to month.
During month when sales are relatively
high, firms usually carry a lot of
inventory, accounts receivable, and
cash. The level of timing of high and
low inventory level basically depends
on the nature of the product. Like
seasonal product that usually has a
high inventory because of low
demands. Business should aware of the
expected minimum and maximum
levels of current assets each year.
STEPS IN PRAPARING CASH
BUDGET
1. Forecast The Business Monthly
Sales
2. Forecast The Cash Sales And
The Credit Sales From The
Projected Monthly Sales
3. Consider Other Cash Receipt ,
it Is Sources Of Cash Other
Than Sales
4. Sum Up The Total Cash
Receipt
5. Forecast The Business Monthly
Purchases
6. Forecast The Cash Purchases
And The Credit Purchases For
The Projected Monthly
Purchases
7. Take Into The Account Other
Cash Disbursement
8. Sum Up The Total Cash
Disbursement
9. Subtract The Total Cash
Disbursement From The Total
Cash Receipts To Get The Net
Cash Flow
10. Add The Beginning Cash
Balance To The Net Cash Flow
To Get The Net Cash Flow
DLP 5
SHORT TERM FUNDS
Funds that will be use as working
capital in a daily business operations.
LONG TERM FUNDS
Funds that usually use for the
start –up business requirements, or
capital expenditures or business
expansion for existing business.
TYPES OF FINANCIAL
INTERMEDIARIES
1. Bank - is a commercial or state
institution that provides financial
services, including issuing money in
various forms ,receiving deposits of
money ,lending money and processing
transactions and the creating of credit.
 Commercial bank and
Universal Bank
 Thrift Bank and Savings Banks
 Rural Banks and Cooperative
Banks
2.Non –Bank financial
companies – also known as a non
– bank financial institutions that
provide banking services without
meeting the legal definition of a
bank, i.e one that does not hold a
banking license.
Non–bank institutions frequently acts
as suppliers of loans and credit
facilities, supporting investments in
property, providing services relating to
events within people’s lives such as
funding private education, wealth
management and retirement planning
however they are typically not allowed
to take deposits from the general
public and have to find other means of
funding their operations such as
issuing debt instruments.
 Life and Non – life Insurance
Companies
 Pension Fund and Mutual Fund
Companies
 Investment House and Lending
Investor/Companies
 Trust Companies and
Pawnshop
DLP 6
INDIVIDUAL /SINGLE
PROPRIETORSHIP
a. A certified photocopy of its
trade name or style registered
with the Department of Trade
and Industry.
b. Mayor’s Permit
 c. License to engage in business
issued by the City of
Municipality
d. Income Tax Return for the
preceding year and official
receipt of payment
e. Latest audited/unaudited
financial Statement
PARTNERSHIP
a. A certified photocopy of its
trade name or style registered
with the Department of Trade
and Industry.
b. Copy of article of
partnership ,duly registered
with the securities and
Exchange Commission (SEC)
c. Latest audited/unaudited
financial Statement
d. Income Tax Returns for the
preceding year of each member
of the partnership
e. License to engage in business
issued by the City or
Municipality
f. Resolution of the partnership
authorizing the negotiation of
the loan and authorizing the
partner to sign for and in behalf
of the partnership
I. Curriculum Vitae or
personal information
CORPORATION
a. A certified photocopy of its h. License to engage in business
trade name or style registered issued by the City or
with Bureau of Department of Municipality
Trade and Industry and the
Security and Exchange
Commission (SEC)
b. Copy of Articles of
Corporation and By – Laws,
duly registered with the SEC
c. Latest audited financial
statements
d. Certified list of stockholders of
the company as of date of
application, to include the
following:
name of its stockholders
nationality
-number of shares subscribed
-Amount
subscribed
 -Amount paid
on subscription
e. Certified list of incumbent
officers
f. Curriculum Vitae or personal
information sheet of the
officers
g. Board Resolution ( with
Corporation Secretaries
Certification) authorizing the
filing of the application and
authorizing the person to
undertake the application