SR. SALOME D.

LUMONGSOD, DC
MBA-FM

Class Activity 1

1. Explain very well your understanding of this statement: “Profit is not an end in itself but a just
means towards other ends.”

Every person or company engage in business aims to bring and give satisfaction to
what people need. The “ends” of an enterprise should be what you want to do (for example
to make the best cake in town) and how you want to do it (e.g., with concern for the
humanity of your employees). Of course, companies must be profitable in order to attract
capital, stay alive, and grow. It does not follow that maximizing profit need be the aim of
every business. Business’s principal purpose is to serve the interests of a larger group of
stakeholders, including employees, customers, and even society as a whole.
This saying only means that gaining profits is not the main goal, instead it is what we
do and how we use this profits, and how it will be properly utilized is the main goal. That
means, that financial decisions and aspects does not end on gaining this profits but it goes
on until you utilize this resources and how you will manage them.

2. Applying the functions/aspects of Financial Management in your Personal Finance, how

would you get about with them? Explain each aspect to your personal finance
management.
May I relate this functions/aspects of Financial Management to my experienced
before I entered the consecrated life.
a. Raising of Funds– FUND PROCUREMENT

Having minimal income of being employed in a business firm, I cannot just depend
on what I can get in every month salary. I should find other sources of fund for additional
income. In my case, I just invest the little savings I had from my income.

b. Investing the funds in worthwhile projects – FUND ALLOCATION

Engaging even just in a small business there are important things to consider. In
doing so, it needs extra time, extra effort and of course planning and discernment so that it
will be possible. First thing to consider, is the product needed or in demand? Then also the
customer that would use the product. A budget is essential to living within the means and
saving enough to meet the goals of the project. There will be allocations for daily expenses,
its operations and some expenses for charity purposes.
c. Managing the cash flows released from the project - FUND MANAGEMENT
In managing the cash flows, I made it a point that at the end of the month, there is
an evaluation of my income and expenditures. Based on my budget, did I exceed or just
enough for it? How much is my expenses? How about the income, is there a net income?
Then after that I made a separate a budget for the next month operation.
3. Outline the evolution of Finance by highlighting the significant developments during the
periods mentioned in the reading material.

 Before 1920 – Finance is only being studied for the use on financial instruments,
institutions and procedural aspects of capital markets.
 1920-1930 – Upon the publication of the book, “The Financial Policy of
Corporations”, a separate study of finance emerged. However, at this time, financing
only focused on external financing, rather than internal management.
 1930’s – financial management became conservative and was focused now on the
survival and preservation of the company, primarily because of the downward trend
of the economy at that time.
 1940s-1950s – still focusing on external financing, financial management are still
being looked at the 3 rd parties point of view, in such a way that investors and lenders
get to see the performance and profitability of the company. Through this, cash flow
analysis, planning and control were now being looked at.
 1950s - Finance evolved to dealing with all aspects of acquiring and efficiently
utilizing those funds. The study has expanded, in which almost all universities with a
school or Faculty of Business Administration (1951) have Departments of Finance
and/or Banking. Courses include: Corporation Finance, Security Analysis, Investment
Management, Portfolio Theory, Financial institutions, Money and Banking, Internal
Finance, Insurance, Real Estate Finance and Public Finance.
 1958 & 1961 - path breaking articles by Modigliani and Miller in 1958 and 1961 set
the stage for extended theoretical inquiry which continues till today. Miller and
Modigliani (1958) started a long controversy over the question of whether a firm's
capital structure has any effect on a company's value and its cost of capital. Also,
Miller and Modigliani (1961) started another controversy over the effect of dividend
policy on the value of the firm.
 1959 &1960 – Specific analytical techniques, such as linear programming, was being
employed to solve financial problems.
 1960s -1970s – Finance evolved largely from primarily a descriptive study to one that
encompasses rigorous analysis and normative theory, from a field that was
concerned primarily with the procurement of funds to one that includes the
management of assets, the allocation of capital, and the valuation of the firm to one
that stresses decision making within the firm.