Reference No: KLL-FO-ACAD-000 | Effectivity Date: August 3, 2020 | Revisions No.

: 00

VISION MISSION
A center of human development committed to the pursuit of wisdom, truth, Establish and maintain an academic environment promoting the pursuit of
justice, pride, dignity, and local/global competitiveness via a quality but excellence and the total development of its students as human beings,
affordable education for all qualified clients. with fear of God and love of country and fellowmen.

GOALS
Kolehiyo ng Lungsod ng Lipa aims to:
foster the spiritual, intellectual, social, moral, and creative life of its client via affordable but quality tertiary education;
provide the clients with reach and substantial, relevant, wide range of academic disciplines, expose them to varied curricular and co-
curricular experiences which nurture and enhance their personal dedications and commitments to social, moral, cultural, and economic
transformations.
work with the government and the community and the pursuit of achieving national developmental goals; and
develop deserving and qualified clients with different skills of life existence and prepare them for local and global competitiveness

MODULE
SECOND Semester, AY 2020-2021

I. COURSE CODE/TITLE : FM 101 / FINANCIAL MANAGEMENT

II. SUBJECT MATTER

TOPICS Time Frame

A. Overview of Financial Management

February 14 – 25, 2022
B. Financial Market & Financial Institution

C. The Stock Market

III. COURSE OUTCOME

A. Overview of Financial Management

1. Explain the role of finance, financial management and its importance
2. Identify the advantages & disadvantages of different forms of business organization
B. Corporation
1. Be able to discuss the overview of the corporation
C. Financial Market & Financial Institution
1. Identify the different types of financial markets & institutions, and explain how these
markets and institutions enhance capital allocations
2. Explain how the stock market operates
3. Assess the distinctions between the different types of stock markets

IV. ENGAGEMENT
What is Finance?
Finance is defined as the system that includes the circulation of money, the granting of credit, the making
of investment and the provision of banking facilities.
Areas of Finance

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 a. Financial Management – also called as corporate finance, which focuses on decisions relating to
how much and what types of assets to acquire, how to raise capital needed to purchase assets
and how to run the firm so as to maximize its value.
b. Capital markets – relates to the markets where interest rates, along with the stock and bond prices,
are determined.
c. Investments – relate to decisions concerning stocks and bonds and include a number of activities
such as security analysis, portfolio theory and market analysis.

Finance versus Economics versus Accounting

Finance grew out of economics and accounting. Economists developed the notion that an asset’s value is
based on future cash flows the asset will provide and accountants provided information regarding the
likely size of those cash flows. People who work in finance must need knowledge of both economics and
accounting. Below illustrates that in the modern corporation, the accounting department typically falls
under the control of the CFO.

Forms of Business Organization

A. Proprietorship – is an unincorporated business owned by one individual. Going into business is easy,
and has three important advantages: (1) easy and inexpensive to form, (2) subject to few government
regulations and (3) subject to lower income taxes than corporations. However, it has also limitations: (1)
unlimited liability of proprietors, (2) the life of the business is limited to the life of the individual who created
it and (3) proprietorships have difficulty obtaining large sums of capital; hence they are use for small
business.

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B. Partnership – it a legal arrangement between two or more people who decide to do business together.
It is similar to proprietorship in that they can be established relatively easy and inexpensive. The firm’s
income is allocated on a pro rata basis to the partners and is taxed on an individual basis. However, the
partners are subject to unlimited personal liability, meaning, if the partnership goes bankrupt and any
partner is unable to meet the pro-rated share of liabilities, the remaining partner will be responsible for
making good on the unsatisfied claims. Unlimited liability makes it difficult for partnerships to raise large
amounts of capital.
C. Corporation – legal entity created by a state, and is separate and distinct from its owners and
managers. It is this separation that limits stockholders’ losses to the amount they invested in the firm – the
corporation can lose all its money but its owners can lose only the funds they invested in the company. A
major drawback in a corporation is taxes. Most corporation are subject to double taxation – the
corporation’s earnings are taxed, and then when its after tax earnings are paid as dividends, those
earnings are taxed again as personal income of the stockholders.

Main Financial Goal: Creating value to the Investors

In public corporations, managers and employees work on behalf of the shareholders who own the
business, and therefore they have an obligation to pursue policies that promote stockholder value. While
many companies focus on maximizing a broad range of financial objectives, such as growth, earnings per
share, and market share, these goals should not take precedence over the main financial goal, which is to
create value for investors. Keep in mind that a company’s stockholders are not just an abstract group—
they represent individuals and organizations who have chosen to invest their hard-earned cash into the
company and who are looking for a return on their investment in order to meet their long-term financial
goals, which might be saving for retirement, a new home, or a child’s education.

Business Ethics
Ethics is defined in Webster’s Dictionary as “standards of conduct or moral behavior.” Business ethics can
be thought of as a company’s attitude and conduct toward its employees, customers, community, and
stockholders. A firm’s commitment to business ethics can be measured by the tendency of its employees,
from the top down, to adhere to laws, regulations, and moral standards relating to product safety and
quality, fair employment practices, fair marketing and selling practices, the use of confidential information
for personal gain, community involvement, and the use of illegal payments to obtain business.

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Financial Markets
People and organizations wanting to borrow money are brought together with those who have surplus
funds in the financial markets.
Types of Financial Markets
1. Physical asset markets versus Financial asset markets

Physical Asset Markets Financial Asset Markets

● Also called the tangible or real ● Also called as the derivative market
market
● This market deals with the stocks, bonds,
● This market deals with products notes and mortgages
such as rice, autos, computers,
machineries, etc

2. Spot markets versus Futures markets

Spot Markets Future Markets

● These are the markets in which ● These are the markets in which
assets are bought or sold for on- participants agree today to buy or sell an
the-spot delivery asset at some future date

3. Money markets versus Capital markets

Money Markets Capital Markets

● These are markets for short-term ● These are the markets for immediate (1 –
(less than a year), highly liquid debt 10 years) or long-term (more than 10
securities years) debt and corporate stocks

4. Primary markets versus Secondary markets

Primary Markets Secondary Markets

● These are the markets in which ● These are markets in which securities
corporations raise new capital by and other financial assets are traded
issuing new securities among investors after they have been
issued by corporations

5. Private markets versus Public markets

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 Private Markets Public Markets

● These are markets in which ● These are markets in which standardized

transactions are worked out directly contracts are traded on organized
between 2 or more parties exchange

Financial Institutions
Direct funds transfers are common among individuals and small businesses and in economies where
financial markets and institutions are less developed. But large businesses in developed economies
generally find it more efficient to enlist the services of a financial institution when it comes time to raise
capital.
Major categories of financial institutions:
1. Investment banks. Traditionally help companies raise capital. An organization that underwrites and
distributes new investment securities and helps businesses obtain financing. They (1) help
corporations design securities with features that are currently attractive to investors, (2) buy these
securities from the corporation, and (3) resell them to savers.
2. Commercial banks. The traditional department store of finance serving a variety of savers and
borrowers.
3. Financial services corporations. A firm that offers a wide range of financial services, including
investment banking, brokerage operations, insurance, and commercial banking
4. Credit unions. These are cooperative associations whose members are supposed to have a
common bond, such as being employees of the same firm. Members’ savings are loaned only to
other members, generally for auto purchases, home improvement loans, and home mortgages.
Credit unions are often the cheapest source of funds available to individual borrowers.
5. Pension funds. These are retirement plans funded by corporations or government agencies for
their workers and administered primarily by the trust departments of commercial banks or by life
insurance companies. Pension funds invest primarily in bonds, stocks, mortgages, and real estate.
6. Life insurance companies. These take savings in the form of annual premiums; invest these funds
in stocks, bonds, real estate, and mortgages; and make payments to the beneficiaries of the
insured parties.
7. Mutual funds. These are corporations that accept money from savers and then use these funds to
buy stocks, long-term bonds, or short-term debt instruments issued by businesses or government
units. These organizations pool funds and thus reduce risks by diversification. They also achieve
economies of scale in analyzing securities, managing portfolios, and buying and selling securities.
8. Exchange traded funds. These are similar to regular mutual funds and are often operated by
mutual fund companies. ETFs buy a portfolio of stocks of a certain type and then sell their own
shares to the public
9. Hedge funds. These are also similar to mutual funds because they accept money from savers and
use the funds to buy various securities, but there are some important differences. While mutual

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 funds (and ETFs) are registered and regulated by the Securities and Exchange Commission
(SEC), hedge funds are largely unregulated

The Stock Market

Stock market, the most active secondary market and the most important one to financial manager, is
where the prices of firms’ stocks are established. Because the primary goal of financial managers is to
maximize their firms’ stock prices, knowledge of the stock market is important to anyone involved in
managing a business.
The Market for Common stock
Some companies are so small that their common stocks are not actively traded; they are owned by
relatively few people, usually the companies’ managers. These firms are said to be privately owned, or
closely held, corporations; their stock is called closely held stock. In contrast, the stocks of most large
companies are owned by thousands of investors, most of whom are not active in management. These
companies are called publicly owned corporations, and their stock is called publicly held stock.
Types of stock market transactions
1. Outstanding shares of established publicly owned companies that are traded: the secondary
market.
2. Additional shares sold by established publicly owned companies: the primary market.
3. Initial public offering made by privately held firms: the IPO market. Whenever stock in a closely
held corporation is offered to the public for the first time, the company is said to be going public, or
the act of selling stock to the public at large by a closely held corporation or its principal
stockholders. The market for stock that is just being offered to the public is called the initial public
offering (IPO) market, or the market for stocks of companies that are in the process of going public.

V. ACTIVITY

Research on the following topics.

1. Relationship among economics, accounting and finance.
2. Key differences among proprietorship, partnership and corporation.
3. Why are financial markets essential for a healthy economy and economic growth?

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VI. OUTPUT (RESULT)
Output is to be submitted on March 12, 2022.

VII. EVALUATION

Criteria Points Exemplary Accomplished Developing Beginning

6-7 4-5 2-3 0-1
Yes Yes, but No, but No

Topic Directly Relevant Somewhat relevant Remotely Relevant Totally Unrelated

Good organization; Organized points are Some organization

Organization points are logically somewhat jumpy; points jump around; Totally unrelated
ordered; sharp sense sense of beginning beginning and ending
of beginning and end and ending are unclear

Quality of information Supporting details Some details are non- Details do not support Unable to find specific
specific to the subject supporting to the topic details
subject

Grammar usage, Mechanics & No errors Only one or two errors More than two errors Numerous errors
Spelling distract from
understanding

Interest Level Vocabulary is varied; Vocabulary is varied Vocabulary is Basic vocabulary

supporting details vivid unimaginative; detail needs descriptive
lacks color words

Timeliness Report on time Report one class Report two class Report more than one
period late period late week late

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Prepared by:

KATHLEEN G. MALALUAN

IRHIL E. BUERA

DAVE NICHOLE H. ALDABA

Instructors I

Checked by:

Department Module Editing Committee

Approved by:

BIBIANA JOCELYN D. CUASAY, Ph.D.

Module Editing Chair

AQUILINO D. ARELLANO, Ph.D., Ed.D.

Vice President for Academic Affairs and Research

Noted by:

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MARIO CARMELO A. PESA, CPA
College Administrator

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