UNIVERSITY of the VISAYAS

College of Business Administration

REQUIRED OUTPUT FOR FUNCTIONAL AREAS OF

BUSINESS OPERATIONS

A Paper Respectfully Submitted to

DINO M. CAŃEDA, MBA

In Partial Fulfillment of the

Term Requirements in
(BA 11)

Submitted by:

First Semester
Academic Year 2022-2023
 I. SUBJECT

I. How to Plan and Invest in Insurance Sector and Tax Planning

II. Sources of Short-Term Financing

III. Laws and Regulations that Affect the Banking Sector, Investments and Finance Management

II. OBJECTIVES

I. Our discussion with the first topic above will make us know more about planning in
insurance investment sector as well as taxation planning. This will give us an upper-
hand having to learn more of this type of investment after the discussion. On the other
hand, the topic will also help us in taxation planning;
II. The second topic will give us much more learnings about short-term financing involving
micro finance and its sources. This will give us better idea in classifying the sources of
short-term financing;
III. The third topic will give us ideas about the provisions and regulations being issued by
Bangko Sentral ng Pilipinas (BSP) that governs Philippine banking sector as well as the
investment and financing management of the land.

III. DISCUSSION

I. HOW TO PLAN AND INVEST IN INSURANCE SECTOR AND TAX PLANNING

Brief History

During the pre-Spanish era there was no insurance and every loss had to be borne by
the person of the family who suffered the misfortune. When the Spaniards came, they
introduced to our ancestors the insurance which concept is present until today. In 1906, the
first domestic non-life insurance company, the Yek Tong Lin Insurance Company, was organized.
Followed by Insular Life Assurance Co., Ltd. was four years after.

The Government in 1949 formed an agency to handle insurance affairs, where the
Insular Treasurer was appointed commissioner ex-officio. Republic Act 1161 was then enacted
in 1954, which provided for the organization of the Social Security System (SSS) covering
employees of the private sector.

What is an Investment Insurance Plan?

 Known as ‘variable universal life insurance’, investment insurance provides both
financial security and financial growth. In traditional insurance policy models, you or your
beneficiaries only receive the benefit of an insurance policy after an unfortunate event.
However, and insurance investment plan means that you also receive returns from your policy
even before an unfortunate incident occurs.

Is Insurance an investment? How does Investment Insurance work?

Insurance is an investment in the sense that you are putting away money to help your
family when and unexpected incident could set you back financially. Insurance investment
plans are like two-for-one investment. Part of your premiums become investments after a
certain period. As the value of your premiums grow, so does your investment.

Benefits of Investment Insurance:

 Benefits from flexible premiums
 Funds for emergencies and leisure
 Higher returns
 You do not compromise your policy
Investing in Insurance needs advice from the experts. These are highly trained
individuals that knows exactly what you are looking for in Insurance Investments.

TAX PLANNING

Tax planning is an activity that enables you to reduce your tax liability. It is one of the
most basic yet integral parts of the financial plan.

Objectives of Tax Planning

 To reduce tax liability
 To minimize litigation
 To stabilize the economy
 To leverage productivity and financial growth

Investing in tax-savings instruments helps in “reducing tax liability” for the entire
financial year. Availing the services of legal advisor, which is essential while planning taxes,
“minimize legal litigation”. Adopting adequate provisions of tax planning laws, saves the
company from judicial harassment. Planning your taxes is beneficial for you and the “economy
of the country”. Paying all taxes which are legally due, contribute towards creating a more
productive economy. Planning your taxes prudently can facilitate “economic growth” for you.
Chalking out clear and precise financial objectives from your investments, over specific time
frames and investing in the right tax-saving instruments can help you create a good corpus,
thereby contributing to economic growth.

Different Ways In Which You Can Plan Your Taxes

 Short-range tax planning
 Long-range tax planning
 Permissive tax planning
 Purposive tax planning

“Short-range tax planning” are being executed when the financial year comes to an end.
“Long-range tax planning” on the other hand, is laid out on the table when financial year begins
and in which the taxpayer follows through throughout the year, and hold on to the investment
for a period exceeding one year. “Permissive tax planning” means planning investments under
various provisions of the taxation laws of the land. Provisions that offer exemptions,
deductions, incentives and contribution. And lastly, “Purposive tax planning” refers to the act
of planning investments with specific purpose in mind, thereby ensuring that you can avail
maximum benefits from your investments. It involves the accurate selection of investments
instruments, creating a suitable agenda to replace assets (if necessary) and diversification of
income and business assets based on your residential status.

II. SOURCES OF SHORT-TERM FINANCING

Short-Term Financing

Refers to the financing needs for a small period normally less than a year. In business, it
is also known as “working capital financing”. This type is normally needed because of uneven
flow of cash into the business. In most cases, it is used to finance all types of inventories,
accounts receivables, etc.

How Do Firms Raise the Funding They Need?

Firms borrow money (debt), sell ownership shares (equity), and retained earnings
(profits). Financial Managers must assess all these sources and choose the one most likely to
help maximize the firm’s value. Like expenses, borrowed funds can be divided into short and
long-term loans. A short-term loan comes due within a year, long-term loan has a maturity
greater than one year. Short-term financing is shown as a current liability on the balance sheet
and is used to finance current assets and support operations. It can be secured or unsecured.

Unsecured loans are made on the basis of the firm’s creditworthiness and the lender’s
previous experience with the firm. Secured short-term loans require the borrower (firm) to
pledge specific assets as collateral, or security. Typically, the collateral for secured short-term
loans is accounts receivables or inventory.

Sources of Short-Term Financing

 Trade Credit: Accounts Payable
 Bank Loans
 Commercial Papers
 Invoice Discounting or Re-discounting
 Factoring
 Business Credit Line

Trade Credit refers to the credit extended by the supplier of goods or services to his/her
customer in the normal course of business, more like accounts payable. Trade credit is
spontaneous source of finance that arises in the normal business transactions without specific
negotiation (automatic source of finance).

Bank Loans refers to the credit line granted to business firms and owners to finance its
working capital.

Commercial Paper represents a short-term unsecured promissory note issued by firms

that have a fairly high credit (standing) rating. First introduced in the USA and became an
important money market instrument.
 Invoice Discounting or Re-discounting refers to fund arrangement against the submission
of invoices whose payments are to be received in the near future. The receivable invoices are
discounted with the banks, financial institutions or any third party.

Factoring is similar to the arrangement like invoice discounting in which business sells
their accounts receivable to a third party called factor at a rate lower than the net realizable
value. It can be any type with recourse or without recourse unlike discounting which can only
be with recourse.

Business Credit Line works like a revolving credit. A facility approved by banks to
individuals and firms. Availed line or the utilized line are charge with interests by the bank and
not the whole approved business credit line.

Advantages of Short-Term Financing

A. Less Interest: As these are to be paid off in a very short period. The total amount of
interests paid by firms or individuals availing the short-term financing are least as compared
to long term loans which take years to be paid off.
B. Low Risk of Default: Loan payment default is less due to shorter maturity date compared
to long term loans where risk of payment default is higher.
C. Less Documentation: As it is less risky, the documents required for the same will also be
not too much making it a better option for firms.

III. LAWS AND REGULATIONS AFFECTING THE BANKING SECTOR, INVESTMENTS, AND FINANCE
MANAGEMENT

The Government

The government recognizes the vital role of banks conducive to the sustained
development of the country’s economy. Accordingly, it is the government’s policy to promote
and maintain a stable and efficient banking system that is globally competitive, dynamic and
responsive to the demands of a developing economy.

General Banking Law

The General Banking Law governs not only universal banks, it is also governing the
commercial banks. The rules implementing the above statues are embodied in the Manual of
Regulations for Banks (MORB) issued by the Banko Sentral ng Pilipinas (BSP).

From time to time, additional circulars and other issuances are promulgated by the BSP
to cover new matters, if not to amend, repeal, supplement, or otherwise modify existing rules.
The BSP, through its Monetary Board, is primarily responsible for overseeing banks.

PDIC

Banks must insure their deposit liabilities with the PDIC. Each depositor is a beneficiary
of the insurance for a maximum amount of 500,000.00 pesos or its foreign currency equivalent.
PDIC is an attached agency of the Department of Finance.

Latest BSP Issuances – Circulars

Circular Number 1108 Issued: 01/26/2021
“Guidelines for Virtual Asset Service
Providers (VASP)”
Circular Number 1109 Issued: 02/04/2021
 “Amendments to the Regulations on
Investment Management Activities”

What is Virtual Asset?

Virtual Asset refers to any type of digital unit that can be digitally traded, or transferred,
and can be used for payment or investment purposes. It can be defined as a “property”,
“proceeds”, “funds”, “funds or other assets”, and “other corresponding value”. It is used as a
medium of exchange or a form of digitally stored value created by agreement within the
community of VA users. Also, virtual currencies as previously defined in BSPs Circular No. 944
(Guidelines for Virtual Currency Exchange) shall now be referred to as VAs.

BSP Circular Number 944

Issued: 02/06/2017
“Virtual Currency”

A virtual currency (VC) is a type of digital “currency” created by a community of online

users, is stored in electronic wallets (e-wallets), and generally transacted online. It is not issued
guaranteed by central banks or government authorities. VCs may be transferred within the
community of users. It may be used to buy virtual items (e.g. games, apps) or real goods from
online shops/merchants willing to receive the VC as payment. In this sense, VCs are used as a
medium of exchange. VCs may also be exchanged to/from actual cash (fiat money) through
people/community that are part of the community users.

What is VASP?

Virtual Asset Service Provider (VASP) refers to any entity that offers services or engages
in activities that provide facility for the transfer or exchange of VA, which involve the conduct of
one or more of the following activities:
1. Exchange between Vas and fiat currencies.
2. Exchange between one or more forms of Vas.
3. Transfer of Vas, and
4. Safekeeping and/or administration of Vas or instruments enabling control over Vas.

Amendment of Section 415 Under Circular No. 1109

The “minimum size of each Investment Management Account (IMA)” to be maintained

by a client in an IMA: Provided, that the same at least be 100,000.00 pesos: Provided further,
that the initial contribution and the carrying balance shall not fall below the said amount,
except in cases where the reduction is due to investment losses and/or fund management fees.

Before the Amendment:

Under Section 415: Minimum size of each Investment Management Account (IMA)
No investment management account shall be accepted or maintained for an amount less than
1.0 million pesos.

Amendment of Section 415 of the MORB:

Withdrawals from the Portfolio:

Subject to availability of funds and the non-diminution of the Portfolio below (the
amount prescribed by the trust entity, but not lower than 100,000.00 pesos), the Principal may
withdraw the income/principal of the Portfolio or portion thereof upon written instruction or
order to the Investment Manager.
 IV. CONCLUSION

Planning to invest in Insurance could be a wise decision. Future thinker individuals are
putting their money not for today’s use but for way ahead of time – future, and that is where
insurance is good at. That is why most successful individuals are still enjoying the best of time
even if they are no longer currently working or toiling hard just to make money. They are
reaping the rewards of their investments they were making several years back.

For some business, short-term financing is the best way in running the show without
taking huge chunks from their assets. Borrowing money in the bank or from any financial firms
that offer short-term financing is good enough for most businessmen nowadays. Paying smaller
interests from the loan and making profits at the same time is already a big deal for them.

Banking industry is very well governed by laws and regulations crafted by among the
genius lawmakers of the country. This is for its sustainability and so to level with global
standards. It might affect some of the investment procedures and finance management but it
brought positive impact to investors society because of the protection the government are
giving to their investments.