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Business Finance
Quarter 3 – Module 1:
Introduction to
Financial Management
Business Finance
Alternative Delivery Mode
Quarter 3 – Module 1: INTRODUCTION TO FINANCIAL MANAGEMENT
First Edition, 2020

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Eugenio B. Penales, Ed. D
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Business Finance
Quarter 3 – Module 1:
INTRODUCTION TO
FINANCIAL MANAGEMENT
Introductory Message
For the facilitator:

Welcome to the Business Finance Alternative Delivery Mode (ADM) Module on

Introduction to Financial Management !

This module was collaboratively designed, developed and reviewed by educators

both from public and private institutions to assist you, the teacher or facilitator in
helping the learners meet the standards set by the K to 12 Curriculum while
overcoming their personal, social, and economic constraints in schooling.

This learning resource hopes to engage the learners into guided and independent
learning activities at their own pace and time. Furthermore, this also aims to help
learners acquire the needed 21st century skills while taking into consideration
their needs and circumstances.

In addition to the material in the main text, you will also see this box in the body of
the module:

Notes to the Teacher

This contains helpful tips or strategies that
will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this module.
You also need to keep track of the learners' progress while allowing them to
manage their own learning. Furthermore, you are expected to encourage and assist
the learners as they do the tasks included in the module.

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For the learner:

Welcome to the Business Finance Alternative Delivery Mode (ADM) Module on

Introduction to Financial Management!

The hand is one of the most symbolized part of the human body. It is often used to
depict skill, action and purpose. Through our hands we may learn, create and
accomplish. Hence, the hand in this learning resource signifies that you as a
learner is capable and empowered to successfully achieve the relevant
competencies and skills at your own pace and time. Your academic success lies in
your own hands!

This module was designed to provide you with fun and meaningful opportunities
for guided and independent learning at your own pace and time. You will be
enabled to process the contents of the learning resource while being an active
learner.

This module has the following parts and corresponding icons:

What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in
the module.

What I Know This part includes an activity that aims to

check what you already know about the
lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.

What’s In This is a brief drill or review to help you link

the current lesson with the previous one.

What’s New In this portion, the new lesson will be

introduced to you in various ways such as a
story, a song, a poem, a problem opener, an
activity or a situation.

What is It This section provides a brief discussion of

the lesson. This aims to help you discover
and understand new concepts and skills.

What’s More This comprises activities for independent

practice to solidify your understanding and
skills of the topic. You may check the
answers to the exercises using the Answer
Key at the end of the module.

What I Have Learned This includes questions or blank

sentence/paragraph to be filled into process
what you learned from the lesson.

What I Can Do This section provides an activity which will

help you transfer your new knowledge or
skill into real life situations or concerns.

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 Assessment This is a task which aims to evaluate your
level of mastery in achieving the learning
competency.

Additional Activities In this portion, another activity will be given

to you to enrich your knowledge or skill of
the lesson learned. This also tends retention
of learned concepts.

Answer Key This contains answers to all activities in the

module.

At the end of this module you will also find:

References This is a list of all sources used in

developing this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of
the module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your
answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are
not alone.

We hope that through this material, you will experience meaningful learning
and gain deep understanding of the relevant competencies. You can do it!

What I Need to Know

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This module was designed and written with you in mind. It is here to help you
master the major role of financial management and the different individuals
involved. Financial management starts with a plan. Do you have plans of becoming
one of the business executives? Then the function of finance plays a very critical
role in an organization. In this journey, you will enhance your skills in financial
decisions.

The module contains:

 Explain the major role of financial management and the

different individuals involved

After going through this module, you are expected to:

1. Define finance and financial management
2. Describe the different branches of finance
3. Discuss finance and financial management vis-à-vis the overall
business environment
4.

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 What I Know

Choose the letter of the best answer. Write the chosen letter on a separate sheet of
paper.

1. What is finance?
a. It is the study of how firms and individuals make decisions and how
these decision-makers interact.
b. It is the study of how entities evaluate investment opportunities,
business proposals, business projects, and raise capital to fund them.
c. It is the study of the economy as a whole, including growth in
incomes, changes in prices, and the rate of unemployment
d. It is the study of ensuring that the funds to be invested will create a
value to the business
2. What is financial management?
a. It deals with financial statement analysis, evaluating investment
opportunities among others
b. It refers to the efficient and effective management of funds
c. Both A and B
d. None of A and B
3. Which of the following is one of the key activities of a financial manager?
a. Making financing decisions
b. Managing financial accounting
c. Making legal policy decisions
d. Managing cost accounting
4. Which of the following is not included in the financial institution?
a. Mutual Fund Companies
b. Private Equity Firms
c. Finance Companies
d. Financial Position
5. Which of the following is the field of finance which deals with the collection
of taxes and budget allocation for programs designed to benefit the general
public?
a. Public Finance
b. Personal Finance
c. Corporate Finance
d. Service Finance

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Lesson
Introduction to Financial
1 Management
In this lesson, you will learn to deal with financial decisions in an
organization. Learning about financial management will improve your skills in your
own daily financial decisions as a student and even as a son or daughter to your
parents.

What’s In

A business is an organization that utilizes resources and information, supplying

the wants and needs of the customers through goods or services, in exchange for
money or giving back a different kind of goods or services. There are several types
of businesses, categorized according to ownership and to activities.
 Sole Proprietorship - A business owned by one person and operated for his or
her own profit.
 Partnership - A business owned by two or more people and operated for profit.
 Corporation – An entity created by law owned by shareholders.

Indicate the type of business activity performed by the following firms:

1. Accounting Office
2. East Supermarket
3. Linis Laundry Shop
4. Bag Factory
5. Dental Clinic
6. Janitorial Agency
7. Galing Drug Store
8. Unilever Company
9. CW Home Depot
10. Fashion Trend Boutique

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 What’s New

As a student, you often hear your parents say that it is difficult to manage a
household, especially when it comes to finances – setting and following a budget
that accounts for unexpected events and emergencies and future savings.
Activity 1:
List down all the expenses you incurred daily activities during school days.
Based on your list, answer the questions that followed.

My Daily Expenses
1. Fare - _________________
2. Allowance - _________________
3. Load - _________________
4. Snacks and Meals - _________________
5. School Supplies - _________________
6. Projects/Requirements - _________________

Guide Questions:

1. What do you think your parents actually mean when they ask
you to manage your finances?
2. How important is it that you manage your fiancés effectively?
3. How do you think people manage their finances?
4. If you would be having a job or career in line with financial
management, how simple or complex do you think would it is?
5. In your own words, what is financial management and how
important it is both in your personal life and in the world of
business?

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 What is It

Finance and Financial Management Defined

Finance is the study of how individuals or businesses evaluate investment

opportunities, business proposals, and business projects, and raise capital to fund
them.

Field is also a field in business and economics. Finance is the allocation of scarce
resources which includes money. In business, it is the function or area which is
responsible for managing the aspect of the operations that deals with money
matters. It is also concerned with not just the allocation of funds but also with the
sources of those funds.

Financial management means the efficient and effective management of funds. It

has broader in meaning as it covers the planning, organizing, leading and
controlling of all financial activities of an organization. Financial management puts
emphasis on managing the funds of an organization which includes day-to-day
operations, investment decisions, and financing those investments. To achieve this,
it would be helpful to understand and apply financial management tools, concepts,
and theories.

Branches of Finance

Public finance is the field of the field of finance which deals with the collection of
taxes and budget allocation for programs designed to benefit the general public and
the production and distribution of public goods.

Personal finance is a field of finance which gained popularity especially among

younger generation of income earners. It encompasses everything that pertains to
personal financial planning, including coming up with a budget that matches one’s
short- and long-term needs, creating a savings plan for contingencies, investing in
financial products which are often intended for retirement, and investing for the
purpose of maximizing wealth.

Corporate Finance is primarily concerned with the management of all financial

activities of an enterprise or a business organization. The ultimate goal of corporate
finance is to maximize shareholder value through sound financial planning.

Four interrelated areas of Corporate Finance:

1. Financial Markets and Institutions – this area covers banks, insurance

companies, finance companies (nonbank institutions which offer both short-term
and long-term loans to individuals and other firms), and other financial
intermediaries.

2. Investments – this area focuses on investment options and decisions made by

both individual and corporate investors

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3. Financial Services – this area refers to services offered by organizations whose
line of business is to help individuals and organizations manage money that
includes banks, insurance companies, brokerage firms, and similar companies that
provide professional guidance on decisions pertaining to how money should be
managed.

4. Managerial (Business Finance) – this is the area that will be the focus of
organizations which rely heavily on sound decisions on the following:

 Cash flows (inflow and outflow)

 How to finance acquisition of assets and other growth plans
 Which financing options to access when the supply of cash is deficient
 What to do with the firm’s excess cash
 Optimal inventory level
 Accounts receivable and accounts payable management

Financial Management in Business

Decision makers rely heavily on financial information prepared, processed, and

analyzed by financial managers. Financial managers are involved in planning
wherein they contribute in identifying goals and objectives, setting targets, and
establishing control measures in order to monitor performance.

Financial information is generated by the different departments. The overall

financial plan includes detailed budgets for the different programs. The finance
manager as also tasked to provide the members of the top management or board of
directors with information that will help them make informed decisions on matters
that involve huge amount of money.

The following is a discussion on how important finance is on the different areas of

operation in an organization:

 Research and Development – in terms of budget devoted for the

creation of new products or improvements that need to be made on
existing products
 Employee Relations – data on how much the organization can spend
on wages, benefits, learning and development, and activities aimed at
boosting employees’ morale.
 Marketing Promotion – by determining the optimal amount of budget
that should be spent on marketing activities such as advertising and
promotion
 Expansion – finance is in-charge of capital budgeting
 Meeting Contingencies – every business faces external factors (e.g.
natural calamities fluctuation of prices) which are commonly beyond
control.
 Government Agencies – finance serves as liaison between the
organization and the government agencies

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  Asset Management – finance is tasked to include in the master budget
plan the disposal, sale, or acquisition of fixed assets; finance is also
responsible for projecting future cash flows of asset
 Information Systems – finance managers rely on information supplied
to them by the different department heads

The Important Role of Financial Management

Financial management deals with decisions that are supposed to maximize the
value of shareholders’ wealth. (Cayanan) These decisions will ultimately affect the
markets perception of the company and influence the share price.

The goal of financial management is to maximize the value of shares of stocks.

Managers of a corporation are responsible for making the decisions for the
company that would lead towards shareholders’ wealth maximization.

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 What’s More

Activity 2:

You are the finance manager for a small firm that manufactures slippers, sandals,
and shoes. The owners of the business approached you and asked for your opinion
on how to save money – in effect increasing profits – without sacrificing quality.
Answer the following guide questions based on the scenario given.
Afterward, create a summarized report of the information you gathered.
Guide Questions:

1. Who should you talk to in order to gather data that can help you in
your analysis?
2. What type of financial information will you ask for?

Criteria for your report:

Relevance of the Information 40%

Completeness 30%

Clarity 30%

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 What I Have Learned

Now, let us sum up what you have learned from the lesson by completing
the phrases below:

1. Finance is…

__________________________________________________________________________
__________________________________________________________________________
____________________________________________________________________

2. Financial Management is…

__________________________________________________________________________
__________________________________________________________________________
____________________________________________________________________

3. The Role of Financial Management is…

__________________________________________________________________________
__________________________________________________________________________
____________________________________________________________________

4. The branches of finance are…

__________________________________________________________________________
__________________________________________________________________________
____________________________________________________________________

5. Finance is very important in the different areas of the organization in

terms of…

__________________________________________________________________________
__________________________________________________________________________
____________________________________________________________________

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 What I Can Do

Activity 3:
You are an aspiring entrepreneur who wants to open a new business. You are
aware that it is crucial that you find sources to fund your business venture.
Finding the right source will lead your business to sales success. Your task is to
evaluate which of the financial institutions would be the best choice in funding
your business.
Make an analysis through a Venn Diagram on the pros and cons of the financial
institutions that will lead you to choosing what is best for your business.

Venn Diagram

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 Assessment

Multiple Choice. Choose the letter of the best answer. Write the chosen letter on a
separate sheet of paper.
1. Which of the following is primarily concerned with the management of financial
activities of an enterprise or a business organization?
A. Corporate Finance
B. Public Finance
C. Personal Finance
D. Both B and C

2. The following are related to corporate finance, except:

A. self-employed
B. bank employee
C. financial analyst
D. head of accounting department

3. It is the field of finance which gained popularity especially among the young
generation of income earners.
A. Public Finance
B. Corporate Finance
C. Personal Finance
D. All of the above

4. Who is involved in planning wherein they contribute in identifying goals and

objectives, setting targets, and establishing control measures in order to monitor
performance?
A. Accounting Manager
B. Finance Manager
C. Business Manager
D. All of the above

5. What do you call an area of operation in an organization that is tasked to include

in the master budget plan the disposal, sale, or acquisition of fixed assets?
A. Asset Management
B. Government Agencies
C. Marketing Promotions
D. Information Systems

6. Which of the following does not belong to the study of corporate finance?
A. Financial Markets and Institutions
B. Forms of Business
C. Investments
D. Financial Services

7. Which of the following are decisions of Managerial or Business Finance?

A. Accounts receivable management
B. Cash flow

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 C. Optimal inventory level
D. all of th
8. The primary goal of the financial manager is
A. minimizing risk
B. maximizing profit
C. maximizing wealth
D. minimizing return

9. This area of corporate finance covers banks, insurance companies, finance

companies, and other financial intermediaries
A. Financial Markets and Institutions
B. Investments
C. Financial Services
D. Business Finance

10. A financial manager must choose between four alternative Assets: 1, 2, 3, and
4. Each asset costs $35,000 and is expected to provide earnings over a
three-year period as described below.

Based on the profit maximization goal, the financial manager would choose
Asset Year 1 Year 2 Year 3
1 21,000 15,000 6,000
2 9,000 15,000 21,000
3 3,000 20,000 19,000
4 6,000 12,000 12,000

A. Asset 1.
B. Asset 2.
C. Asset 3.
D. Asset 4.

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 Additional Activities

Activity 4:

Funds are very important to a business whether to start, sustain, or expand

operations, it also helps to understand how funds are raised. These funds come in
form of the common denominator – money.

Make a concept map based on the following flow of funds:

The flow of money begins with the individual who deposits in the bank. This
depositor opens up a bank account and earns interest from this account and earns
an interest from this account. In turn, these funds are lent by the banks to
businesses, the borrowers who either start up a new project, a new line of product,
or merely expand operations. As the business earns profits, the borrower of the
funds is able to pay interest on the loan, and the depositor receives an interest on
his bank account.

Concept Map

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 Answer Key

Assessment What's In
1. A 1. Corporation
2. A 2. Partnership
3. C 3. Sole Proprietorship
4. B 4. Sole Proprietorship
5. A 5. Partnership
6. B 6. Corporation
7. D 7. Partnership
8. C 8. Sole Proprietorship
9. A 9. Sole Proprietorship
10.B 10.Corporation

What I Know
1. B
2. B
3. A
4. D
5. A

RUBRIC: (What I Can DO and Additional Activities)

Criteria 4 3 2 1
Content and Content is Content is Content is less Content is not
Organization comprehensive, comprehensive, comprehensive, comprehensive,
accurate, and accurate, and and ideas are and ideas are

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 ideas are ideas are stated not very not clear and
stated clearly stated clearly clearly and are not well
and are well and are well well supported. supported.
supported. supported.
There are also
specific ideas
added
Organization Concepts of the Concepts of the Some concepts Concepts of the
and diagram are diagram are of the diagram diagram are
Structure clear and easy clear and easy are not clear not clear and
to follow. There to follow. and easy to not easy to
is evidence of follow. follow.
outlining.

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References

Business Finance Teacher’s Guide

Published by the Commission on Higher Education, 2016
Chairperson: Patricia B. Licuanan, Ph.D.

Business Finance
Phoenix Publishing House Inc.
Yumang, K., Chan Pao, TP., Pefianco, E.

Business Finance
Rex Bookstore
Cayanan, A., Borja, DV

Business Finance
Diwa Senior High School Series
Gamatero, Albert N.

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Meralco Avenue, Pasig City, Philippines 1600

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