----------------------Money---------------------- E. 1290 A.D.

- current medium of exchange in the form of - the travels of Marco Polo to China introduced
coins, banknotes, etc. the idea of paper money to Europeans.

- pays for good and services - paper money was great for business because it
could be mass produced without relying on raw
Functions of Money materials like gold and silver.

A. Medium of Exchange F. 1860 A.D.

- money can be used for buying and selling - industry giants, spearheaded e-money with
goods and services. electronic fund transfer via telegram.

B. Unit of Account G. 1946 A.D.

- money is the common standard for measuring - John Biggins invented the “Charge-It” card,
relative worth of goods. the first credit card.

C. Store of Value H. 1967 A.D.

- money is the most liquid asset. - the invention of ATMs.

- money’s value can be retained over time and it - Barclays Bank, with their first model installed
is a convenient way to store wealth. in Enfield, North London in 1967.

History of Money - early ATMs used checks impregnated with

A. 9000 B.C.
- early man would barter goods they had in
surplus for ones they lacked.
- grains and cattle were popular goods to barter.
- it was first recorded in Egypt.
carbon 14 – a radioactive substance – and paid out a
maximum of £10 at a time.
I. 1997
- Mobile Oil Corporation introduced Speedpass,
an electronic payment tag that let consumers pay for fuel
at the pump.

B. 1100 B.C. J. 1999

- in China, people started using small replicas of - European banks began offering mobile banking
goods cast from bronze with primitive smart phones.

C. 600 B.C. K. 2008

- “official currency” Lydia (Turkey) by King - contactless payment cards were issued in the
Alyathes. U.K. for the first time.

- a standardized coinage allowed trade to L. 2014

flourish across the Mediterranean world. - bitcoins entered the mainstream.
D. 1250 A.D. - the first fully implemented decentralized
- the florin, a gold coin minted in Florence, was cryptocurrency.
widely accepted across Europe, encouraging Characteristics of Money
international commerce.
A. Durability
 - it can be used repeatedly. Three Types of Business Organization

- it must be surviving wear and tear for long A. Service Business

periods.
- provides services rather than products to
B. Portability customers.

- must be able to go wherever such that it is easy B. Merchandising Business

transport as people travel.
- sell products they purchase from other
C. Divisibility businesses to customers.

- it deals with the fact that money is easily C. Manufacturing Business

divided to buy different products.
- change basic inputs into products that are sold
D. Uniformity to customers.

- it calls for a standardization of money so that Three Forms of Business Organization

it looks the same.
A. Sole Proprietorship
E. Acceptability
- the simplest and most common form of
- it deals with the fact that the form of currency business ownership and is also the easiest to organize.
must be acceptable.
- the owner or entrepreneur has sole control over
F. Limited Supply the enterprise thus reaps all the profits and also all the
losses.
- it states that money is only valuable if it is in
limited supply. - there is no distinction between the owner and
the enterprise meaning the entrepreneur is personally
Budgeting- the act of estimating revenue and expenses answerable and obligated to fulfill all the terms and
over a period of time. conditions of any business contract that her/she enters to.
Investments- when you have an excess amount of ADVANTAGES DISADVANTAGES
money it presents an opportunity for investments and it All profits are subject to Owner is 100% liable for
comes in many forms that will generate income or the owner business debts
appreciate in the future between hiding cash under their There is little regulation Equity is limited to the
bed and depositing it in the bank. for proprietors owner’s personal resources
Owners have total Ownership of
-----------Business Organization------------ flexibility when running proprietorship is difficult
the business to handle
Business Very few requirements for No distinction between
starting often only a personal and business
- bisignes (English) = care, anxiety and business license income
occupation.

- the activity of making, buying or selling goods B. Partnership

or providing services in exchange of money.
- the main objectives of a business is to earn
profit.
Profit- the difference between the amount earned and
the amount spent in buying, operating or producing
something.
- two or more persons binding themselves into a
contract to contribute money, property and enterprise in
a common venture with the intention of dividing the
profits among themselves.
- can own its own assets, can incur it on
liabilities and can sue and get sue.
 - a minimum of two persons can constitute a 1. Stock Corporation
partnership, but there is no limit to the number of
persons in a partnership. - issues capital stocks dividend into shares.

- the decision of one partner is binding to all the - the corporation is authorized to raise capital
other partners. that has a corresponding number of sales.

Types of Partnership 2. Non-Stock Non-Profit Corporation

1. Limited Partnership - organized to carry out a purpose other than

generating profits for investors.
- consists of partners who have limited
liabilities. - usually has a social mission.

2. General Partnership - profit is plowed back into the mission.

- consists of partners who have unlimited - governed by board of trustees.

liability for the debts and obligations of the partnership. 3. Close Corporation
ADVANTAGES DISADVANTAGES - limit the ownership of issued stocks to at least
Shared resources Each partner is 100%
20 persons.
provide more capital responsible for debts
for the business and losses
- there are strict restrictions on the transfer of
Each partner shares Selling the business is
stocks.
the total profits of the difficult requires
company finding new partner
- the stocks cannot be listed in any stock
Similar flexibility and Partnership ends
simple design of a when any partner exchange nor can any public offering of shares be made.
proprietorship decides to end it
4. Sole Corporation
Inexpensive to
establish a partnership - special form of corporation allowed by law
formal or informal
usually associated with the clergy.

- trusteeship that is set up for the purpose of

C. Corporation
administering and managing the affairs, property and
- has a separate legal personality quite distinct temporalities of a church or group of clergy.
from the investors who contributed money to the
enterprise. ADVANTAGES DISADVANTAGES
Limits liability of the Corporate operations are
- can be formed or incorporated by at least five owner to debts or losses costly
Establishing a corporation
or at most 15 natural persons who are called
Easier to raise capital is costly because of double
“shareholders” taxation
Has business continuity Rigid formalities and
- once the corporation is established there is no
and security protocols to follow
limit to the number of natural or juridical persons who Able to raise additional
can invest in the corporation. funds by selling shares in
the corporation
- owned and established under the corporation
code regulated by the S.E.C.

- the shareholders are also registered with the ----------------Business Shares---------------

S.E.C. and are assigned to at least one share of the stock.
Stockholder
Types of Corporation
 - an individual or company that legally owns one sentiment and the economic prospects of the
or more share of stock in a joint company. country among others.

- an individual, group or organization that holds Measurement of the Shareholder’s Wealth

one or more shares in a company and in whose name the
share certificate is issued.
Shareholder
- is a person who bought shares of stocks of a
publicly traded corporation.
Stakeholder
- include not only shareholders, but everyone
who has an interest or a stake on how the business is
performing or how it is managed.
 The overall objective of a shareholder should be
wealth maximization.
 Shareholders’ wealth is measured based on the
current market price of the corporation’s stocks.
 The market price changes across different
periods. Hence, the value of your investment
changes in different points on time based on the
market value at that time.
Factors that Influence Market Price

Types of Stakeholder CONTROLLABLE BY UNCONTROLLABLE

MANAGEMENT BY MANAGEMENT
A. Internal Stakeholder Macroeconomic
Profitability
Conditions
- are directly involved in the management or Having a Good Liquidity
operations of the business. and Reasonable Leverage Political Stability
Position
B. External Stakeholder Prospects of the Industry
Dividends where the Company
- is someone who is not directly involved in the Operates
business, but in one way or another has a stake on how Competent Management
the business is managed or how it is performing. which affects the
General Market Sentiment
Company’s Operating
How and Where to Buy Stocks? Efficiency
Coming up with Corporate
 Corporations may either be privately owned or Flow of Foreign Funds
Plans that Improve the
Invested in the Philippines
publicly owned. Business Prospects of the
Stock Market
company
 Privately owned corporations are often owned
by family members whose stocks may not be
offered to outsiders unless consent by the family Profitability
members is secured.
- profit is a measure of the financial performance
 Companies which are publicly listed are owned of a company for a period of time.
by unrelated investors and are traded in
- although it is a major driver for increasing the
organized exchanges like the Philippine Stock
value of stock, an investor should not rely on profits
Exchange.
alone.
 While there are many stockholders, there is
Good Liquidity and Reasonable Leverage Position
generally a group of investors or a family which
control each listed company. - liquidity and leverage refer to the company’s
management of the type and amount of assets and
 Prices of stocks of listed corporations are driven
liabilities that it will hold during its operations.
by several factors such as the earnings of the
companies, the prospects of the industry where Dividends
these companies operate, the general market
 - holders of shares receive dividends from a
corporation as returns on their investments in form of
cash or other properties.
- companies which have better dividend policies
are generally more attractive than companies who do not
pay out dividends.
Competent Management
Competent managers may have any of the ff. attributes:
A. Visionary
B. Decisive
C. People-Oriented
D. Inspiring
E. Innovative
F. Respected
G. Experienced/Seasoned Manager
External Factors
- these factors influence the general reaction of
investors in making an investment decision.
- its effect is not only to a specific company, but
on all companies or a group of companies under similar
circumstances.
- such factors are a result of the environment a
company operates in rather than the decisions of the
company’s management.
----Corporate Organization Structure-----
A. Shareholders
- is a person, company, or institution that owns
at least one share of a company’s stock, which is known
as equity.
- they elect the Board of Directors.
- each share held is equal to one voting right.
- since the Board of Directors is elected by the
shareholders, their responsibility is to carry out the
objectives of the shareholders otherwise they would not
have been elected in that position.
B. Board of Directors
- is the highest policy making body in a
corporation.
- their primary responsibility is to ensure that the
corporation is operating to serve the best interest of the
stockholders.
- they appoint the president.
Responsibilities of the Board of Directors
 Setting policies on investments, capital structure
and dividend policies.
 Approving company’s strategies, goals and
budgets.
 Appointing and removing members of the top
management including the president.
 Determining top management’s compensation.
 Approving the information and other disclosures
reported.
C. President/Chief Executive Officer
- is one of a number of corporate executives in
charge of managing an organization
- the role of ta president in a corporation may
vary from once company to another.
Responsibilities of the President
 Overseeing the operations of a company and
ensuring that the strategies as approved by the
board are implemented as planned.
 Performing all areas of management: planning,
organizing, staffing, directing and controlling.
 Representing the company in professional,
social and civic activities.
D. Vice President
- the president cannot manage the company on
his own, especially when the corporation has become too
big.
 - to assist him are the vice presidents of different
functional areas: finance, marketing, production and
administration.
Responsibilities of Vice Presidents per Area
1. Vice President for Marketing
 Formulating marketing strategies and plans.
 Performing market and competitor analysis.
 Directing and coordinating company sales.
 Analyzing and evaluating the effectiveness and
cost of marketing methods applied.
 Conducting or directing research that will allow
the company to identify new marketing
opportunities.
 Promoting good relationships with customers
and distributors.
2. Vice President for Production
 Ensuring production meets customer demands.
 Identifying production technology/process that
minimizes production cost and make the
company cost competitive.
 Coming up with a production plan that
maximizes utilization of the company’s
production facilities.
 Identifying adequate and cheap raw material
suppliers.
3. Vice President for Administration
 Coordinating the functions of administration,
finance and marketing departments.
 Assisting other departments in hiring employees.
 Providing assistance in payroll preparation,
payment of vendors and collection of
receivables.
 Determining location and the maximum amount
of office space needed by the company.
Identifying means, processes or systems that
will minimize the operating costs of the
company.
4. Vice President for Finance
 Financing decisions include making decisions
on how fund long term investments and working
capital which deals with the day-to-day
operations of the company.
 Determine the appropriate capital structure of
the company.
Four Functions of a Vice President for Finance
a. Financing
b. Investing
c. Operating
d. Dividend Policies
Capital Structure- refers to how much of your total
assets is financed by debt and how much is financed by
equity.
Securities- refers to a range of assets you can invest in.
----------------------Finance---------------------
Finance
Definition of Finance Base on Parts of Speech
A. Verb
- it is to provide funding.
- may it be like loaning money to someone.
B. Noun
- it is a field in business and economics.
Definition of Finance Base on Perception
A. From the Perspective of an Economist
- it is the allocation of scarce resources which
include money.
B. From the Perspective of Business
- it is the function or area which is responsible
for managing the aspect of the operations that deals with
money matters.
 - it is concerned not only with the allocation of
funds, but also with the sources of such funds.
Branches of Finance
A. Public Finance
- covers management of public funds, national
budget and tools for fiscal policy such as government
expenditure and taxation.
Public Revenue- is generally derived from taxes.
Public Expenditure- involves allocation of national
budget into programs designed to benefit the general
public.
B. Private Finance
- is all about the management of finances at an
individual level.
Types of Private Finance
1. Personal Finance
- pertains to personal financial planning.
- it includes coming up with a budget that
matches one’s short and long-term needs, creating a
savings plan for contingencies and investing in financial
products such as retirement plans and insurance.
2. Corporate/Business Finance
- primarily concerned with the management of
all the financial activities of an enterprise or a business
organization.
- the ultimate goal of corporate finance is to
maximize shareholder value through sound financial
planning.
- a detailed plan for a business organization
includes areas of decision that are meant to ensure the
financial well-being of the firm.
Interrelated Areas of Corporate Finance
a. Financial Markets and Institutions
- this area covers banks, insurance companies,
finance companies (non-bank institutions that offer both
short and long-term loans to individuals and other firms)
and other financial intermediaries.
- financial intermediaries are also non-bank
financial institutions that offer specialized financial
services to businesses.
b. Investments
-this area focuses on investment options and
decisions made by both individual and corporate
investors.
c. Financial Services
- this area refers to services offered by
organizations whose line of business is to help
individuals and other organizations manage money.
- these organizations include banks, insurance
companies, brokerage firms and other companies that
provide professional guidance on decisions pertaining to
how money should be managed.
d. Managerial (Business) Finance
- the area on which holds in making sound
decisions related to finance.
Relationship Between Accounting and Finance
- although they are closely related they are
distinct disciplines that have different focuses.
A. Managerial/Management Accounting
- involves the preparation of reports that are
intended to aid internal users in decision-making to
ensure good or better performance in the future.
- some of the most common reports are budget,
cost analysis, inventory analysis, sales and profit
projections and risk-return analysis.
- may rely on the use of historical data provided
by financial accounting.
B. Financial Accounting
- keeps track of all the historical transactions of
a business that will be used in preparing reports intended
for use by external parties such as government agencies,
investors and creditors.
Financial Management
 - involves the actual handling of an
organization’s funds, which covers operational,
investment and financial decisions.
- it puts emphasis on managing the funds of an
organization in order to create value for the firm by
minimizing risks (cost and expense) and maximizing
returns (sales and profits).
- finance managers are involved in planning on
which they contribute in identifying goals and
objectives, setting targets and establishing control
measures in order to monitor performance.
Financial Information
- the decisions made by the business depends
largely on the financial information gathered, prepared
and analyzed by this management.
- financial information is generated by different
departments on which at times other department heads
also prepare financial reports.
- it is up to the person in charge of the finance
department to gather all these data and put them together
in a format that is clearly and easily understood by
decision makers.
- the overall financial plan also becomes the
basis for evaluating organizational performance.
- finance managers are also tasked to provide the
members of the top management or the board of
directors the information that will help them make
informed decisions on matters that involve huge
amounts of money.
-----Concept of Saving and Investing-----
- there are certain places where a saver or
supplier of funds and a user or demander of funds can
provide assistance to them financially.
A. Private Placement
- when a saver knows that a user needs funds or
if a user knows that a saver is willing to invest funds this
could be agreed upon.
- the sale of a new security directly to an
investor or group of investors.
B. Financial Market
- savers and users can go to a this market on
which it is an organized forum that lets both parties meet
and make transactions.
- once they have met in the financial market,
they can now agree to make a private placement.
- this place is a mean for the buying and selling
of stocks, bonds and other financial instruments.
- this place is also mean where individuals and
organizations who need funds find investors and lenders.
Classifications of Financial Markets
1. Primary Market
- financial market in which securities are
initially issued.
- the only market in which the issuer is directly
involved in the transaction.
2. Secondary Market
- financial market in which pre-owned securities
(those that are not issues) are traded.
 To raise money, users of funds will go to a primary
market to issue new securities (either debt or equity)
through a public offering or a private placement.
Public Offering- the sale of new securities to the
general public.
Initial Public Offering- the first offering of stock.
Money Market vs Capital Market
- money market is where transactions involving
short-term debt securities take place.
- capital market is where transactions involving
long-term debt securities or those maturing in more than
one year take place.
C. Financial Institutions
- they will receive the saver’s supply of funds
and match it with the user’s demand of funds
 - is an organization that handles financial C. Financial Equity
transactions for individuals, groups and other
organizations. - is any contract that evidences a residual
interest in the assets of an entity after deducting all
- transactions like saving or borrowing money, liabilities.
sending or receiving money overseas and exchanging
currencies are all done here. - examples are ordinary share capital and
preference share capital.
- most common financial institutions are banks
and insurance companies. Financial System

Types of Financial Institutions by Nature

1. Depository Institution

- manages money that is deposited by

individuals and organizations.

2. Nondepository Institution

- does not handle deposits instead it serves as an

intermediary between savers and users that need
additional funds to support their personal needs or
business operations.

- this institution borrows funds from savers.

Financial Instruments
- is a document that signifies a legal or binding
agreement between two parties
- it is used when individuals and organizations
alike deal with each other in completing financial
transactions.
Note: On the diagram presented, the solid lines represent
the flow of cash/funds, while the broken/ light lines
represent the flow of financial instruments which
represent obligations to transfer cash or other assets in
the future. Moreover, financial institutions actively
participate in the financial markets as both suppliers and
users of funds.
-Financial Planning Tools and Concepts-
Planning

- is the process of thinking about the activities

Types of Financial Instruments by Nature
A. Financial Asset
- is any asset that is cash.
- examples are notes receivable, loans
receivable, investment in stocks, investment in bonds
B. Financial Liability
- is any liability that is a contractual obligation.
required to achieve a desired goal.
- it is an important aspect of the firm’s
operations because it provides road maps for guiding,
coordinating and controlling the firm’s actions to
achieve its objectives.
Management Planning
- is about setting the goals of the organization
and identifying ways on how to achieve them.

- examples are notes payable, loans payable, Financial Planning

bonds payable.
 - the process of determining a person's or firm's
financial needs or goals for the future and the means to
achieve them.

- it involves deciding what investments and

activities would be most appropriate under both personal
and broader economic circumstances.

Strategic Planning

- designed by the Top-Level Managers.

- usually broad plans based on the company’s

vision, mission, values and address the company as a
whole.

- used as bases from more specific plans.

Tactical Planning

- creates plans for specific areas of the company.

- translates broader plans into functional foals

for each area or department.

- these includes, budgets, resources and goals

with specific deadlines.

Long-Term Financial Plans

- is an integrated strategy that takes into account

various departments such as sales, production, marketing
and operations for the purpose of guiding these
departments towards strategic goals.

- it consider proposed outlays for fixed assets,

research and development activities, marketing and
product development actions, capital structure and major
sources of financing.

- also included would be termination of existing

projects, product lines or lines of business; repayment or
retirement of outstanding debts; and any planned
acquisitions.

Short-Term Financial Plans

- specify short-term financial and the anticipated

impact of those actions.

- it includes setting the sales forecast and other

forms of operating and financial data which would then
translate into operating budgets, the cash budget and pro
forma financial statements.