BUSINESS FINANCE

MR. LOPE L. DUQUE JR.

AIMS
 Content Standard: The learners demonstrate an understanding of definition of
finance, the activities of the financial manager, and financial institutions and
markets.

 Performance Standard: The learners are able to define finance, describe who are
responsible for financial management within an organization and the role of
financial institutions and markets.

 Most Essential Learning Competencies: The learner explain the major role of
financial management and the different individuals involved, and distinguish a
financial institution from financial instrument and financial market.
FINANCIAL MANAGEMENT

involves the process of planning, organizing,

directing and controlling the financial
activities of the firm. This includes obtaining
and utilizing funds for the operations of the
enterprise. It deals with the application of
general management principles and capitalizes
on the financial resources of the enterprise.
DEFINITION OF TERMS

 Finance – is the science and art of managing money which includes the process of acquiring
the needed funds. Finance also encompasses the oversight, creation, and study of money,
banking, credit, investments, assets and liabilities that make up financial systems.

 Financial manager - is a person who takes care of all the important financial functions of an
organization. His actions directly affect the profitability, growth and goodwill of the firm.
 Financial Institution – Intermediaries that channel the savings of individuals, businesses,
and governments into loans or investments.

 Financial Markets – organized forums in which the suppliers and users of various types of
funds can make transactions directly. Financial Instruments – is a real or a virtual document
representing a legal agreement involving some sort-of monetary value. These can be debt
securities like corporate bonds or equity like shares of stock.
MAJOR ROLE OF FINANCIAL MANAGEMENT

Generally, financial management is concerned with procurement, allocation and

control of financial resources of a business entity with the following objectives:
1. To ensure regular and adequate supply of funds;
2. To ensure adequate returns to the shareholders through capital gains which
are dependent upon the earning capacity and the market price of the share;
3. To ensure optimum funds utilization at least cost;
4. To ensure investment of funds in safe ventures so that adequate rate of return
can be achieved; and
5. To design a sound capital structure by maintaining a fair composition of
capital through a balance between debt and equity capital.

E s t im a t io n o f c a p it a l
r e q u ir e m e n t s
This is dependent upon
expected costs, profit and future
programmes and policies of a
business entity. Estimations
have to be made in an adequate
manner which increases the
earning capacity of the
enterprise
The Corporate Organization Structure
VP FOR
MARKETING
F u n c t io n s o f f in a n c ia l m a n a g e m e n t
D e t e r m in a t io n o f c a p it a l Choice of source s
c o m p o s it io n
When the estimation has been  Additional issuance of
m a d e a d e c is io n o n t h e c a p it a l shares of stock and/ or
structure follow so this involve s bonds
short-term and long –term debt  Loans from banks or any
equity analysis. This results to an willing financial institutions
acceptable proportion between  Investments from the public
equity capital and additional in the form of bonds
funds to be raised from external
creditors and interested parties
SHAREHOLDERS
elects O W N ERS
B O A R D O F D IR E C T O R S
appoints
P R E S ID E N T ( C E O ) M
A
N
A
G
VP FO R VP FOR VP FO R E
F IN A N C E P R O D U C T IO N A D M IN IS T R A T IO N R
S
TO BE
CONTINUED