Business Finance

Mr. Dave Kieth J. Lappay

Subject Teacher
 Chapter 1: An Introduction to Financial
Management
• Financial Institutions and the Key Individuals who Play Vital Roles
• Financial Instruments and Financial Markets
• Financial Institutions and Financial Services
• Financial Instruments Compared and Contrasted
• The Flow of Money and the Role of the Financial Manager
 Chapter Objectives
At the end of the chapter, the students are expected to:
• define financial management through the discussion of the role of
financial institutions and financial instruments;
• recognize all aspects of finance and financial management; and
• interest the student in the a whole new world of business and finance.
 Finance and Financial Management
• Finance is the study of how individuals or businesses evaluate investment
opportunities, business proposals and business projects and raise capital to
fund them.
• Financial Management means the efficient and effective management of
funds.
Financial Institution and Key Individuals who
Play the Vital Roles
 Financial Instruments
• Money Market Funds/Instruments – Inexpensive way for government and
financial institutions to raise funds.
• Long-term Debt – Payment terms are longer and interest rates is higher
than money market instruments.
• Stock Market – It is a type of security that signifies ownership in a
corporation and represents a claim on part of the corporation’s assets and
earnings.
 Money Market Debt

• Treasury Bills • Issued by treasury government

• Matures within one year.
• Default free
• Commercial Papers • Issued by financially-sound
businesses to fund investment.
• 9-month maturity
• Low default risk
 Money Market Debt
• Issued by banks or mutual fund
• Money Market Funds company
• No specific maturity date.
• Low default risk.
• Consumer Credit Card
• Issued banks, credit unions and
financing companies.
• Maturity date varies
• Default risk varies
 Long-term Debt

• Treasury Notes/Bonds • Issued government and no

default.
• Two or more years maturity.

• Federal Agency Debt • Less attractive due to low interest.

• Issued by federal government.
• Maturity date for up to 30 years.
• Low default risk.
 Long-term Debt

• Municipal Bonds • Issued by local government.

• Matures up to 30 years.
• Low default risk.
• Corporate Bonds • Issued by corporations.
• Maturity date of more than 30
years.
• Medium default risk.
 Equity Financing/Stock Market
• Issued by corporation and no maturity
• Preferred Stocks date.
• Pays dividend has no voting rights.
• Has preference over common stocks.
• Common Stocks • Issued by corporations and pays
dividends.
• Has voting rights on selection of BOD.
• Enjoy potential profits from capital
appreciation.
 Formative Assessment
• As a student, what do you think would be the best investment among the
three types of financial instruments? Explain your answer clearly and cite
an examples.
 Kinds of Banks
• Thrift banks – These are deposit-taking financial institutions that also extend credit to the
consumer market.
RANK   NAME OF BANK TOTAL ASSETS
           
BPI FAMILY SAVINGS
  1 BANK INC 284,743.52  

  2 PHIL SAVINGS BANK 234,906.22  

RCBC SAVINGS BANK
  3 INC 137,038.84  
CHINA BANK SAVINGS
  4 INC 95,827.27  

PHILIPPINE BUSINESS
BANK INC A SAVINGS
  5 BANK 94,845.56
 Kinds of Banks
• Commercial banks – These are deposit-taking financial institutions that also extend credit retail and consumer
market.
• Commercial Banks in Philippines
• Bank of the Philippine Islands
• Citibank Philippines
• Equitable Bank
• Far East Bank & Trust Company
• International Exchange Bank
• Land Bank of the Philippines
• Metropolitan Bank and Trust Company (Metrobank)
 Kinds of Banks
• Universal banks – It lends to multinational companies or companies with global presence. Their transactions are
larger than commercial banks and denominated with multicurrency.
• Universal Banks in Philippines
• Al-Amanah Islamic Investment Bank of the Philippines.
• Asia United Bank Corporation (AUB)
• Australia and New Zealand Banking Group (ANZ)
• BDO Unibank, Inc. ( ...
• Bank of America, N.A.
• Bank of China - Manila Branch.
• Bank of Commerce (a subsidiary of San Miguel Corporation)
 Kinds of Banks
• Investment banks – It is known to successfully raise funds for big corporations and governments in more specialized
and creative manner.
• Investment Banks in Philippines
• Top Investment Banks in the Philippines
• ABCapitalOnline.com, Inc.
• Asian Alliance Investment Corporation.
• Asian Focus Group Inc.
• BPI Capital Corporation.
• Eastgate Capital Partners, Inc.
• First Abacus Financial Holdings Corporation.
 Non-banks Financial Institution
• Leasing Companies – Are not banks and not governed by central banks, yet,
they extend credit to companies that need funds.
• Top leasing companies in the Philippines
• Top-Notch Construction- House Builder
• Assetters Inc.
• STRONGHOLD INSURANCE COMPANY INC.
• SOUTH ASIALINK CREDIT CORPORATION (MBL-SAU).
• BDO LEASING AND FINANCE
 Non-banks Financial Institution
• Investment Companies – Are regulated by SEC and perform similar
functions as banks through bond issuance and IPO.
• Top leasing companies in the Philippines
• Top-Notch Construction- House Builder
• Assetters Inc.
• STRONGHOLD INSURANCE COMPANY INC.
• SOUTH ASIALINK CREDIT CORPORATION (MBL-SAU).
• BDO LEASING AND FINANCE
 Non-banks Financial Institution
• Mutual Funds– Are collective investments or funds of small investors pooled together
and managed to be able to reach maximum returns.
Top 10 Mutual Funds Companies (as of 1-Year Return
August 24, 2018)

Cocolife Fixed Income Fund, Inc. 5.38%

Sun Life Prosperity Money Market Fund,

2.31%
Inc.

ALFM Money Market Fund, Inc. 2.28%

Philam Managed Income Fund, Inc. 1.78%

 Non-banks Financial Institution
• Insurance Companies– Companies that sell insurance coverage for death, illness,
accident, loss or damage of property in return of premium payment.
Sun Life of Canada (Philippines), Inc. PHP 32.11 billion
Philippine Axa Life lnsurance Corporation (AXA
PHP 26.18 billion
Philippines)
BPI-Philam Life Assurance Corp., Inc. (BPl-
PHP 20.33 billion
Philam)
Philippine American Life & General lnsurance Co.
PHP 19.90 billion
(Philam Life)
Pru Life lnsurance Corporation of U.K. (Pru Life
PHP 19.22 billion
U.K.)
 Non-banks Financial Institution
• Private Equity Funds – these are not regulated by any regulatory body but by private
fund managers and private investors.
• Private Equity Funds in the Philippines
• Eastgate Capital Partners, Inc.
• First Metro Investment Corporation
• Investment & Capital Corporation of the Philippines
Organizational Chart and the Roles of VP of
Finance
BOARD OF
DIRECTORS

PRESIDENT

VP FOR SALES & VP FOR VP FOR VP FOR

MARKETING FINANCE PRODUCTION ADMINISTRATION
 Roles of Board of Directors (BOD)
• Setting policies on investment, capital structure and dividends.
• Approving company’s strategies, goals, and budgets.
• Appointing and removing members of the top management including
president.
• Determining top management’s compensation.
• Approving the information and other disclosures reported in the financial
staatements.
 Roles of Financial Manager
• Pay his employees and in turn, his employees can feed their families and
send their children to school
• Pay the rent or amortization on his office property
• Pay his creditors the interest from the borrowed money
• Reinvest some of the profits to the business; thereby sustaining all who
depend it.
• Financing, investing, operation and dividend policies.
 Formative Assessment
• Financial institutions are intermediaries that play a vital role in nation
building. They source funds for businesses to engage in projects that are
profitable, maximize shareholder wealth, and build communities. Is there
a project you have in mind that is worthwhile, has potential to earn profits,
and will benefit your community in the long-term? List down those
projects. What financial institutions can help you achieve your dream of a
sustainable business for you shareholder or community?
THANK YOU!