SEAT WORK

1 WHOLE YELLOW PAPER

On a sheet of paper, answer the following questions:
1. How much is your daily allowance or average allowance per day?
2. Write down all the items you spend money on. List the description
and peso amount spent.
3. Compute for the balance of your allowance by deducting the expenses
you listed from your daily allowance.
4. If the answer to question 3 is positive, what do you do with the money
left? If the answer is negative, where do you get additional money?
 INTRODUCTION TO
FINANCIAL
MANAGEMENT

• Definition of Finance
• Primary Goals
• Concepts and Functions of Business Finance
According to Webster, finance may be defined as a noun and as a verb.

As a noun – management of money, the monetary support for an enterprise,

or the money resources of a government , company, or person.
As a verb – to provide capital for a person or enterprise.
 FINANCE
The word finance is derived from the Latin word finer,
meaning “to end” or “to pay”. When a
person pays his bill, the financial matter is
ended.

Shetty et al (1995) viewed finance as the operational or practical side of

economics, the practical science of the production and distribution of wealth.
Saldana (1997) added that finance, as a discipline, is concerned with identifying,
evaluating, and managing sources and use of cash in order to increase the value of
the business enterprise to its present owners.
Medina (2007) defined finance as the study of the acquisition and investment of
cash for the purpose of enhancing value and wealth.
In summary, finance therefore, is the function of:
1. Allocating available funds;
2. Acquiring needed funds; and
3. Utilizing theses funds to achieve set goals.
Allocation means determining where to use funds,
currently available to the firm.
Acquisition means obtaining funds from the right sources
at the right time.
Utilization means using the funds.
PRIMARY GOALS
The primary goals of a business concern must therefore be
as follows:
To earn profit
To increase its own value as an economic entity
To improve the quality of life in the community
 TO EARN PROFIT
Funds are invested in business to earn sufficient
return on investment. Goods and services are made
available to the public and are billed to
customers/clients with sufficient markup to cover
operating expenses, financing charges, income taxes and
desired net profit.
 INCREASING THE VALUE OF A
BUSINESS
Growth and stability are the primary base in measuring the value of a
business entity. Growth may be measured in terms of increase in assets
that appreciate in value, improved production capacity accompanied by
increase in sales volume and increase in owners equity. Profitability
contributes to growth and stability especially when part of realized
profit is retained or plowed back into the business.

There are 70 SM Malls in the Philippines

 SOCIAL RESPONSIBILITY OF
BUSINESS
The social responsibility of a businessman refers to his
contribution to the improvement of the quality of life in the community.
This is not only in the form of pecuniary contributions but more on how
his business is able to improve the economy and its environment. He
adheres to legal and moral standards by adopting company objectives,
policies and practices consistent therewith.
Multiplier Effect of Business in a Community. This refers to the chain effects of
business activities. They affect not only the earning power of people directly
involved with it (such as the employees, suppliers and customers) but also those
indirectly affected by its economic activities. All these bring about increased demand
for other products and services. Thus, the multiplier effect of a business is geometric or
exponential in nature.
SEAT WORK

Draw something and give meaning to it in

relation to the quote.
 THE LIFE OF A HIGH SCHOOL
STUDENTS

Introduction to Financial Management

 FINANCE HAS BEEN DEFINED AS THE
“ART AND SCIENCE OF MANAGING
MONEY”

Its p , a nd
rede e nt ur c e
Stab ter m u re m r e so
ility, ined pr oc ci a l
prof obje ti on , fi na n
itabi ctive l o ca o f
lity a s rel i t h al z a ti on
nd li ative
n e d w e u t ili
quid to gr n c e r e c t i v
ity owth i s c o d e ff
, I t n ta n
i e
effic
 FUNCTIONS of
CONCEPTS
and

The following are the functions of business finance:

1. Allocation of financial resources
2. Procurement of funds
3. Efficient and effective utilization of financial resources.

Introduction to Financial Management

ALLOCATION OF FINANCIAL
RESOURCES
In accordance with a company’s
financial objectives and standards,
projects or activities and operations
are carefully planned, evaluated
based on certain criteria, and
subsequently ranked for the
allocation of financial resources.
The objective is to be assured that
funds are channeled to activities
that are considered profitable
and/or will increase the value of the
business itself and that company
costs and risks are minimized.
Capital/funds must be made available at the least cost when it is
needed. The procurement function requires awareness of the
different sources of funds and the costs involved. Funds are also
generated from operations.
Efficient Utilization of financial resources refers to their economical use. In
EFFICIENT AND EFFECTIVE
other words, we see to it that financial resources are actually being used for
UTILIZATION OF FINANCIAL
what they have been intended. Inefficiency in the use of financial resources
may be caused by extravagance in the choice of property and equipment,
RESOURCES
unnecessary expenditures, tardiness of personnel and nonproductive
resources.

Effective Utilization of financial resources refers to their use towards the

attainment of predetermined objectives.
CLASSIFICATION OF FINANCE
Finance can be classified into different types, the most
common of which are:
A. As to Form of Negotiation
1. Direct Finance
M. Hadjimichalakis and K. Hadjimichalakis (1995)
distinguished direct finance from indirect finance. Their
idea is that finance involves flow of funds. To whom
and from whom the funds flow differentiates direct
finance from indirect finance. Direct finance is finance
involved in direct borrowings a company going to a
bank to obtain a loan is direct finance. Similarly, a
friend borrowing money from another is direct finance.
A corporation selling shares to its incorporators is direct
finance.
INDIRECT FINANCE
Indirect finance involves financial intermediaries in the real sense of the
word. This means that financial intermediaries act as middlemen when they
buy securities for resale or simply facilitate the sale from the original issuers
to the final buyers. In some cases, they buy for their own account, they own
asset the securities they buy, they do not resell financial intermediaries act as
middlemen and in these instances, indirect finance is involved.
 B. As to User
1. Public Finance
Public finance deals with the revenue and expenditure patterns of the government.
It is concerned with government affairs – managing the government’s sources and uses of
funds. Government expenditures for infrastructure like building streets, schools, bridges,
among others and payment of government employees are government spending and thus
public finance. When the government issues treasury securities like Treasury bills, notes and
bonds, the government is in fact borrowing money from the public, which is also public
finance. Like all individuals and entities, the Public finance is concerned with government
revenues, like taxes, and government expenses, like paying salaries of government
employees. Government spending and government borrowing are all public finance

Introduction to Financial Management

 2. Private Finance
All finance other than public finance, is private finance. An individual
borrowing money from a financial institution is doing private finance. Medina
(2007) stated that private finance is that which deals with the area of general
finance not classified under public finance.
He divided private finance further into:
a. Personal finance
b. Finance of non-profit organization
c. Business finance
Introduction to Financial Management
 PERSONAL
FINANCE OFFINANCE
NON-PROFIT
ORGANIZATION
BUSINESS FINANCE
Refers to finance conducted by individuals/consumers.
Involves those conducted by charitable, civic, religious organizations, among others.
Deals with financing for business firms or for commercial use, the goal of which is
to make profit.

Introduction to Financial Management

 FINANCE IN THE BUSINESS
WORLD
Business is any lawful economic activity that
involves rendering service, buying and selling
goods; converting raw materials into finished
products and selling the same; borrowing and
lending money; acquiring funds and investing the
same; extracting mineral resources; constructing
buildings, road, and infrastructure; providing
insurance for a sense of peace; and serving the
public like public utilities, transportation, and
communication entities. In all of theses activities,
effectively and efficiently acquiring and utilizing
funds (finance) make the difference and that is
what business finance is all about.
FINANCE CONSISTS OF THREE
INTERRELATED AREAS. THESE ARE:
1. Managerial finance;
2. Investment, and
3. Money and capital markets.
FROM THE CHIEF FINANCIAL
OFFICERS (CFOS) OF THE RESPECTIVE
CORPORATIONS:
Unilever – “Finance plays a critical role across every aspect of our business. We
enable the business to turn our ambition and strategy into sustainable, consistent and
superior performance” – Jean-Marc Huet
Jollibee – “It’s very exciting because you are not just thinking of today but what the
company will need in the future” – Ysmael V. Baysa
Globe Telecom – “Yesterday’s solutions are never adequate for the future”’ – Albert
De Larrazabal
SM Corporation – “Now, we don’t go out because we need funds. We go out because
it’s an opportunity” – Jose T. Sio
 SEAT WORK (GROUP
YOURSELVES INTO 4 GROUPS)
You have to interpret the quote according to your group
assignments

Introduction to Financial Management

 15 MINUTE REVIEW

Introduction to Financial Management

HOME WORK (EXPERIENTIAL
EXERCISES)
Search two (2) history background of
some famouse store in the Philippine. And
identify on how they start on the business
world.
LUKE 12:48
“For everyone to whom much is given, from him much will be
required; and to whom much has been committed, of him they will
ask the more.”