BUSINESS FINANCE

Quarter 1 Week 1

Name: _____________ Date:

Grade and Section:

The Definition of Finance and the Activities of Financial Manager

I. Learning Competency
Identify the major role of financial management and the different
individuals involved.

II. Objectives
1. Explain the major role of financial management and the different
individuals involved.
III. Activities

Activity 1 Life of a Senior High School Learners (Before pandemic)

Instructions: Answer the following questions.

1. As a senior high school student, how much allowance do you usually receive
and how often do you receive it (daily, weekly, etc.)

Amount of allowance : ______________ How often :_________________

2. List down the activities that you usually do from getting to school until going
back home.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
_____________________________________________________________
3. Do you have savings out of the allowance that you received? Yes :______
No:_______

4. Identify the expenses that you usually incurred when you go to school.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________

5. Do you agree with the importance of saving money ?Why?

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Most of the activities that you do involving decisions on where to use
your allowance is a finance decision

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Facts: Finance can be defined as the science and art of managing money.
(Gitman & Zutter, 2012)

Activity 2

1. What words come into your mind when you hear the word finance? Write at
least five words which is closely associated with it.

1.
2.
3.
4.
5.

2. In your own words, how would you define finance ?

_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________

Facts:
1. Budgeting is the act of estimating revenue and expenses over a period of time.
2. Excess money presents an opportunity for investments .Investments come in
many forms that will generate income or appreciate in the future.

Activity 3

1. Go back to the list of expenses that you write in Activity 1.1 no. 4 and this
time you will be asked for the total peso amount of the listed items.
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________

2. If the peso amount exceeds your daily allowance, which items should be
dropped off from the list. Cross out the items dropped but do not erase
completely. Continue this until total items remaining in the list can be covered
by the daily allowance.
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________

3. Focus your attention on the surplus resulting from your budgeting. This
resulted in savings or excess cash. What will you do with the excess money?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

Facts

Sources of funds. When faced with financial difficulties (in this case, the lack of
funds to meet the current expenses) we look for people or institutions that will
give us the money we need

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Activity 4

If ever they are situations where you are short of cash, what would you do?
Where will you get extra cash? What other sources of cash do you know?

The Corporate Organization Structure

Every organization has corporate structure to illustrate the roles and functions
of each employee. It also shows the corporate organization structure and
inform them that this particular set of people each play a role in the decision
making of the company.

Facts
Shareholders: The shareholders elect the Board of Directors (BOD). Each share
held is equal to one voting right. Since the BOD 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. Ask the learners again what
the objective of the shareholders is just to refresh.
Board of Directors: The board of directors is the highest policy making body in
a corporation. The board’s primary responsibility is to ensure that the corporation
is operating to serve the best interest of the stockholders
President (Chief Executive Officer): The roles of a president in a corporation
may vary from one company to another. Among the responsibilities of a president
are the following:
- 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

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THE RESPONSIBILITIES OF A BOARD OF DIRECTORS***
1.Setting policies on investments, capital structure and dividend policies.
2.Approving company’s strategies, goals and budgets.
3.Appointing and removing members of the top management including
the president.
4.Determining top management’s compensation.
5.Approving the information and other disclosures

THE RESPONSIBILITIES OF A PRESIDENT OR CHIEF EXECUTIVE OFFICER

(CEO)***
1. Overseeing the operations of a company and ensuring that the
strategies as approved by the board are implemented as planned.
2. Performing all areas of management: planning, organizing, staffing,
directing and controlling.
3. Representing the company in professional, social, and civic activities.
4. Carries out the decision making for all functions

VP for Marketing: The following are among the responsibilities of VP for

Marketing
1. Formulating marketing strategies and plans.
2. Directing and coordinating company sales.
3. Performing market and competitor analysis.
4. Analyzing and evaluating the effectiveness and cost of marketing methods
applied.
5. Conducting or directing research that will allow the company identify new
marketing opportunities, e.g. variants of the existing products/services already
offered in the market.
6. Promoting good relationships with customers and distributors.
(Cayanan, A. 2015)

VP for Production: The following are among the responsibilities of VP 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 the utilization of the
company’s production facilities.
- Identifying adequate and cheap raw material suppliers. (Cayanan, A. 2015)

VP for Administration: The following are among the responsibilities of VP

for Administration:
1. Coordinating the functions of administration, finance, and marketing
departments.
2. Assisting other departments in hiring employees.
3. Providing assistance in payroll preparation, payment of vendors, and
collection of receivables.
4. Determining the location and the maximum amount of office space needed by
the company.
5. Identifying means, processes, or systems that will minimize the operating
costs of the company. (Cayanan, A. 2015)

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Activity 5 .
Fill in the blanks. Direction: Identify the following.Write your answer on the
space provided before each number.

1. The _______________________ is the highest policy making body in a

corporation.
2. The ______________________analyze and evaluate the effectiveness and cost of
marketing methods applied.
3. The ________________________ elect the Board of Directors (BOD).
4. The ______________________oversee the operations of a company and ensure
that the strategies as approved by the board are implemented as planned.
5. The _____________________provide assistance in payroll preparation, payment
of vendors, and collection of receivables.

Activity 6
Directions: Discuss briefly the roles of each position identified. Write your
answer on the space provided for each item.

1. Shareholders

2. Board of Directors

3. President (CEO)

4. VP for Marketing

5. VP for Production

6. VP for Administration

7. VP for Finance

Fact

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 thecompany that would
lead towards shareholders’ wealth maximization.Wealth Maximization is the
concept of increasing the value of a business in order to increase the value of the
shares held by its stockholders.

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Functions of a Financial Manager

The four functions of a VP for finance (CFO) are as follows:

1.Financing 2. – Investing 3. – Operating 4. - Dividend Policies
Financing decisions include making decisions on how to fund long term
investments (such as company expansions) and working capital which deals
with the day to day operations of the company (i.e., purchase of inventory,
payment of operating expenses, etc.).
The role of the VP for Finance of the Financial Manager is to determine the
appropriate capital structure of the company. Capital structure refers to how
much of your total assets is financed by debt and how much is financed by
equity.
Recall that Assets = Liabilities + Owner’s Equity. To be able to acquire assets,
our funds must have come somewhere. If it was bought using cash from our
pockets, it is financed by equity.On the other hand, if we used money from our
borrowings, the asset bought is financed by debt.

Activity 7

In the figure below, the total assets is financed by 60% debt and 40% equity.
Accordingly, the capital structure is 60% debt and 40% equity. Try to analyse.
Are there ideal mixture of debt and equity across corporations? Try to express
inner understanding as a manager. Explain your answer.

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Facts

Operating decisions deal with the daily operations of the company. The role of
the VP for finance is determining how to finance working capital accounts such
as accounts receivable and inventories. The company has a choice on whether to
finance working capital needs by long term or short term sources. Short Term
sources are those that will be payable in at most 12 months. Long term sources,
on the other hand, mature in longer periods.

Activity 1.8

Why does a Financial Manager need to choose which source of financing a

company should use? What do they need to consider in making this decision?

Facts

Dividend Policies. Recall that cash dividends are paid by corporations to

existing shareholders based on their shareholdings in the company as a return
on their investment. Some investors buy stocks because of the dividends they
expect to receive from the company. Non-declaration of dividends may disappoint
these investors. Hence, it is the role of a financial manager to determine when
the company should declare cash dividend

Before a company may be able to declare cash dividends, two conditions must
exist:
1. The company must have enough retained earnings (accumulated profits) to
support cash dividend declaration.
2. The company must have cash.

Activity 1.9

What do you think will be the effect of the decision of management in paying
dividends? Remember that dividends come from the company’s cash and
availability of unrestricted retained earnings.

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Facts

Investing is where to put your excess cash to make it more profitable. We expand
that definition by including cash held taken from funds as a result of financing
decisions. Investments may either be short term or long term. Short term
investment decisions are
needed when the company is in an excess cash position. To plan for this, the
Financial
Manager should be able to make use of Financial Planning tools such as
budgeting
and forecasting. Long term investments should be supported by a capital
budgeting analysis which is among the responsibilities of a finance manager.
Capital budgeting analysis is a tool to assess whether the investment will be
profitable in the
long run.

Activity 1.10
Why do you think that the company should choose which type of investment
it should invest that would provide a most optimal risk and return tradeoff.?

Activity 1.11
Message from the CFOs Reflect on the quotes .Take the Challenge cited and
mention how critical and dynamic working in the finance field is.
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 Huët (Unilever)
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 Morales,2013)
SM Corporation: ―Now, we don’t go out because we need funds. We go out
because it’s an opportunity.‖ – Jose T. Sio (Montealegre, 2015

References for Learners

1. https://int.search.myway.com/search/AJimage.jhtml?
2. https://int.search.myway.com/search/AJimage.jhtml?

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EPS Mathematics
FLORENTINO S. RAMOS, JR., Ph.D.
Reviewed by:
Writer
DIANA S. SIMON
Prepared by
Exercise 1.5 Exercise 2 Exercise 3 Exercise 4
1.Board of Director Answers Answers may vary. Answers
2.VP-Marketing may vary. may vary.
3.Shareholders
4.President/(CEO)
5. VP-Administration
Answer Key