Performance Standard: The Learners Are Able To Define Finance, Describe Who Are Responsible For

INSTRUCTIONAL DESIGN
Subject Area: Business Finance

Grade Level: ____12_______
Quarter: __Third__
Week: ___1_______
Guide to the Parent:
Learners may require your guidance in following the directions and answering the questions
in each part of the activity. Make sure that they will answer each part of the activities.
Guide to the Learner:

This plan is developed to guide you in your learning journey. Follow the steps in every
activity, answer all the assessment given. Please be guided with your class schedule even if you
are at home.
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.
DAY/Lesson/ Obejctives Materials to Acitvities Assessment

Number/ TOPIC be included in
the learning
1. The learners have
an appreciation of
Day 1-5 what the overall - Identification
Lesson 1 objective of Self- Learning What I can Do?
Introduction to management should module Analysis of the - Enrichment
Financial be. given problem.
Management 2. Describe the
different individuals
responsible for
financial management
within an
organization.
3. Define financial
institution, financial
instrument and
financial market
WEEKLY HOME LEARNING TASK
Grade__12_
Week: ___1___ Quarter __3__
Learning Area: __Business Finance_
Day and Time LearningCompetency Learning Task
 Explain the major  Define Finance
role of financial  Describe who are
management and responsible for
Week 1 the different financial
Day 1 to 5 individuals involved management within
 Distinguish a an organization
financial institution  Describe the role of
from financial financial institutions
instrument and and markets
financial market
Expected Learning Outcomes:
The learners will be able to:

1. Have an appreciation of what the overall objective of management should be.
2. Describe the different individuals responsible for financial management within
an organization.
3. Define financial institution, financial instrument and financial market.
What’s In?
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.
What’s New?
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.
What is It?
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.
Functions of financial
management
Choice of
Estimation of capital Determination of capital sources
requirements composition
This is dependent upon When the estimation has been  Additional issuance of
expected costs, profit and future made a decision on the capital shares of stock and/ or
programmes and policies of a structure follow so this involves bonds
business entity. Estimations short-term and long –term debt  Loans from banks or any
have to be made in an adequate equity analysis. This results to an willing financial institutions
manner which increases the acceptable proportion between  Investments from the public
earning capacity of the equity capital and additional in the form of bonds
enterprise funds to be raised from external
creditors and interested parties
The Corporate Organization Structure
SHAREHOLDERS
elects OWNERS
BOARD OF
DIRECTORS
appoints
PRESIDENT
(CEO) M
A
N
A
G
VP
VP FOR FOR VP FOR VP FOR E
MARKETIN FINANC PRODUCTIO ADMINISTRATI
G E N ON R
S
Figure 1: Illustration of the Corporate Organization Structure
From the diagram presented, it shows that each line is working for the interest of the person on the
line above them. Since managers of the company are making decisions for the interest of the board
of directors. Then the board of the directors does the same for the interest of the shareholders. The
goal of each individual in a corporate organization should have an objective of shareholders’ wealth
maximization.
Shareholders – elect the Board of Directors (BOD). Each share held is equal to one voting right.
The elected board of director’s responsibility is to carry out their objectives. Otherwise, they would
not have been elected in that position.
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.
Setting policies on investments, capital structure and dividend policies; appointing and removing
members of the top management including the president; approving company’s strategies, goals and
budgets are other responsibilities of the board of directors.
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; 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 such planning, organizing, staffing, directing and
controlling; representing the company in professional, social, and civic activities
What More?
Differences among Financial Instruments, Financial Markets and Financial Institutions

How transactions between suppliers and users of funds take place? How would they prove that
there was a transaction so that the demander will be able to repay the supplier on time and at the
right amount?
Financial Instruments – like stocks and bonds are recorded evidence of obligations on which
exchanges of resources are founded. It is a real or a virtual document representing a legal agreement
involving some sort –of monetary value. Transfer of funds from one party to another are made
through financial instruments. When a financial instrument is issued, it gives rise to a financial asset
on one hand and a financial liability or equity instrument on the other.
Financial Asset – any asset that is:
 Cash
 An equity instrument of another entity
 A contractual right to receive cash or another financial asset from another entity
 A contractual right to exchange instruments with another entity under conditions that
are potentially favourable. (IAS 32.11)
Ex. Notes Receivable, Loans Receivable, Investment in Stocks, Investment in
Bonds Financial Liability – is any liability that is a contractual obligation:
 To deliver cash or other financial instrument to another entity
 To exchange financial instruments with another entity under conditions that are
potentially unfavourable. (IAS 32)
Ex. Notes Payable, Loans Payable, Bonds Payable
Equity Instrument - is any contract that evidences a residual interest in the assets of an
entity after deducting all liabilities. (IAS 32)
Ex. Ordinary Share Capital, Preference Share Capital
When companies are in need of funding, they either sell debt securities (or bonds) or issue
equity instruments. The proceeds from the sale of the debt securities and issuance of bonds
will be used to finance the company’s plans. On the other hand, investors buy debt securities
of equity instruments in hope of receiving returns through interest, dividend income or
appreciation in the financial asset’s price.
Financial Markets – are the mechanisms used to trade the financial instruments. It is an
organized forums in which suppliers and users of various types of funds can make transactions
directly.
 How will you classify Financial Markets into comparative groups?

 Primary Market – financial market in which securities are initially issued; the
only The only market in which the issuer is directly involved in the transaction.
 Secondary Market- Financial market in which preowned securities (those that are not
new issues) are traded.
 Money Market – A financial relationship created between suppliers and users of short
– term funds.
 Capital Market – a market that enables suppliers and users of long –term funds to
make transactions.
Financial Institutions – are the ones that facilitate the transfer of resources among those
investors who are involved in buying and selling of financial instruments.
FINANCIAL INSTITUTIONS
MUTUAL FUNDS -are owned by

COMMERCIAL BANKS - works directly investment companies which enable small
with businesses. The majority of large banks investors to enjoy the benefits of investing
offer deposit accounts, lending and financial in a diversified portfolio of securities
advice to any business in different industries purchased on their behalf by professional
INSURANCE COMPANIES - Help PENSION FUNDS – Financial

individuals to transfer risk of loss. Services institutions that receive payments from
includes protection against financial loss due employees and invest the proceeds on
to death, disability, accidents, property their behalf.
damage
The figure above illustrates how the key financial institutions serve as intermediaries for suppliers
and users of funds.

Financing is determining the appropriate capital structure of the company and to raise funds from debt
and equity.

The different individuals involved in the financial management within an organization are the
Shareholders, Board of Directors, President (CEO).

A Financial Manager is part of a management team whose ultimate goal is to maximize shareholders
wealth. Determine the appropriate capital structure of the company.

Financial Instruments like stocks and bonds are recorded evidence of obligations on which exchanges of
resources are founded.

Financial Markets- are the mechanism used to trade the financial instruments.

Financial Institutions – are the ones that facilitate the transfer of resources among those investors who are
involved in buying and selling of financial instrument
What I Can Do?
1. A financial manager must choose between four alternative Assets: 1, 2, 3, and 4.

Each asset costs $35,000 and is expected to provide earnings over a three-year period as described
below.
Asset Year 1 Year 2 Year 3
1 $ 21,000 $ 15,000 $ 6,000
2 $ 9,000 $ 15,000 $ 21,000
3 $ 3,000 $ 20,000 $ 19,000
4 $ 6,000 $ 12,000 $ 12,000
Based on the profit maximization goal, the financial manager would choose _____.
A. Asset 1.
B. Asset 2.
C. Asset 3.
D. Asset 4.
2. A financial manager must choose between three alternative investments. Each asset is
expected to provide earnings over a three-year period as described below. Based on the wealth
maximization goal, the financial manager would
Asset Year 1 Year 2 Year 3
1 $ 21,000 $ 9,000 $ 15,000
2 $ 15,000 $ 15,000 $ 15,000
3 $ 9,000 $ 21,000 $ 15,000
$ 45,000 $ 45,000 $ 45,000
A. choose Asset 1.
B. choose Asset 2.
C. choose Asset 3.
D. be indifferent between Asset 1 and Asset 2.
Assessment
Fill in the blanks with the correct answer.

1. The ______ is created by a financial relationship between suppliers and users of short-
term funds.
2. Firms that require funds from external sources can obtain them from _____.
3. The major securities traded in the capital markets are ____.
4. The wealth of the owners of a corporation is represented by ________.
5. Wealth maximization as the goal of the firm implies enhancing the wealth of ______.
6. A ______is one financial intermediary handling individual savings. It receives
premium payments that are placed in loans or investments to accumulate funds to cover
future benefits.
7. A _____ is set up so that employees of corporations or governments can receive
income after retirement.
8. _______ is a type of financial intermediary that pools savings of individuals and makes
them available to business and government users. Funds are obtained through the sale of
shares.
9. The mechanism used to trade the financial instruments______.
10. Long –term debt instruments used by both government and business are known as__.
Enrichment
Explain the following questions in not less than 5 sentences.

1. How would you relate the role of financial managers, role of financial markets and role
of investors?
2. Why does shareholder wealth maximization should be the overriding objective of
management?
3. What other positions can you think of that are related to financial management?
1. Cayanan, A. & Borja (forthcoming). Business Finance. Quezon City. Rex Bookstore.
2. Gitman, L. J. & Zutter C. J. (2012), Principles of Managerial Finance (13th Ed), USA: Prentice-
Hall
3. De Guzman, Angeles A., Business Finance for Senior High School 2019.
Internet Sources
https://www.managementstudyguide.com/financial-management.htm
https://www.investopedia.com/ask/answers/what-is-finance/

Grade Level: ____12_______
Quarter: __Third__
Week: ___2_____

are at home.
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 describe the primary activities of the
financial manager and how they helped in achieving the goal of the organization.
Most Essential Learning Competencies: The learner explain the flow of funds within an
organization through and from the enterprise and the role of the financial manager.
the learning
1. Identify the
primary activities of
Day 1-5 the financial manager What I can Do? - Concept Map
Lesson 1 2. Explain how the Self- Learning
Introduction to financial manager module Problem Solving - Enrichment
Financial helps in achieving the
Management goal of the
organization.
3. Discuss the flow of
funds within an
organization through
and from the
enterprise.

Grade__12_
Week: ___2__ Quarter __3__
Day and Time Learning Competency Learning Task

 Explain the flow of  Describe the primary
funds within an activities of the
organization through financial manager
Week 2 and from the
Day 1 to 5 enterprise and the
role of the financial
manager

1. Identify the primary activities of the financial manager
2. Explain how the financial manager helps in achieving the goal of the organization.
3. Discuss the flow of funds within an organization through and from the enterprise.
What’s In?
Flow of funds within an organization. All business transactions include the exchange of value
between two or more parties which are measureable in terms of money particularly cash if not on
credit or on account. Companies will not be able to attain growth by offering on a cash basis only.
Role of the financial Manager. One of the most important and complex activities of a firm is
handling the financial activities of a firm. The one who takes care of these activities is a financial
manager who also performs all the requisite monetary undertakings.
What’s New?
Financial Manager – a qualified person who does have a lot of experiences in handling all
the important financial functions of an organization.
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.)
Capital structure- refers to how much of your total assets is financed by debt and how much
is financed by equity.
Capital budgeting analysis – is a tool to assess whether the investment will be profitable in the
long run
What is It?
Functions of a Financial Manager
1. Financing – to determine the appropriate capital structure of the company and to raise funds
from debt and 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.
2. Investing - is putting money to work to start or expand a project - or to purchase an asset or
interest - where those funds are then put to work, with the goal to income and increased value over
time. The term "investment" can refer to any mechanism used for generating future income. In the
financial sense, this includes the purchase of bonds, stocks or real estate property among several
others.
 Short term investments – plan for excess in cash using financial planning tools
such as budgeting and forecasting
 Choose which type of investment should it invest in that would secure the best
profits
 Long term investments – should be supported by a capital budgeting analysis
which is among the responsibilities of a finance manager.
3. Operating decisions – deal with the daily operations of the company. The financial manager
determines 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.
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?
 Short term sources- are those that will be payable in at most 12 months, such as
loans with banks and suppliers’ credit. Generally, interest rate on bank loans are
lower as compared to that of long term loans. Pose a trade –off between profitability
and liquidity risk.
 Suppliers’ credit- amounts owed to suppliers for the inventories they delivered
or services they provided, and is free of interest charges. The obligations with
them have to be paid on time to maintain good supplier relationship.
 Long term sources – mature in longer periods. Since this will be paid much later; the
lenders expect more risk and place a higher interest rate, which makes the cost of long
term sources higher than short term sources. However, since long terms sources have
a longer time to mature, it gives the company more time to accumulate cash to pay off
the obligations in the future.
 Liquidity risk - risk that the company will fail to pay its short term obligations and
risk that you will not be able to sell investments in financial assets immediately.
4. Dividend Policies - the investors’ share in profits of the company is distributed in the form of
dividends which will directly impact the operation of the capital market. If dividends are not
declared, the market price of the shares of stock in the stock market will be lower while dividends
declaration will tend to make the market price a little higher. However, some companies try to
retain accumulated profits for expansion projects which make the shares of stock more attractive to
investors. Hence, it is the role of financial manager to determine when the company should
declare cash dividends.
What More?
What are the two conditions that must exist before a company can declare cash
dividends?
1. The company must have enough retained earnings (accumulated profits) to support
cash dividend declaration.
2. The company must have cash.
What do you think will affect the decision of management in paying
dividends? Dividends come from the company’s cash and availability of
unrestricted retained earnings.
 Availability of financial viable long-term investment
 Access to long term sources of funds
 Management’s target Capital structure
Small Enterprises which are undergoing expansion may have limited access to long term
financing (both long term debt and equity) which results to reinventing their earnings into their
business rather than paying them out as dividends
A company which has access to long term sources of funds may able to declare
dividends even if they are faced with investment opportunities. However, these
investment opportunities are generally financed by both debt and equity.
 The management usually appropriates a portion of retained earnings for investment
undertakings and this may limit the amount of retained earnings available for
dividend declaration.
 Creditors are not willing to finance entirely the cost of a company’s long term
Investment.
Example of companies PLDT, Globe Telecom, and Petron.
PLDT and Globe are two of the Philippine listed companies which have generously
distributed cash dividends for the last five years (information as of 2014).
Why do some companies end up with a residual dividend policy?

Companies end up in residual dividend policy when they faced investment opportunities,
internally generated funds that will be used first to finance these investments and dividends can only
be declared if there are excess funds.
FLOW OF FUNDS WITHIN AN ORGANIZATION
The most important borrower-spenders are businesses and the government, but households and
foreigners also borrow to finance their purchases of cars, furniture, and houses. The arrows show
that funds flow from lender-savers to borrower-spenders via two routes. In direct finance (the route
at the bottom of the Figure, borrowers borrow funds directly from lenders in financial markets by
selling them securities (also called financial instruments), which are claims on the borrower’s future
income or assets.
Securities are assets for the person who buys them but liabilities (IOUs or debts) for the individual
or firm that sells (issues) them. For example, if General Motors needs to borrow funds to pay for a
new factory to manufacture electric cars, it might borrow the funds from savers by selling them
bonds, debt securities that promise to make payments periodically for a specified period of time.
Why is this channelling of funds from savers to spenders so important to the economy?
The answer is that the people who save are frequently not the same people who have profitable
investment opportunities available to them, the entrepreneurs. That’s why financial markets have
such an important function in the economy. They allow funds to move from people who lack
productive investment opportunities to people who have such opportunities.
Financial markets are critical for producing an efficient allocation of capital, which contributes to
higher production and efficiency for the overall economy. Well-functioning financial markets also
directly improve the well-being of consumers by allowing them to time their purchases better. They
provide funds to young people to buy what they need and can eventually afford without forcing them
to wait until they have saved up the entire purchase price. Financial markets that are operating
efficiently improve the economic welfare of everyone in the society.
What I Have Learned?
The important roles of a financial manager are financing, investing, operating and determining when
the company should declare cash dividends. Moreover, he/she is a qualified person who does have a
lot of experiences in handling all the important financial functions in an organization in order to
ensure that the funds are utilized in the most efficient manner. The results of his her actions will
directly affect the profitability, growth and goodwill of the firm.
For a company to survive in the long run, there is a need to generate positive cash flows through
intensified collection of accounts or by ensuring that the company’s long term cash inflows
exceed its long term cash outflows.
What I Can Do?
Example:
1. Company A which is in the business of selling Halo-halo in the Dapitan area (or any other area)
for
5 years. Company A is consistently earning profits and has a positive cash flow. When asked how
Company A sees itself after 5 more years, Company A answered that it would continue to sell Halo-
halo in Dapitan (or any other area).
On the other hand, Company B sells Buko Juice in Katipunan area (or any other area different
from Company A’s area) for 5 years. Company B is consistently earning profits and has a positive
cash flow. When asked how Company B sees itself after 5 more years, Company B answered that it
has generated enough cash to expand its business to Cubao area (or any other area) to take advantage
of the growing demand of Buko Juice in Cubao.
Between Company A and Company B, which would be a better investment?
Assessment
1. Using your creativity, draw a concept map or paradigm that illustrates the concepts of
Functions of a Financial Manager.
Enrichment
Explain the following:

1. How does the financial manager help in achieving the goal of the organization?
2. What are the important financial decisions?
3. Why does securities is an asset to the buyer and a liability for the seller?
Gitman, L. J. & Zutter C. J. (2012), Principles of Managerial Finance (13th Ed), USA: Prentice-
2. Hall
Internet Sources https://www.managementstudyguide.com/financial-
management.htm https://www.investopedia.com/ask/answers/what-is-
finance/ https://www.investopedia.com/terms/i/investment.asp

Grade Level: ____12_______
Quarter: __Third__
Week: __3______

are at home.
Content Standard: The learners demonstrate an understanding of the financial planning
process, including budget preparation, cash management, and working capital management.
Performance Standard: The learners are able to illustrate the financial planning process, prepare
budgets such as projected collection, sales budget, production budget, income projected stamen of
comprehensive income, projected of financial position, and projected cash flow statement.
Most Essential Learning Competencies: The learner identify the steps in the financial planning
process, illustrate the formula and format for the preparation of budgets and projected financial statement
the learning
1. Enumerate and Self- Learning - Problem - Planning for
apply the steps in Module Solving. establishing
planning. a business
Day 1-5 2. Discuss the tools - Enrichment
Lesson 3 used in preparation
Financial projected financial
Planning Tools statement
and Concepts 3. Know and apply
the tools used in
budgeting.
WEEKLY HOME
LEARNING TASK
Grade__12
_
Week: ___3_ Quarter __3__
Learning Area: __Business
Finance_

 Identify the steps in  Illustrate the
the financial planning planning process
process  Prepare budgets
Week 3  Illustrate the formula such as projected
Day 1 to 5 and format for the collection, sales
preparation of budget, production
budgets and budget, income
projected financial projected statement
statement of comprehensive
income, projected of
financial position,
and projected cash
flow statement

1. Enumerate and apply the steps in planning.
2. Discuss the tools used in preparation projected financial statement
3. Know and apply the tools used in budgeting.
Each individual should have good financial planning. Financial planning should start at an early age
in life; ideally when a person starts earning. Every individual has varied needs which broadly depend
on his age, income, expenses and family responsibilities. Young earning individual has high risk
taking ability compared to an individual with higher age; as he has more number of earning years in
hand and less responsibilities. Individuals in the later life-stage have less risk taking ability. Thus life
stage based planning has gained importance while deciding financial plans for individuals.
Planning is a primary management function. It involves setting the direction and goals of an
organization, establishing a system that will define the activities of the organization, and formulating
a plan to ensure that the system works toward achieving the goals of the organization.
Management planning is about setting the goals of the organization and identifying ways on how
to achieve them (Borja&Cayanan, 2015).
Financial planning- is the process through which an individual moves towards meeting personal
and financial goals through the development and implementation of a comprehensive financial plan.
In general, financial planning is series of steps taken by an individual for planning his future. It
involves planning and directing individual’s resources to grow and accumulate assets so that
financial goals of an individual can be achieved within pre decided time period. Financial planning is
a complex process which needs knowledge and time.
Strategic Planning- is the process of documenting and establishing a direction of your small
business—by assessing both where you are and where you’re going. The strategic plan gives you a
place to record your mission, vision, and values, as well as your long-term goals and the action
plans you’ll use to reach them.
Tactical planning - occurs after a business, team, or individual has created a strategic plan
that outlines general goals and objectives
Long-term financial plans

 These are a set of goals that lay out the overall direction of the company.
 Also included would be termination of existing projects, product lines, or lines of
business; repayment or retirement of outstanding debts; and any planned acquisitions
(Gitman & Zutter, 2012).
Short-term financial plans
 Specify short-term financial actions and the anticipated impact of those actions. Part of short
term financial plans include setting the sales forecast and other forms of operating and
financial data.
Steps in Financial Planning Process
1. Set goals or objectives.
For corporations, long term and short term objectives are usually identified. These can be
seen in the company’s vision and mission statements.
Vision statement describes what the company wants to achieve and where it wants to go
in the future.
Examples are:
“To make people Happy “
--- Walt Disney Corporation
“A personal computer in every home running Microsoft software.”
---- Microsoft
Mission Statement describes a company’s reason for its existence. It answers the question
why the company exists.
Examples are:
“Apple is committed to bringing the best personal computing experience to
students, educators, creative professionals, and consumers around the world through
its innovative hardware, software and Internet offerings.
---- Apple Computer
“Facebook’s mission is to give people the power to share and make the world more
open and connected”
----Facebook
2. Identify resources (Borja & Cayanan, 2015). Determine your current financial situation
Resources with
Include regard to income, savings, living expenses, and debts. Preparing a list of
s current asset
produc debt balances and amounts spent for various items gives you a foundation for
tion financial planning activities.
capacit
y,
human
resourc
es who
will
man
the
operati
ons
and
financi
al
and
3. Identify goal-related tasks

You should periodically analyze your financial values and goals. This involves identifying
how you feel about money and why you feel that way. The purpose of this analysis is to
differentiate your needs from your wants.
Specific financial goals are vital to financial planning.
4. Establish responsibility centers for accountability and timeline.
These courses of action determine the responsibilities that will be assigned to specific
personnel and requires setting timelines for the implementation of each course of action.
5. Establish the evaluation system for monitoring and controlling
The management must establish a mechanism which will allow plans to be monitored.
This
can be done through quantified plans such as budgets and projected financial statements. The
management will then compare the actual results to the planned budgets and projected financial
statements. Any deviations from the budgets should be investigated.
6. Determine contingency plans
In planning, contingencies must be considered as well. Budgets and projected financial
statements are anchored on assumptions. If these assumptions do not become realities,
management must have alternative plans to minimize the adverse effects on the company
(Borja & Cayanan, 2015)
Preparing Budgets
A plan is useless if it is not quantified. A quantified plan is represented through budgets and
projected or pro-forma financial statements that are useful for controlling. They serve as the bases
for monitoring actual performance.
Most organizations prepare budgets as bases in evaluating the results of their operations by
comparing the actual figures over the previous years. The process of preparing a budget should be
highly well-organized and should follow set schedule, so that the completed budget is ready for use
by the beginning of the next calendar year.
Budgeting and Financial Statement Projection
1. Sales Budget
 The most important account in the financial statement in making a forecast is sales since
most of the expenses are correlated with sales.
 Given the importance of the sales forecast, the financial manager must be able to support this
figure with reasonable assumptions. The following external and internal factors should be
considered in forecasting sales:
External Internal
• Gross Domestic Product (GDP) • production capacity

growth rate • man power requirements
• Inflation • management style of managers
• Interest Rate • reputation and network of the
• Foreign Exchange Rate controlling stockholders
• Income Tax Rates • financial resources of the
• Developments in the industry company
• Competition
• Economic Crisis
• Regulatory Environment
• Political Crisis
Table 1: Factors that Influence

Sales External and Internal factors influencing sale:
 Macroeconomic Variables (external)
Macroeconomic variables such as the GDP rate, inflation rate, and interest rates, among
others play an important role in forecasting sales because it tells us how much the consumers
are willing to spend. A low GDP rate coupled by a high inflation rate means that consumers
are spending less on their purchases of goods and services. This means that we should not
forecast high sales of the periods of low GDP.
 Developments in the Industry (external)
Products and services which have more developments in its industry would likely have a
higher sales forecast than a product or service in slow moving industry. Consumer trends are
always changing, thus the industry should be competitive to be able to appeal to more
customers and stay in the market.
 Competition (external)
Suppose you are selling bread and you know that each person in your community eats an
average of one loaf of bread a day. The population of your community is 500 people. If you are
the only person selling bread in your town, then your sales forecast is 500 units of bread.
However, you also have to take account your competition. What if there are 4 other sellers of
bread? You will need to have to divide the sales between the 5 of you. Does this mean your
new forecast should be 100 units of bread? Not necessary. You should also know the
preference of your consumers. If more of them would prefer to buy more bread from you,
then you should increase your sales forecast.
 Production Capacity and man power (internal)
Suppose that you have already evaluated the macroeconomic factors and identified that there is a
very strong market for your product and consumers are very likely to buy from you. You
forecasted that you will be able to sell 1,000 units of your product. However, you only have 20
employees who are able to produce 20 units each. Your capacity cannot cover your
expected demand hence, you are limited by it. To be able to increase capacity, you should be
able to expand your operations.
What are the implications if sales budget is not correct?
If understated, there can be lost opportunities in the form of forgone sales. If it is too
optimistic, the management may decide to unnecessarily increase capacity or hire more
employees and end up with inventories.
2. Production Budget
 Provides information regarding the number of units that should be produced over a given
accounting period based on expected sales and targeted level of ending inventories
 It is computed as follows:

Required production in units = Expected Sales + Target Ending Inventories - Beginning Inventories
Note: Ending inventory of current period is beginning inventory of next period.
3. Budgeting Cash
 Operations budget refers to the variable and fixed costs needed to run the operations of the
company but are not directly attributable to the generation of sales.
Examples:
Rent payments, Wages and Salaries of selling and administrative
personnel Administrative Costs, Travel and representation expenses
Professional fees, Interest Payments, Tax Payments
4. Cash Budget
 The cash budget forecasts the timing of these cash outflows and matches them with cash
inflows from sales and other receipts.
 It is also a control tool to monitor the way the company handles cash.
General form of Cash Budget:

CASH BUDGET
Jan Feb …….. Nov Dec Total
Cash Receipts xxx xxx ……. xxx xxx xxx
Less: Cash Disbursements xxx xxx …… xxx xxx xxx
Net Cash Flow xxx xxx …… xxx xxx xxx
Add: Beginning Cash xxx xxx ….. xxx xxx xxx
Ending Cash xxx xxxx …… xxx xxx xxx
Required Ending Cash Balance xxx xxx ….. xxx xxx xxx
Required total financing (xxx) …. (xxx)
Excess cash balance xxx ….. xxx xxx
STEPS IN FORMULATING A CASH BUDGET:

A. Form the sales forecast, identify how much would be collected in the cash budget
period. Sales may be made in cash or for credit. Cash sales are translated to cash at the point
of sale while credit sales are collected depending on the credit period. Credit periods may
range from 10 days to more than a month depending on the strategy of the company.
B. Identify other receipts
Examples:
Interest received, Return on principal investments
Proceeds from sale of non-operating assets, Issuance of capital stock,
Proceeds from borrowings
Note: add these receipts to the collections from sales to get the total receipts.
C. From the Production Budget, identify how much of the purchases made will be
paid by the company on the cash budget period. Like sales, purchases may be
made in cash or on credit depending on the supplier’s credit terms.
D. From the operations budget, identify which expenses will be paid in cash during the
cash budget period.
E. Identify all other cash payments to be made.


Fixed-asset purchases in cash

Cash dividend payments ‣

Principal Payments

Repurchase of common stock

Purchase of stock/bond investments
It is important to recognize that depreciation and other noncash charges are NOT included in
the cash budget.
F. Match the receipts and disbursements on the periods they become collectible and
payable, respectively.
G. Set a minimum reqired cash balance. This balance is maintained in case
contingenicies arise.
H. If the net cash flow is above the minimum cash balance, the company is in excess cash
and may consider putting it in short term investments. If it is below, the company should
make a short term borrowing during that period.
5. Projected Finanacial Statements

Is a tool of the company to set an overall goal of what the company’s performance
and position will be for and as of the end of the year. It sets targets to control and
monitor the acitvities of the comapany.
The following reports may be forecasted:

Projected Income Statement

Projected Statement of Financial Position

Projected Statement of Cash Flows
GIVEN DATA:
1. [A] Company forecasts sales in units from January to May as follows:
Jan Feb Mar Apr May

Units 2000 2200 2500 2800 3000
 Moreover, [A] Company would like to maintain 100 units in its ending inventory at the end of
each month.
 Beginning inventory at the start of January amounts to 50 units
PROBLEM 1 :
Production Budget
 How many units should [A] Company produce in order to fulfill the expected sales of
the company?
Answer:
MONTH
Jan Feb Mar Apr May total
Projected Sales 2,000 2,200 2,500 2,800 3,000 12,500
Target level of ending 100 100 100 100 100 100
inventories
Total 2,100 2,300 2,600 2,900 3,100 12,600
Less: beginning inventories 50 100 100 100 100 50
Required production 2,050 2,200 2,500 2,800 3,000 12,500
Formulating Cash Budget

A. From the sales forecast
Continuing from previous example, assume selling price is PHP 1000/unit. Sales for each
a. Month are expected to be collected as follows:
b. Month of sales: 20%
c. A month after sales: 50%
d. 2 months after sales 30%
How much is total receipts from sales?
Jan Feb Mar Apr May Total

Units 2,000 2,200 2,500 2,800 3,000 12,500
Sales in Pesos 200,000 220,000 250,000 280,000 300,000 1,250,000
Collection from current months 40,000 44,000 50,000 56,000 60,000 250,000
sales
Collection from previous months 100,000 110,000 125,000 140,000 150,000
sales
Collections from two months prior 60,000 66,000 75,000 84,000
sales
Total Collections from Sales 40,000 144,000 220,000 247,000 275,000 926,000
B. From the operations budget
The following expense items will be paid based on the following periods:

Rent payments: Rent of PHP5,000 will be paid each month.

Wages and salaries: Fixed salaries for the year are PHP96,000, or PHP8,000 per month.
Wages are estimated as 10% of monthly sales.

Tax payments: Taxes of PHP25,000 must be paid in April.
C. From identifying all other cash to be made

Fixed-asset outlays: New machinery costing PHP130,000 will be purchased and paid for in
April.

Interest payments: An interest payment of PHP10,000 is due in May.

Cash dividend payments: Cash dividends of PHP20,000 will be paid in January.

Principal payments (loans): A PHP20,000 principal payment is due in February.
Jan Feb Mar Apr May Total

Total Payments for Purchases 102,500 110,000 125,000 140,000
477,500
Rent Payments 5,000 5,000 5,000 5,000 5,000 25,000
Wages 20,000 22,000 25,000 28,000 30,000125,000
Salaries 8,000 8,000 8,000 8,000 8,000 40,000
Tax Payment 25,000 25,000
Fixed Asset Outlay 130,000 130,000
Interest Payment 10,000 10,000
Cash Dividend 20,000 20,000
Principal Payment 20,000 20,000
Total Cash Disbursements 53,000 157,500 148,000 321,000 193,000 872,500
PROBLEM 2:
[A]Company has a beginning cash balance of PHP80,000 and would like to maintain an ending
cash balance of PHP100,000 per month. Prepare [A] Company’s Cash Budget for January to May.
Jan Feb Mar Apr May TOTAL
Cash Receipts 40,000 144,000 220,000 247,000 275,000 926,000
Less: Cash Disbursements (53,000) (157,000) (148,000) (321,000) (193,000) (872,000)
Net Cash Flow (13,000) (13,500) 72,000 (74,000) 82,000 53,500
Add: Beginning Cash 80,000 67,000 53,500 125,000 51,500 80,000
Ending Cash Balance 67,000 53,500 125,500 51,500 133,500 133,500
Less: Minimum Cash Balance (100,000) (100,000) (100,000) (100,000) (100,000) (100,000)
Cumulative excess cash balance (33,000) (46,500) 25,500 (48,500) 33,500 33,500
(Cumulative required financing)
Remember:
If the ending cash balance after payment of all required disbursements is less than the
required ending balance, the company needs to borrow additional cash from short term borrowings
to meet its required ending balance. Should the ending cash balance exceed the company’s
minimum cash requirement the next period, the company may be able to repay the loan plus
accrued interest.
Should the Company have excess cash above its required maintaining cash balance, the
company may invest this cash on short term investments so that it will have an opportunity to earn
additional profits. If the company’s cash balance would then fall below its minimum cash
requirement, the company may withdraw the investment to be able to meet the required cash
balance.
STEPS ON FINANCIAL STATEMENT PROJECTION

A. Forecast Sales – sales is important in forecasting financial statements. They are related
to Financial Statement Analysis.
B. Forecast Cost of Sales and Operating Expenses
In determining the cost of sales and operating expenses, variable and fixed costs should be
identified.
Cost of sales are direct costs associated in the generation of sales. One way of projecting cost of
sales is using the cost of sales ratio. Companies would generally have a consistent historical cost of
sales ratio. The company may use this as a starting point.
Operation costs are a mix of variable and fixed costs. Variable costs usually vary with sales. To
project these costs, the percentage of sales method may be used. On the other hand, fixed costs
remain the same no matter how the volume of sales has changed.
The Company wants to maintain the same gross profit per year as 2014.
Variable operating expense is 5% of sales.
Depreciation expense is 5% of the gross beginning balance of property, plant and

equipment. As of December 31, 2014, the gross balance of PPE is PHP5,200,000. For
January 2015, PHP1,000,000 new PPE will be acquired. It is the policy of the company
that PPE acquired in the first half of the year will be depreciated for one full year.
Compute for Cost of Sales, Variable Operating Expense, and Depreciation Expense.
4,305,000 ÷ 5,250,000) x
Cost of sales percentage in 2014 = 100%
Cost of sales percentage in 2014 = 82%
Projected cost of sales in 2015 = 82% x 5,775,000
Projected cost of sales in 2015 = 4,735,500
Variable (5% x Sales of 5,775,000) 288,750
Fixed (depreciation expense)
(5,200,000 + 1,000,000) x 5% 310,000
Total operating expenses 598,750
Compute for net PPE
PPE net, beginning 2,440,000
Additions 1,000,000
Less: Depreciation (310,000)
PPE net, end 3,130,000
C. Forecast Net Income and Retained Earnings.

To forecast net income, interest expense and income tax expense should also be considered using
the relevant interest and tax rates. Retained earnings is arrived at by adding projected net income to
beginning retained earnings then deducting dividends to be declared during the year. Note: Return
to this when all income statement items are complete.
Income tax rate is 30% of the income before taxes. 75% of the income tax expense will
be paid in 2015 while the balance will be paid in 2016.
D. Determine balance sheet items that will vary with sales or whose balances will be highly
correlated to sales.
Balance sheet items that may vary with sales or will be highly correlated with sales are
cash, accounts receivable, inventories, accounts payable, and accrues expenses payable.
Compute as follows:
The following financial statement accounts are expected to vary with sales based on the
2014 financial statements:
A.Cash
B.Trade accounts receivable
C.Inventories
D. Other current assets
E.Trade accounts payable
Cas
h
= (1,060,000 ÷ 5,200,000) x
Cash as a percentage of sales in 2014 100%
Cash as a percentage of sales in 2014 = 20.19%
Projected cash in 2015 = 20.19 % x 5,775,000
Projected cash in 2015 = 1,165,973
Accounts
receivable
= (2,300,500 ÷ 5,200,000) x
Accounts receivable as a % of sales in 2014 100%
Accounts receivable as a % of sales in 2014 = 43.82%
Projected accounts receivable in 2015 = 43.82% x 5,775,000
Projected accounts receivable in 2015 = 2,530,605
Inventories
= (4,850,000 ÷ 5,200,000) x
Inventories as a % of sales in 2014 100%
Inventories as a % of sales in 2014 = 92.38%
Projected inventories in 2015 = 92.38% x 5,775,000
Projected inventories in 2015 = 5,334,945
Other current assets
Other current assets as a % of sales in 2014 = (1,050,000 ÷ 5,200,000) x 100%
Other current assets as a % of sales in 2014 = 20%
Projected other current assets in 2015 = 20% x 5,775,000
Projected other current assets in 2015 = 1,155,000
Accounts payable
= (5,050,000.00 ÷ 5,200,000) x
Accounts payable as a % of sales in 2014 100%
Accounts payable as a % of sales in 2014 = 96.19%
Projected accounts payable in 2015 = 96.19% x 5,775,000
Projected accounts payable in 2015 = 5,554,973
E. Determine payment schedule for loans.
Compute for interest expense:

As of December 31, 2014, there are two long-term loans. Both have an annual interest rate of
8%.
A. The first loan will mature on June 30, 2015 and the remaining principal balance to be paid
on June 30, 2015 is PHP 1, 250,000.
B. The second loan which was incurred on December 31, 2014 is paid at the rate
of PHP500, 000 principal balance every June 30 and December 31.
New loans of PHP3, 500,000 will be incurred on December 31, 2015 payable at the rate
of PHP500, 000 every June 30 and December 31. Annual interest rate is expected at 8%.
First Loan
Interest from January 1 to June 30, 2015
1,250,000 x 8% x (6 mos ÷ 12 mos) 50,000
Second Loan
Interest from January 1 to June 30, 2015
(1,000,000 + 2,000,000) x 8% x (6 mos ÷ 12 mos) 120,000
Interest from July 1 to December 31, 2015 100,000

(500,000 + 2,000,000) x 8% x (6 mos ÷ 12 mos)
Total interest expense for 2015 270,000
F. Check for other information
Cash dividends of PHP300,000 will be paid for 2015.
Other non-current assets and other current liabilities will remain unchanged.
Compute for retained earnings

Retained earnings, beginning 2,122,069
Add: Net Income 119,525
Less: Dividends (300,000)
Retained earnings, end 1,941,594
G. Determine external funds needed (EFN).
H. Determine how external funds needed may be financed.
External Funds Needed is a plug figure to make projected assets equal projected liabilities
and shareholders’ equity.
EFN = change in total assets – (change in total liabilities + total change in
stockholders’ equity) or EFN = Squeeze figure to balance assets to
Liabilities and equity
Financial Planning is a process of setting the objectives, policies, procedures, programmes and
budgets relative to the financial activities and transactions of a frim. Financial forecasts form the
basis for financial planning it is based on past performance of the firm which may not necessarily
be repeated in the future.
The process of preparing a budget should be highly well-organized and should follow a set
schedule, so that the completed budget is ready for use by the beginning of the next calendar year.
The projected financial statements are representation of the financial picture of a firm through
summarized current trends and expectations as of a future date.
1. Assume that you are planning to establish a start-up business. Provide the following details
regarding your company.
a. Company Name
b. Type of business
c. Vision
d. Mission
e. What will be your first project? Provide a description
f. Goal/s of the project
g. Objective/s of the project
Answer briefly the following questions:

1. Discuss the importance of a Cash Budget and how it is formulated.
2. In planning, the goal of maximizing shareholders’ wealth must always be put in
mind. What are the criteria to consider by the Manager for effective planning?
3. Enumerate the steps in Financial Statement Projection.
Enrichment
1. What is the difference between long term and short term goals?
2. What should the management do if the actual performance of the company fell short of the plans
as early as in the first quarter?
2. Hall
Internet Sources https://www.managementstudyguide.com/financial-
management.htm https://www.investopedia.com/ask/answers/what-is-finance/
https://www.investopedia.com/terms/i/investment.asp
https://sba.thehartford.com/business-management/what-is-strategic-planning/

Grade Level: ____12_______
Quarter: __Third__
Week: ___4_____

are at home.
Content Standard: The learners demonstrate an understanding of the financial planning
process, including budget preparation, cash management, and working capital management.
Performance Standard: The learners are able to describe concepts and tools in working
capital management.
Most Essential Learning Competencies: The learner explain tools in managing cash, receivables,
and inventory.

the learning
1. Describe the Self- Learning Problem Solving - Identification
Day 1-5 concepts in working module - Problem
Lesson 3 capital management Solving
Financial 2. Discuss how to
Planning Tools manage cash,
and Concepts accounts receivables
and inventories.

Grade__12_
Week: ___4_ Quarter __3__

 Explain tools in  Describe concepts
managing cash, and tools in working
receivables, and capital
Week 4 inventory manangament
Day 1 to 5

1. Describe the concepts in working capital management
2. Discuss how to manage cash, accounts receivables and inventories.
Cash is the lifeline of every firm. All business operations require cash to be paid out and cash
flows in as a consequence of sale of goods and services provided by the firm. Cash is one of the
components or elements of the current assets of a frim.
Managing inventory is like a juggling act where insufficient stocks will result in lost sales and delays
for customers whereas excessive stocks will result in large amounts of funds that get blocked
Cash Management includes the processes of collection and disbursement of cash. These
processes must be managed well so as to benefit the firm in its ability to generate higher earnings.
Cash Receipts include all of firm’s inflows of cash in a given financial period. The most common
of cash receipts are cash sales, collections of accounts receivables and other cash receipts
Receivables refer to those payments which are not yet received from customer after the goods and
services have been provided.
Inventory refers to the materials available in any organization which have been bought from
outside, manufactured in house.
What is it?
Techniques in Cash Management

1. Cash Planning and Budgeting
The firm forecasts all future cash flows, i.e. inflows and outflows with value and timing as they
can on the basis of their experience. It depends on the knowledge of current market conditions
including the demand for its product
2. Optimum Cash Balance
A frim tries to keep bare minimum cash balance to meet its immediate needs. However, a firm has
to decide as to what is the optimum cash it must retain in different periods. This is computed by
examining the overall money market scenario and the risk-return trade –off.
3. Arranging Cash in Periods of Deficiency
During the periods of low cash inflows and higher cash outflows, the firm must arrange to
obtain cash to meet the requirements. The most commonly adopted method is to get cash by sale
of investment securities. A firm may also raise fresh shorter borrowings, if required.
4. Investing Surplus Cash
Idle cash does not provide any earnings, surplus cash is invested to obtain some income. The
investment is a continuous process and a variety of operations are chosen by a frim depending upon
the amount of cash, the period for which it is required to be invested and the interest rates and the
like.
5. Managing Cash Flows

Since cash is vital for the operations, a firm attempts to accelerate cash inflows and decelerate cash
outflows.
Receivables Management
The accounts receivables management is essential for firms to sustain and develop their business.
The increased sales would also bring increased profits. Higher volumes of production due to
increased sales would also lead to economies of scale i.e. when production quantities are higher, it
becomes cheaper to produce due to reduced overheads cost per unit of production and better batch
quantities.
Accounts Receivable
• Accounts receivables spring out of the need to sell merchandise.
• Credit management strategically defines the quality of account receivables collection.
• The collectability of accounts receivables depends largely on the quality of customers. The quality of
customers depends on the standards or credit policies set up and used by an organization. Credit
policies are an integral part of the credit evaluation and there are 5C’s used in credit evaluation.
These are:
 Character –the willingness of the borrower to repay the loan
 Capacity – a customer’s ability to generate cash flows
 Collateral – security pledged for payment of the loan
 Capital – a customer’s financial resources
 Condition – current economic or business conditions
• Proper management of accounts receivable entails having a good billing and collection system.
- A good system should lead to the sending of statements of account to customers on time.
• Aging of receivables is also a control measure to determine the amount of receivables that are still
outstanding and past due.
INVENTORY MANAGEMENT
 Inventory management involves the formulation and administration of plans and policies
to efficiently and satisfactorily meet production and merchandising requirements and minimize
costs relative to inventories.
 Effective inventory management becomes critical when the nature of the products are either
perishable (e.g. fruits, vegetables), fragile (e.g. glasses), or toxic (e.g. bleaching agent).
• Proper inventory management involves the determination of reasonable levels of inventories
considering the size and nature of business.
 Maintaining too much inventories has costs such as carrying or holding costs,
possible obsolescence or spoilage.
 On the other hand, too low inventory can result to stockout, and eventually lost sales.
Inventory in a Manufacturing Company
• In a manufacturing company, there are three types of inventory:
 Raw materials – these are purchased materials not yet put into production.
 Work in process – these are goods and labor put into production but not yet finished.
 Finished goods – these are goods put into production and finished. These are ready to be
sold.
Illustrative Example:
Source: Gitman, L. (1976). Principles of managerial finance. New York: Harper & Row.
B. Bugay Industries, a defense contractor, is developing a cash budget for October, November, and
December. Jungaya’s sales in August and September were PHP100, 000 and PHP200, 000
respectively. Sales of PHP400, 000, PHP300, 000, and PHP200, 000 have been forecast for
October, November, and December respectively.
Historically, 20% of the firm’s sales have been for cash, 50% have generated accounts receivable
collected after 1 month, and the remaining 30% have generated accounts receivable collected after
2 months. In December, the firm will receive a PHP30, 000 dividend from stock in a subsidiary.
Required: Prepare the cash receipts section of the cash budget.
Solution:
Forecasted sales 100,000 200,000 400,000 300,000 200,000

August September October November December
Cash Sales (20%) P20,000 P40,000 P80,000 P60,000 P40,000
Collection of AR
1st month (50%) P50,000 P100,000 P200,000 P150,000
2nd month (30%) P30,000 P60,000 P120,000
Other cash receipts P 30,000
TOTAL CASH P210,000 P320,000 P340,000
RECEIPTS
Cash Disbursements include all outlays of cash by the firm during a given financial period. The
most common cash disbursements are:
• Cash purchases
• Purchasing fixed assets
• Payments of accounts payable
• Interest payments
• Rent (and lease) payments
• Cash dividend payments
• Wages and salaries
• Principal payments (loans)
• Tax
• It is important to recognize that depreciation and other noncash charges are not included in the
cash budget, because they merely represent a scheduled write-off of an earlier cash outflow.
• Illustrative Example:
Jungaya Industries has gathered the following data needed for the preparation of a cash
disbursements schedule for October, November, and December.
 Purchases - The firm’s purchases represent 70% of sales. Of this amount, 10% is paid in
cash, 70% is paid in the month immediately following the month of purchase, and the
remaining 20% is paid 2 months following the month of purchase.
 Rent Payments - Rent of PHP5,000 will be paid each month.
 Wages and Salaries - Fixed salary cost for the year is PHP96,000, or PHP8,000 per month.
In addition, wages are estimated as 10% of monthly sales.
 Tax Payments - Taxes of PHP25,000 must be paid in December.
 Fixed Assets - New machinery costing PHP130,000 will be purchased and paid for
in November.
 Interest Payments - An interest payment of PHP10,000 is due in December.
Forecasted purchases 70,000 140,000 280,000 210,000 140,000

August September October November December
Cash Purchases (10%) 7,000 14,000 28,000 21,000 14,000
Payment of AP
st
1 month (70%) 49,000 98,000 196,000 147,000
nd
2 month (20%) 14,000 28,000 56,000
Total Cash Purchases 7,000 63,000 140,000 245,000 217,000
Rent 5,000 5,000 5,000
Wages and Salaries 48,000 38,000 28,000
Tax
Machinery purchase 130,000
Interest 10,000
TOTAL CASH 193,000 418,000 285,000
DISBURSEMENTS
 The objective or receivables management is to extend credit to such limit till the incremental
profit arising out of increasing sales is higher than the costs associated with receivables i.e.
the collection cost, working capital cost, opportunity cost and bad debts cost
 The need for holding cash arises because if cash inflows and outflows are not
synchronized, this leads to occasional periods of low cash inflows compared to outflows.
 Managing inventory is like a juggling act where insufficient stocks will result in lost sales
and delays for customers whereas excessive stocks will result in large amounts of funds
that get blocked in inventory.
1. You are to organize your birthday celebration this year. What are the things that should be
considered in planning? List down the needed resources that will be needed for your birthday.
Identification: Give the correct answer on the following:
1. It is the lifeline of every firm.

2. It is essential for firms to sustain and develop their business.
3. The process wherein a firm attempts to accelerate cash inflows and decelerate cash outflows.
4. Strategically defines the quality of account receivables collection.
5. It refers to the materials available in any organization which have been bought from outside.
6. These are purchased materials not yet put into production.
7. _______ are an integral part of the credit evaluation which uses 5C’s.
8. It involves the determination of reasonable levels of inventories considering the size and nature
of business.
9. These are goods put into production and finished. These are ready to be sold.
10. ________ involves the formulation and administration of plans and policies to efficiently
and satisfactorily meet production and merchandising requirements.
1. What are the three ways for Maria to better manage her cash balance?
Maria Luna, a 25-year-old nurse, works at a hospital that pays her every 2 weeks by direct
deposit into her checking account which pays no interest and has no minimum balance
requirement. She takes home about PHP9, 000 every 2 weeks or about PHP18, 000 per month.
She maintains a checking account in the bank that does not earn any interest income with a balance
of around PHP7, 500. Whenever it exceeds that amount she transfers the excess into her savings
account, which currently pays 1.5% annual interest.
She currently has a savings account balance of PHP85, 000 and estimates that she transfers about
PHP3, 000 per month from her checking account into her savings account.
Maria pays her bills immediately when she receives them. Her monthly bills average about PHP9,
500, and her monthly cash outlays for food and transportation cost total about PHP4, 500.
An analysis of Maria’s bill payments indicates that on average she pays her bills 10 days early.
Bank Time Deposit are currently yielding about 4.2% annual interest. Maria is interested in
learning how she might better manage her cash balances.
2. Hall
Internet Sources
https://www.managementstudyguide.com/financial-management.htm
https://www.investopedia.com/ask/answers/what-is-finance/
https://www.investopedia.com/terms/i/investment.asp
https://sba.thehartford.com/business-management/what-is-strategic-planning/
https://www.studocu.com/en-us/document/southern-new-hampshire-university/financial-
management/tutorial-work/373510331-essay-questions/2205425/view

Performance Standard: The Learners Are Able To Define Finance, Describe Who Are Responsible For

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Performance Standard: The Learners Are Able To Define Finance, Describe Who Are Responsible For

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INSTRUCTIONAL DESIGN

Subject Area: Business Finance

Guide to the Parent:

Guide to the Learner:

Content Standard: The learners demonstrate an understanding of definition of finance, the

DAY/Lesson/ Obejctives Materials to Acitvities Assessment

The learners will be able to:

Major Role of Financial Management

The Corporate Organization Structure

Differences among Financial Instruments, Financial Markets and Financial Institutions

 How will you classify Financial Markets into comparative groups?

MUTUAL FUNDS -are owned by

INSURANCE COMPANIES - Help PENSION FUNDS – Financial

What I Can Do?

1. A financial manager must choose between four alternative Assets: 1, 2, 3, and 4.

Fill in the blanks with the correct answer.

Explain the following questions in not less than 5 sentences.

Subject Area: Business Finance

Guide to the Parent:

Guide to the Learner:

Content Standard: The learners demonstrate an understanding of definition of finance, the

WEEKLY HOME LEARNING TASK

Day and Time Learning Competency Learning Task

Expected Learning Outcomes:

Functions of a Financial Manager

Why do some companies end up with a residual dividend policy?

FLOW OF FUNDS WITHIN AN ORGANIZATION

What I Have Learned?

What I Can Do?

Explain the following:

Subject Area: Business Finance

Guide to the Parent:

Guide to the Learner:

Day and Time Learning Competency Learning Task

Expected Learning Outcomes:

Long-term financial plans

3. Identify goal-related tasks

• Gross Domestic Product (GDP) • production capacity

Table 1: Factors that Influence

Note: Ending inventory of current period is beginning inventory of next period.

General form of Cash Budget:

STEPS IN FORMULATING A CASH BUDGET:

E. Identify all other cash payments to be made.

Jan Feb Mar Apr May

Formulating Cash Budget

Jan Feb Mar Apr May Total

Jan Feb Mar Apr May Total

STEPS ON FINANCIAL STATEMENT PROJECTION

Variable operating expense is 5% of sales.

Depreciation expense is 5% of the gross beginning balance of property, plant and

C. Forecast Net Income and Retained Earnings.

E. Determine payment schedule for loans.

Compute for interest expense:

Interest from July 1 to December 31, 2015 100,000

F. Check for other information

Cash dividends of PHP300,000 will be paid for 2015.

Compute for retained earnings

What I Have Learned?

Answer briefly the following questions:

Subject Area: Business Finance

Guide to the Parent:

Guide to the Learner: