‫مدرس ـ ــة أكاديميـ ـ ــة آسي ــا‬

In the name of Allah, Most Gracious, Most Merciful

’’

ASIA ACADEMIC SCHOOL, INC.

Don MC Enriquez Drive, Don Alfaro St., Tetuan, Zamboanga City
Contact No. (062) 955-8342 / (+63) 9153691045
Email address: aas.zambo2015@gmail.com
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Senior High School

LEARNING MODULE IN ABM 03

Business Finance
Grade Level: 12
Learner’s Name:
Module No. 1

Module Title: Introduction to Financial Management Quarter: 1 (1st Semester)

Instructor: Ms. Diana Mae D. Navea No. of Weeks: 2 weeks

Module Overview:

In This module, you will be able to explain the major roles of financial management and the different
individuals involved and the flow of funds within an organization – through and from the enterprise—and the
role of the financial manager.

CONTENT STANDARD/S:

The learners demonstrate an understanding of the definition of finance, the activities of the financial
manager, and financial institutions and markets

PERFORMANCE STANDARD/S:
The learners are able to…
1. define Finance
2. describe who are responsible for financial management within an organization
3. describe the primary activities of the financial manager
4. describe how the financial manager helps in achieving the goal of the organization
5. describe the role of financial institutions and markets

LEARNING COMPETENCY/MELCS:
At the end of this module, the learners will be able to:

1. explain the major role of financial management and the different individuals involved
2. distinguish a financial institution from financial instrument and financial market
3. enumerate the varied financial institutions and their corresponding services
4. compare and contrast the varied financial instruments
5. explain the flow of funds within an organization – through and from the enterprise—and the role of the
financial manager

INTRODUCTION

Pre-Test. Directions: Write the letter of your answer on a separate sheet of paper.

1. Which of the following requires funds from external sources?

a. Financial markets b. Private placement
c. financial institutions d. all of the above
2. Which of the following is the primary goal of financial manager?
a. Minimizing risk b. Maximizing risk profit
c. maximizing wealth d. minimizing return
3. Wealth maximization as the goal of the firm implies enhancing the wealth of ____________________.
a. The Board of Director b. The firm’s employee
c. The federal government d. the firm’s stockholders
4. Which of the following the Financial Managers should consider when evaluating decision alternatives or
potential actions?
a. only risk b. only return c. both risk and return d. risk, return, and the impact on share price
5. It receives premium payments that are placed in loans or investments to accumulate funds to cover future
benefits.
a. life insurance company b. commercial bank c. saving bank d. credit bank
6. Which of the following is not a financial institution?
a. a pension fund b. a newspaper publisher
c. a commercial bank d. an insurance company
7. Which of the following most businesses sell securities in order to raise money?
a. a direct placement b. a stock exchange
c. a public offering d. a private placement
8. Which of the following is not a service provided by financial institutions?
a. Buying the business of customer b. Investing customers saving in stock and bonds
c. Paying savers interest on deposited funds d. Lending money to customers
9. By definition, the money market involves buying and selling of what?
a. Funds that mature in more than one year b. Flows of funds
c. Stocks and bonds d. Short-term funds
10.Which of the following is created by a financial relationship between suppliers and users of short-term
funds?
a. financial market b. stock market c. money market d. capita market
11.Long-term debt instruments used by both government and business are known as what?
a. bonds b. stocks c. equities d. bills
12.It pertains to the money a retired private or government employees receive after retirement.
a. life insurance company b. savings bank c. pension funds d. credit bank
13.Which of the following is the type of financial intermediary that pools savings of individuals and makes them
available to business and government users?
a. Mutual fund b. savings bank c. Savings and loans d. credit union
14.Which of the following major securities is traded in the capital markets?
a. stocks and bonds b. bonds and commercial paper
c. commercial paper and treasury bills d. treasury bills and certificates of deposit
15.The participants in financial transactions are individuals, business, and government where individuals are
considered net _____________ of funds while businesses are net _____________ of funds.
a. Suppliers; users b. users; suppliers c. Purchasers; sellers d. users; providers

INTERACTION

Lesson 1: Identifying the Roles in a Corporate Organization

What is Finance?

• Finance is an act or process of raising or providing funds. (www.merriam-webster.com>finance)

• Finance is the science and art of managing money. (Gitman & Zutter, 2012)

• An organizational structure shows the roles and functions of the employees in a company. Job
descriptions and functions may vary from different companies, depending on its size, and form of
organization, but basic and important features of functions are common in nature. For example, in a
small business, the president or head of the company can also directly perform the responsibility of the
marketing, finance and production managers, while in a big or very large companies, there are Chief
Financial Officers (CFO) or VP for Finance that assumes the responsibility that contributes to the good
financial decisions and directly reports to the top management; and other VP’s for specific
departments.

• Each line is working for the interest of the person above them, based on the diagram, the managers or
VP’s are working for the interest of the board of directors, and the decisions of the board of directors
 are for the interest of the shareholders, therefore, every individual’s goal in an organization must be for
the wealth maximization of the shareholders.

Positions and their roles:

1. Shareholders. Owners of shares in a company. Each share held is equal to one voting right. The
shareholders elect the Board of Directors (BOD).

2. Board of Directors. The highest policy making body in a corporation. An elected group of individuals that
represent shareholders. Manages the company.

Responsibilities of the Board of Directors (BOD):

• Setting policies on investments, capital structure and dividend policies.

• Approving company’s strategies, goals, and budgets.
• Appointing and removing members of the top management including the president.
• Determining top management’s compensation.
• Approving the information and other disclosures reported in the financial statements (Cayanan, 2015).
3. President/Chief Executive Officer (CEO). Oversees the overall operations and resources of the company.
Ensures that planned strategies as approved by the board were implemented and executed.

Responsibilities of the President or CEO:

• 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.
• Carries out the decision making for all functions
4. VP for Marketing. Directing and coordinating company’s sales, promotion, and distribution of products.

Responsibilities of the VP for Marketing:

• Formulates marketing strategies and plans.

• Directing and coordinating company sales.
• Performing market and competitor analysis.
• Analyzing and evaluating the effectiveness and cost of marketing methods applied.
• Conducting or directing research that will allow the company identify new marketing opportunities.
• Promoting good relationships with customers and distributors. (Cayanan, 2015)
5. VP for Production. Ensures production meets customer’s demand. Maximizing company’s optimal operating
performance. Determines an effective production plan with cost efficient and quality-based output process
that maximizes the use of company’s production facilities.

Responsibilities of the 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, 2015)
6. VP for Administration. Oversees the administrative task and functions and develops strategies to enhance
staff’s performance. Organize and manage the functions of different departments in the firm.

Responsibilities of the VP for Administration:

• Coordinating the functions of administration, finance, and marketing departments.

• Assisting other departments in hiring employees.
• Providing assistance in payroll preparation, payment of vendors, and collection of receivables.
• Determining the location and the maximum amount of office space needed by the company.
• Identifying means, processes, or systems that will minimize the operating costs of the company.
(Cayanan, 2015)
•
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 the company that would lead
towards shareholders’ wealth maximization.
Financial Management refers to strategic planning, acquiring, directing, and controlling of financial
undertakings in an organization in a way that it achieves its goal.

Lesson 2. Distinguish a financial institution from financial instrument and financial market

Financial Market

Financial Market - Organized for vendors and consumers with various types of funds may make transactions.
Example: Stock Market-regular activities of buying and selling Bond Market- issue new debt.

Financial institution includes banks and non- banks. These are the commercial banks, universal banks,
investment banks, investment companies, finance companies, life and nonlife insurance companies, mutual
fund companies, and private equity firms.

➢ Commercial Banks are in particular deposit taking monetary institutions that extend credit source to the
retail and purchaser market. They address minimum quantity of employee, single area or small amount
volume, generally now not franchised. Also lend the money of savers/depositors to small and medium
enterprises that will pay them an interest regularly in exchange for the use of their funds.

➢ Universal Banks lend to multinational companies or companies with global presence and their clientele are
mostly the larger corporations. Example: Allied Bank, China Bank

➢ Investment Banks are known to efficiently raise price range for massive agencies and governments. There
are two functions of Investment banks. First is primary function that accepts deposit, making advances, and
credit creation. Second is secondary function that purchase of bonds/shares and to give or accept money.
Example: HSBC.

➢ Mutual Funds- owned by investment businesses which allow small buyers to enjoy the benefits of making an
investment in a different portfolio of securities bought on their behalf through professional funding manages.
When mutual finances use cash from buyers to put money into newly issued debt or fairness securities, they
finance new investment via firms.

➢ Pension Funds – financial institution or establishments that receive payments from workers and invest the
yield in their behalf.

Financial Instruments are the tools that help business daily operations, and eventually make it grow. 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

Example of financial asset is cash.

Financial Liability is any liability that is a contractual obligation. An Equity Instrument is any contract that
evidences a residual interest in the assets of an entity after deducting all liabilities. Example: Ordinary Share
Capital

• These are the common examples of Debt and Equity Instruments.

➢ Debt Instrument generally has fixed returns to fixed interest rates. Examples: Treasury Bonds usually low
interest and have very low risk and Corporate Bonds usually have higher interest rates.

➢ Equity Instruments generally have varied returns based on the performance of the issuing company. Returns
from equity instruments come from either dividend or stock price appreciation. There are two type of equity
instrument: Preferred Stocks and common Stock

➢ Preferred Stock-if a company were to be liquidated and its assets have to be distributed, no asset will be
distributed to common stockholders have been given.

➢ Common Stock is the real owners of the company.

Financial Institutions generally provide the Financial Instruments that you ca trade in Financial Markets.

INTEGRATION

REFLECTIVE LEARNING

Have you ever wondered what the best things are that you can do for your money and your financial future?
What's the Smartest Thing You Do for Your Money? You probably have bright ideas about smart things to do
for your money and finances that others would like to know about too.
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Directions: Differentiate Financial Markets, Financial Institutions and Financial Instruments by describing.

1. FINANCIAL MARKET

2. FINANCIAL INSTITUTION

3. FINANCIAL INSTRUMENT

INTERVENTION

At this point, let us see how much you have gained from the discussions and activities you have undergone.
Exit slip

Directions: complete the sentence on the Exit Slip (Fisher and Frey, 2004).

1.Write one you learned today………

2.I didn’t understand in…..
3.I enjoyed doing in…..
4.I would like to learn more about ….
5.Please explain more about ….
6.The thing that surprised me the most today was…..

Reference/s:

Gitman, L. J. & Zutter C. J. (2012), Principles of Managerial Finance (13th Ed), USA: Prentice-Hall
https://smallbusiness.chron.com/business-financing-problems-292.html. Retrieved June 17, 2020
https://www.investopedia.com/terms/c/corporatefinance.asp. Retrieved June 17, 2020
https://corporatefinanceinstitute.com/resources/knowledge/finance/corpora te-finance-industry/. Retrieved
June 17, 2020 https://www.cleverism.com/corporate-finance-essentials

Prepared by:

Ms. Diana Mae D. Navea