TAGOLOAN Community College

Baluarte, Tagoloan, Misamis Oriental

Tel.No. (08822)740-835/(088)5671-215

College/Department: Bachelor of Science in Business Administration (BSBA)

COURSE Code: BAC 100: Basic Finance
1st Semester of A.Y. 2024-2025

Introduction

Finance is defined as providing of funding and management of money for

individuals, businesses, and governments. The financial system includes the
circulation of money, managing of investments, and lending of funds. In
businesses, the finance team is responsible for ensuring the company has
enough capital, that the appropriate investments are made, and that the
company’s revenues and expenses are well managed.
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Rationale
 Define what is Finance
 Discuss the types of finance namely; personal, corporate, public
 Discuss the functions of Business Finance
 Identify the primary activities of a financial manager.

Intended Learning Outcomes

A. Understand what finance is
B. Discuss the three types of finance
C. Understand the functions of business finance
D. Enumerate and explain the primary activities of the financial manager
E. Relate and Discuss

Activity

 What is finance?
 How do you manage your personal finances?
 Identify 3-5 personal financial risk and how did you manage it?

Discussion

Finance is a broad term that describes activities associated with banking, leverage or debt,
credit, capital markets, money, and investments. Basically, finance represents money
management and the process of acquiring needed funds. Finance also encompasses the
oversight, creation, and study of money, banking, credit, investments, assets, and liabilities
that make up financial systems.

Since individuals, businesses, and government entities all need funding to operate, the
finance field includes three main sub-categories: personal finance, corporate finance, and
public (government) finance.

Personal Finance
Financial planning involves analyzing the current financial position of individuals to formulate
strategies for future needs within financial constraints. Personal finance is specific to every
individual's situation and activity; therefore, financial strategies depend largely on the
person's earnings, living requirements, goals, and desires.
Example: Individuals must save for retirement, which requires saving or investing enough
money during their working lives to fund their long-term plans. This type of financial
management decision falls under personal finance.

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 Personal finance includes the purchasing of financial products such as credit
cards, insurance, mortgages, and various types of investments. Banking is also considered a
component of personal finance including checking and savings accounts and online or
mobile payment services like PayPal and Gcash.

Corporate Finance
Corporate finance refers to the financial activities related to running a corporation, usually
with a division or department set up to oversee the financial activities.
For example, a large company may have to decide whether to raise additional funds
through a bond issue or stock offering. Investment banks may advise the firm on such
considerations and help them market the securities.
Start-ups may receive capital from angel investors or venture capitalists in exchange for a
percentage of ownership. If a company thrives and decides to go public, it will issue shares
on a stock exchange through an initial public offering (IPO) to raise cash.
In other cases, a company might be trying to budget their capital and decide which projects
to finance and which to put on hold in order to grow the company. These types of decisions
fall under corporate finance.

Public Finance
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Public finance includes tax, spending, budgeting, and debt issuance policies that affect how
a government pays for the services it provides to the public.
The federal government helps prevent market failure by overseeing the allocation of
resources, distribution of income, and economic stability. Regular funding is secured mostly
through taxation. Borrowing from banks, insurance companies, and other nations also help
finance government spending.

In addition to managing money in day-to-day operations, a government body also has social
and fiscal responsibilities. A government is expected to ensure adequate social programs for
its tax-paying citizens and to maintain a stable economy so that people can save and their
money will be safe.

Functions of Business Finance

The finance function covers the legal and accounting relationship between a company and
its source and uses of funds.

1. Allocation of financial resources

In accordance with a company’s financial activities and operations are carefully planned,
evaluated based on certain criteria, and subsequently ranked for the allocation of financial
resources. The objective is to be assured that funds are channelled to activities that are
considered profitable and/or will increase the value of the business itself and that the
company costs and risks are minimized. The more risky a project is, the higher is the standard
set as minimum desired rate of return on investment.

2. Procurement of funds
Capital must be available at the least cost when it is needed. This function requires
awareness of the different sources of funds and the cost involved. On capital contributed by
owners or stockholders, the corresponding cost is in the form of dividends or shares in profit.
3. Efficient and effective utilization of financial resources
Efficient utilization of financial resources refers to their economical use. In other words, we see
to it that financial resources are actually being used for what they have been intended.
Inefficiency in the use of financial resources may be caused by extravagance in the choice
of property and equipment, unnecessary expenditures, tardiness of personnel and non-
productive resources.
Effective utilization of financial resources refers to their use towards the attainment of
predetermined objectives. This requires a periodic review of operations to determine whether
they are in accordance with plans and whether the plans, as prepared, will enable the
company to attain its short-term goals and long term objectives considering the changes in
the economic environment.

Financial resources must be utilized in a manner that minimizes company costs arising from
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 wastages and lost opportunities due to delays in operations and idle or non-productive
resources. It requires adoption of effective control measures. When approved projects are
already in operation, there should be constant follow-up by observation, inspection, periodic
review of operations with use of progress reports and comparison between plans and
operations so that prompt remedial or corrective measures may be adopted.

The Finance Manager: His primary activities

In as much as business finance is concerned with the management of the financial resources
of a company and financial resources refers to all resources of a company that are
measurable in terms of the monetary unit, the primary activities of the financial manager
must concern the different items included in the balance sheet. Thus, his primary activities
must be (a) financial planning and analysis, (b) managing the firm’s assets and (c) managing
the firm’s liabilities and owner’s equity.

Financial planning and analysis

Most business decisions affect the financial resources of a company. The financial manager,
therefore, takes part in corporate, strategic and operational planning in an enterprise. His
knowledge of economics,, particularly, managerial economics, enables him to make
projections based on accumulated data and the different options open to management.
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Projections may in the form of estimates of revenue, cost and expenses, and similar ratios.

Managing the firm’s assets

This activity concern the left side of the balance sheet. The financial manager determines the
mix and type of assets that a business must have and see to it that they are duly accounted
for.
Managing the firm’s liabilities and owner’s equity
The items concerned in this activity are on the right side of the balance sheet. The financial
manager determines the mix of short-term and long-term financing, what particular source is
best at a given point in time, and the level at which the debt/equity ratio should be
maintained. These are very important because they will affect profitability and liquidity of the
enterprise.

The financial or finance manager in a business organization is not always called as such. His
title varies depending on the size and organizational set-up in a company. In small business
firms, the finance functions are discharged by the sole proprietor, the accountant, or by the
manager. As the organization grows bigger, the organizational set-up becomes more
sophisticated so that we may have the finance functions delegated to the controller and/or
the treasurer.

The Role and importance of business finance

Business finance is an essential requirement for the establishment of any business. Money is
actually the most important tool to bridge the gap between production and sales. Business
firms and government are oriented towards the provision of goods and services to the
society. Regarding this task, however, private business firms assume the major role. Under the
free enterprise system, firms are free to compete with each other. This atmosphere makes
possible the offering of new or improved products and services to the society. The standard
of living is raised or lowered depending to a large extent on the performance of business
firms. Business is largely responsible for bringing into the market a wide array of products and
services which were not previously available.

Corporate/ business finance is an important and inevitable function in any business and
efficient financial management is crucial for success and sustenance since it involves the
management of financial resources and financial activities of the organization. A team of
finance and accounting professionals or the finance department generally handles it. Even
though a strong vision and a great product are the central needs of a business, one cannot
ignore the importance of finance and its efficient management. Here is how finance is
important to business:
Initial Capital: It is popularly said that money is essential for making money. To start the
activities of a business, capital investment is required. For ideas to materialize and become
products/ services, the groundwork for sales, product testing, marketing, etc. seed capital is
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 essential. Businesses have a tough but defining choice between debt and equity financing.
Meeting operational expenses: In the short-term, businesses require finance in the form of
working capital to meet operational expenses such as remunerative payments, raw
materials, inventory, interest payments, etc. Proper short-term financial planning and
maintenance of good working capital flow is crucial to keep the operations going. Though
maintain adequate cash flow is always important, it is especially important in the starting
stages since revenues will take some time to match the cash outflows.
Scaling up and asset creation: In the long-term, capital is crucial for purchasing assets like
machinery, land, equipment, etc. to expand the production scale. Scaling up production will
create assets, help the business grow and penetrate existing markets. The business must have
sufficient capital budget to do so and cannot depend on short-term finances for this. They
must have savings and should be able to raise and infuse capital investment through debt or
equity financing.
New products and markets: Without finance and proper financial management, even an
established organization will not be able to explore newer markets or develop and test newer
solutions/ products. Finance is required for testing and research purposes as well as for
marketing and advertising purposes.
Business cycles: Business cycles of growth, boom, recession, depression and renewal caused
by changes in the economy and other external factors are a reality. And no matter how well
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it is doing, the business is bound to bear the consequences and has to be prepared to tackle
these cycles. The financial plans must be fool proof and should include plans for when the
business takes a hit due economic downturn.

Finance provides discipline to all the components of the organization involved in decision
making. Therefore, you need knowledge of it to perform effectively. For effective
communication, you must be able not only to understand what financial people are saying,
but also to express your ideas in their language. You can "open the door' to the finance
department by having a better understanding of the finance function and more productive
working relationships with finance professionals. If you master the finance vocabulary, you will
be able to comprehend financial information (e.g., budgets), use that information
effectively, and communicate clearly about the quantitative aspects of performance and
results. You must clearly and thoughtfully express what you need to financial officers in order
to perform effectively. To do so, you have to be familiar with the basics of accounting, taxes,
economics, and other aspects of finance. Finance uses accounting information to make
decisions regarding the receipt and use of funds to meet corporate objectives.

Exercise
1. Provide 3 examples in each of the types of finance.
2. Why business finances should be managed?
3. How helpful it is to understand the functions of finance?

Assessment

Students’ are graded based on the following matrix, to wit:

C- Continent Students are tasked to read the given chapter(s) 20%
and comprehend how the chapter contribute to
the related subject matter. (Full readings)
E- experience Based on their readings, students are expected to 20%
share their experience through writing relevant to
the topics.(One-two sentences)
R- Reflection Based on the topics, students are expected to think 20%
deeply and assess the occurrence and recurrences
of an event.(One-two sentences)
A-Action/Application Based on the topics, students are expected to 20%
form recommendation or action taken.(One-two
sentences)
E- Evaluation Based on the topics, students are expected to 20%
form a conclusion based on the readings(One -two
sentences)
TOTAL 100%
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 Evaluation Approaches and Methods:

 Assignment (related activity designed in the syllabus as feedback to connect the past and
present)
 Quizzes (long and short: Announced and un-announced)
 Project (activity compilations)
 Major Exams (Mid-term and Final)

Reflection

Create a paragraph or two about the discussion of the topics.

Resources and Additional Resources

 Business Finance and Phil. Business Firms, N. Mejorada

 Business Finance, R. Medina
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Additional Resources:
 https://corporatefinanceinstitute.com/resources/knowledge/finance/finance-industry-overview/

Prepared by:

Joan T. Batahoy, LPT, MBA

Instructor