THIS MODULE IS NOT FOR SALE! THIS MODULE IS NOT FOR SALE! THIS MODULE IS NOT FOR SALE!

THIS MODULE IS NOT FOR SALE! THIS MODULE IS NOT FOR SALE! THIS MODULE IS NOT

SENIOR HIGH SCHOOL DEPARTMENT

FIRST SEMESTER, A.Y.2021-2022 LEARNING MODULE GRADE 12
for
SUBJECT: BUSINESS FINANCE- maximization of profit

MODULE NO.: 1
WEEK NO.: 1-2

TOPIC: IDENTIFYING THE ROLES IN A CORPORATE ORGANIZATION

LEARNING 1. Explain the major role of financial management and the different individuals involved.
COMPETENCY/IES: 2. Explain the flow of funds within an organization- through and from the enterprise-
and the role of the financial manager.

OBJECTIVES: a.) understand the key positions in a corporate organization and identify the roles of
each
b.) identify the primary activities of the financial manager

CONTENT:
LESSON 1: The Corporate Organization Structure

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

From the diagram presented, each line is working for the interest of the person on the line above them. Since the
managers of the company are making decisions for the interest of the board of directors and the board of directors do
the same for the interests of the shareholders, it follows that the goal of each individual in a corporate organization
should have an objective of shareholders’ wealth maximization. (Cayanan, A. 2015)

 Shareholders: The shareholders elect the Board of Directors (BOD). Each share held is equal to one voting right.
Since the BOD is elected by the shareholders, their responsibility is to carry out the objectives of the
shareholders otherwise; they would not have been elected in that position.
One person owns the company- owner /proprietor
Two to five owners- partners
More than five owners- company/corporation (shareholders)

2
  Board of Directors: The board of directors is the highest policy making body in a corporation. The board’s
primary responsibility is to ensure that the corporation is operating to serve the best interest of the
stockholders/shareholders.

THE RESPONSIBILITIES OF A BOARD OF DIRECTORS

1. Setting policies on investments, capital structure (percentage that the corporation is composed of debt and equity)
and dividend policies.
2. Approving company’s strategies, goals and budgets.
3. Appointing and removing members of the top management including the president.
4. Determining top management’s compensation.
5. Approving the information and other disclosures reported in the Financial statements (Cayanan 2015)

THE RESPONSIBILITIES OF A PRESIDENT OR CHIEF EXECUTIVE OFFICER (CEO)

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

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

VP for Production: The following are among the responsibilities of VP for Production:
1. Ensuring production meets customer demands.
2. Identifying production technology/process that minimizes production cost and make the company cost competitive.
3. Coming up with a production plan that maximizes the utilization of the company’s production facilities.
4. Identifying adequate and cheap raw material suppliers.
VP for Administration: The following are among the responsibilities of VP for Administration:
1. Coordinating the functions of administration, finance, and marketing departments.
2. Assisting other departments in hiring employees.
3. Providing assistance in payroll preparation, payment of vendors, and collection of receivables.
4. Determining the location and the maximum amount of office space needed by the company.
5. Identifying means, processes, or systems that will minimize the operating costs of the company. (Cayanan, A.
2015)

LESSON 2: Flow of Funds within an Organization through and from Enterprise and the role of the Financial 2 Manager

Functions of a Financial Manager

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

2
  Operating
 Dividend Policies

There are situations when we are faced with lack of funds. Financing decisions include making decisions on
how to fund long term investments (such as company expansions) and working capital which deals with the day to day
operations of the company (i.e., purchase of inventory, payment of operating expenses, etc.).
The role of the VP for Finance of the Financial Manager is to determine the appropriate capital structure of the company.
Capital structure refers to how much of your total assets is financed by debt and how much is financed by equity.

To illustrate, show/draw the figure below:

Recall that Assets = Liabilities + Owner’s Equity. To be able to acquire assets, our funds must have come somewhere. If it
was bought using cash from our pockets, it is financed by equity.
On the other hand, if we used money from our borrowings, the asset bought is financed by debt. In the figure above, the
total assets is financed by 60% debt and 40% equity. The mix of debt and equity varies in different corporations depending
on management’s strategies. It is the responsibility of the Financial Manager to determine which type of financing (debt or
equity) is best for the company.
Investing is where to put your excess cash to make it more profitable. We expand that definition by including cash held
taken from funds as a result of financing decisions. Investments may either be short term or long term.
 Short term investment decisions are needed when the company is in an excess cash position. To plan for this, the
Financial Manager should be able to make use of Financial Planning tools such as budgeting and forecasting.
Moreover, the company should choose which type of investment it should invest in that would provide a most
optimal risk and return trade off.
 Long term investments should be supported by a capital budgeting analysis which is among the responsibilities of a
finance manager. Capital budgeting analysis is a tool to assess whether the investment will be profitable in the long
run. This is a crucial function of management especially if this investment would be financed by debt. The lenders
should have the confidence that the investments that management will push through with will be profitable or else
they would not lend the company any money.
 Operating decisions deal with the daily operations of the company. The role of the VP for finance is determining
how to finance working capital accounts such as accounts receivable and inventories. The company has a choice
on whether to finance working capital needs by long term or short term sources. 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?

2
SOURCES OF FUNDS

 Short Term sources are those that will be payable in at most 12 months. This includes short-term loans with banks and
suppliers’ credit. For short-term bank loans, the interest rate is generally lower as compared to that of longterm loans. Hence,
this would lead to a lower financing cost. Suppliers’ credits are the amounts owed to suppliers for the inventories they
delivered or services they provided.
 Long term sources, on the other hand, 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 term sources have a longer time to mature, it gives the company more time to accumulate cash to pay off the
obligation in the future.

Dividend Policies
Recall that cash dividends are paid by corporations to existing shareholders based on their shareholdings in the company
as a return on their investment. Some investors buy stocks because of the dividends they expect to receive from the
company. Non-declaration of dividends may disappoint these investors. Hence, it is the role of a financial manager to
determine when the company should declare cash dividends.
Before a company may be able to declare cash dividends, two conditions must exist:
1. The company must have enough retained earnings (accumulated profits) to support cash dividend declaration.
2. The company must have cash. What do you think will be the effect of the decision of management in paying
dividends? Remember that dividends come from the company’s cash and availability of unrestricted retained
earnings. Recall that one of the functions of a finance manager is investing and its available cash may be used to
invest in long term investments that would increase the profitability of the company. Some small enterprises which
are undergoing expansion may have limited access to long term financing (both long term debt and equity). This
results to these small companies reinvesting their earnings into their business rather than paying them out as
dividends.
On the other hand, companies which have access to long term sources of funds may be able to declare dividends even if
they are faced with investment opportunities. However these investment opportunities are 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. Examples of these companies are companies such as
PLDT, Globe Telecom, and Petron.
SELF-ASSESSMENT:
Directions: Analyze and answer the question briefly.
1. 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 decisions?
2. Globe Telecom: ―Yesterday’s solutions are never adequate for the future‖ – Albert De Larrazabal (Klobucher, 2015).
Explain briefly

References:

Cayanan, A. & Borja (forthcoming). Business Finance. Quezon City. Rex Bookstore.
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

2
THIS MODULE IS NOT FOR SALE! THIS MODULE IS NOT FOR SALE! THIS MODULE IS NOT FOR SALE! THIS MODULE IS NOT FOR SALE! THIS MODULE IS NOT FOR SALE! THIS MODULE IS NOT

SENIOR HIGH SCHOOL DEPARTMENT

FIRST SEMESTER, A.Y.2021-2022 LEARNING ACTIVITY SHEET GRADE 12
for
SUBJECT: BUSINESS FINANCE
MODULE NO.: 1
WEEK NO.: 1-2
TOPIC: IDENTIFYING THE ROLES IN A CORPORATE ORGANIZATION

ACTIVITY NO.: 1

NAME: __________________________________________________________ GRADE & SECTION: ________________________

GENERAL INSTRUCTIONS:

a.) Only this/these activity sheet/s is/are allowed to be returned to the adviser.
b.) Write your answer/s neatly and legibly.
c.) Read specific instructions carefully before doing the task/s.
d.) Do not submit extra paper if possible.
e.) CHEATING IS STRICTLY PROHIBITED. It is subject to punishment. (SHS Student Handbook, 12.3, p.26)
For clarifications and concerns, please contact your subject teacher.

MULTIPLE CHOICE Direction: Choose the letter corresponding to the correct answer for each of the questions provided
below.

1. The role of the _______________________________ is to determine the appropriate capital structure of the
company.

a. VP for Marketing b. VP for Finance of the Financial Manager

c. VP for Production d. VP for Administration

2. ______________________________ is a tool to assess whether the investment will be profitable in the long run.

a. Capital budgeting analysis b. Chief Financial Officer

c. Shareholders d. Dividend policies e. Short term investment

3. _______________________ 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.

a. Sources of funds b. Short term investment decisions

c. Issuance of new shares d. Financing decisions

4. Capital structure refers to how much of your total assets is financed by debt and how much is financed by equity.

a. Capital structure b. Dividend Policies

c. Retained earnings for investment d. Long term investment decisions

5. If we used the money from our borrowings, the asset bought is financed by ________________________.

a. Equity b. Raw material suppliers

c. Debt d. Cash dividends

FILL IN THE BLANKS WITH THE CORRECT ANSWER:

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

2
 2. The ______________________analyze and evaluate the effectiveness and cost of marketing methods applied.
3. The ________________________ elect the Board of Directors (BOD).
4. The ______________________oversee the operations of a company and ensure
that the strategies as approved by the board are implemented as planned.
5. The _____________________provide assistance in payroll preparation, payment of vendors, and collection of
receivables.
THIS MODULE IS NOT FOR SALE! THIS MODULE IS NOT FOR SALE! THIS MODULE IS NOT FOR SALE! THIS MODULE IS NOT FOR SALE! THIS MODULE IS NOT FOR SALE! THIS MODULE IS NOT

SENIOR HIGH SCHOOL DEPARTMENT

FIRST SEMESTER, A.Y.2021-2022 LEARNING ACTIVITY SHEET GRADE 12
SUBJECT: BUSINESS FINANCE for
MODULE NO.: 1
WEEK NO.: 1-2
TOPIC: IDENTIFYING THE ROLES IN A CORPORATE ORGANIZATION

ACTIVITY NO.: 2

NAME: __________________________________________________________ GRADE & SECTION: ________________________

GENERAL INSTRUCTIONS:

a.) Only this/these activity sheet/s is/are allowed to be returned to the adviser.
b.) Write your answer/s neatly and legibly.
c.) Read specific instructions carefully before doing the task/s.
d.) Do not submit extra paper if possible.
e.) CHEATING IS STRICTLY PROHIBITED. It is subject to punishment. (SHS Student Handbook, 12.3, p.26)
For clarifications and concerns, please contact your subject teacher.

Directions: Discuss briefly the roles of each position identified. Write

your answer on the space provided for each item.

a. Shareholders

b. Board of Directors

c. President (CEO)

d. VP for Marketing

e. VP for Production

f. VP for Administration

g. VP for Finance
H. Answer the following questions to enhance your Critical thinking skills as a future
financial manager of a company.
a) Why should shareholder wealth maximization be the overriding
objective of management?

2
_________________________________________________________________________________________
________________________________________________________________________________________
b) What other positions can you think of that are related to financial
management?
_________________________________________________________________________________________
_________________________________________________________________________________________