BUSINESS

FINANCE

SELF-LEARNING MODULE
(Quarter 1 – Module 1)

1
Introduction to
Financial
Management

2
Introductory Message
For the facilitator:
Welcome to the Business Finance 12 Self-Learning Module (SLM) on Introduction to Financial
Management!
This module was collaboratively designed, developed and reviewed by educators both from public
and private institutions to assist you, the teacher or facilitator in helping the learners meet the
standards set by the K to 12 Curriculum while overcoming their personal, social, and economic
constraints in schooling.
This learning resource hopes to engage the learners into guided and independent learning activities
at their own pace and time. Furthermore, this also aims to help learners acquire the needed 2lst
century skills while taking into consideration their needs and circumstances.
In addition to the material in the main text, you will also see this box in the body of the module:

Notes to the Teacher

This contains helpful tips or strategies
That will help you in guiding the
learners.

As a facilitator you are expected to orient the learners on how to use this module. You also need
to keep track of the learners' progress while allowing them to manage their own learning.
Furthermore, you are expected to encourage and assist the learners as they do the tasks included
in the module.

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For the learner:
Welcome to the Business Finance 12 Self-Learning Module (SLM) on Introduction to Financial
Management!
The hand is one of the most symbolized part of the human body. It is often used to depict skill,
action and purpose. Through our hands we may learn, create and accomplish. Hence, the hand in
this learning resource signifies that you as a learner is capable and empowered to successfully
achieve the relevant competencies and skills at your own pace and time. Your academic success
lies in your own hands!
This module was designed to provide you with fun and meaningful opportunities for guided and
independent learning at your own pace and time. You will be enabled to process the contents of
the learning resource while being an active learner.
This module has the following parts and corresponding icons:
This will give you an idea of the skills or
What I Need to Know
competencies you are expected to learn in the
module.

This part includes an activity that aims to

check what you already know about the
What I Know lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.

What’s In This is a brief drill or review to help you link

the current lesson with the previous one.

In this portion, the new lesson will be

introduced to you in various ways such as a
What’s New story, a song, a poem, a problem opener, an
activity or a situation.
This section provides a brief discussion of the
What is It lesson. This aims to help you discover and
understand new concepts and skills.
This comprises activities for independent
practice to solidify your understandings and
What’s More skills of the topic. You may check the
answers to the exercises using the Answer
Key at the end of the module.
This includes questions or blank
What I Have Learned sentence/paragraph to be filled in to process
what you learned from the lesson.
This is a task which aims to evaluate your
Assessment level of mastery in achieving the learning
competency.

This contains answers to all activities in the

Answer Key
module.

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At the end of this module you will also find:

References This is a list of all sources used in

developing this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the module. Use a
separate sheet of paper in answering the exercises.
2. Don't forget to answer What I Know before moving on to the other activities included in the
module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do not hesitate to consult
your teacher or facilitator. Always bear in mind that you are not alone.
We hope that through this material, you will experience meaningful learning and gain deep
understanding of the relevant competencies. You can do it!

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 What I Need to Know

This module was designed and written with you in mind. It is here to help you master the
Introduction to Financial Management. The scope of this module permits it to be used in many
different learning situations. The language used recognizes the diverse vocabulary level of
students. The lessons are arranged to follow the standard sequence of the course. But the order in
which you read them can be changed to correspond with the textbook you are now using.

In this module, you will be able to:

• explain the major role of financial management and the different individuals
involved (ABM_BF12-IIIa-1);
• distinguish a financial institution from financial instrument and financial market
(ABM_BF12-IIIa-2); and

• explain the flow of funds within an organization – through and from the
enterprise—and the role of the financial manager. (ABM_BF12-IIIa-5)

Specifically, you are expected to:

• have an appreciation of what the overall objective of management should be;
• describe the goals of the firm and explain why maximizing the value of the firm
is an appropriate goal for a business;
• identify factors that influence the change in market price;
• understand the key positions in a corporate organization and identify the roles of
each;
• identify the primary activities of the financial manager;
• prepare a diagram illustrating how the Financial System works;
• define Financial Markets, Financial Institutions and Financial Instruments; and,
• identify the types of Financial Markets, Financial Institutions and Financial
Instruments.

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 What I Know

Are you ready to take the first step on this module? But before that, let’s take a small glimpse on
what you already know about our lesson. (Pre-Test)
Test I. True or False. Write true if the statement is correct and false if the statement is wrong.
_____1. To achieve the goal of profit maximization for each alternative being considered, the
financial manager would select the one that is expected to result in the highest monetary return.
_____2. Dividend payments change directly with changes in earnings per share.
_____3. The wealth of corporate owners is measured by the share price of the stock.
_____4. Financial markets are intermediaries that channel the savings of individuals, businesses,
and government into loans or investments.
_____5. The money market involves trading of securities with maturities of one year or less while
the capital market involves the buying and selling of securities with maturities of more than one
year.

Test II. Multiple Choice. Encircle the letter that corresponds to your answer.
1. The ______ is created by a financial relationship between suppliers and users of short-term
funds.
A. financial market
B. money market
C. stock market
D. capital market
2. Firms that require funds from external sources can obtain them from _____.
A. financial markets.
B. private placement.
C. financial institutions.
D. All of the above.
3. The major securities traded in the capital markets are ____.
A. stocks and bonds.
B. bonds and commercial paper.
C. commercial paper and Treasury bills.
D. Treasury bills and certificates of deposit.
4. The primary goal of the financial manager is _____.
A. minimizing risk.
B. maximizing profit.

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 C. maximizing wealth.
D. minimizing return.
5. 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.

Based on the profit maximization goal, the financial manager would choose _____.
A. Asset 1.
B. Asset 2.
C. Asset 3.
D. Asset 4.

Test III. Answer the following questions.

A. How much is your daily allowance? If not given daily, how much is your average allowance
per day?
_____________________________________________________________________________________

_____________________________________________________________________________________

_____________________________________________________________________________________

_____________________________________________________________________________________
_____________________________________________________________________________________

B. Write down all the items you spend money on. List the description and peso amount spent.
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________

C. Compute for the balance of your allowance by deducting the expenses you listed from your
daily allowance.
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________

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_____________________________________________________________________________________
_____________________________________________________________________________________

D. If the answer to Question C is positive, what do you do with the money left? If the answer is
negative, where do you get additional money?
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________

Congratulations! You have finally gauged your knowledge about introduction to financial
management.

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 Introduction to Finance and Key Concept

Financial literacy is similar to learning any other language. You have to use and apply your
knowledge to stay proficient. There are certain terms and concepts you need to be aware of, and
practice makes perfect when you’re building your awareness with money matters. Regardless of
your age, occupation, or income level, having a solid grasp on your financial situation helps you
to be responsible with how you allocate the money that you earn. You’ll also have to be honest
with yourself, so that you know how much money you need to live a lifestyle that makes you
happy.
If you’d like to start saving, remember this basic tip from Dave Ramsey:
“Don’t spend more than you earn!”

What’s In

Think of a scenario of your everyday life. How much allowance you are given to and how
often do you receive it (daily, weekly, etc.)? Like a activities done in a day from getting to school,
to attending flag ceremony, classroom discussions, lunch breaks, end of classes, occasional
meriendas or going out with friends and playing computer games, going back home and going
back out to a nearby store to buy autoload because you realized that you can’t end the day without
texting your crush. How many savings out of the allowance you get from your parents? Then
identify the expenses you incurred (i.e. tricycle fare, lunch, merienda, computer games) and
recognize the value of savings and possibly investing at a young age. Most of the activities you do
involving decisions on where to use your allowance is a finance decision.

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

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 What’s New

Alright! Let’s have a short activity. I hope this will awaken your interest about the topic.
Enjoy!
Activity 1: “Let’s budget!”
Materials: Module, extra paper, pen
Procedure:
1. Engage yourself by exhausting the expenses you wrote down and listing all these down
with the respective peso amounts. Try to get as many answers as possible.
2. Identify an allowance cap. This will serve as the average daily allowance that you able to
spend.
3. If the peso amount exceeds the daily allowance, which items should be dropped off from
the list. Cross out the items dropped but do not erase completely. Continue this until total
items remaining in the list can be covered by the daily allowance.

What is It

How are you coping with our lesson? I hope you had fun!
The activity you did is called budgeting.
Budgeting is the act of estimating revenue (in the form of their allowance) and expenses
over a period of time (in this case, on a daily basis).
However, budgeting will be further discussed in Lesson 3 – Financial Planning Tools.
Go back to the activity and focus your attention on the surplus resulting from your
budgeting. Do you have savings or excess cash? What did you do with the excess money?
• Carry over to the next day
• Return to parents
• Save. How and where? Coin savers, Hidden under your beds, Deposit in banks, Invest in
stocks (rare answer)
Excess money presents an opportunity for investments. Investments come in many forms
that will generate income or appreciate in the future. Between hiding your cash under your bed
and depositing it in the bank, it would be better to keep your money in bank deposits because these
earn interest.
However investments will be discussed further in Lesson 6 – Introduction to investments.
Go back to the activity. What other problems you may face in making financial decisions?
Assume that all the expenses listed (including those that were previously crossed out) are incurred
during the day. Compute how much more cash you would need to support all those expenses.

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 If ever you are in a situation where you are short of cash, what would you do? Where will
you get extra cash? What other sources of cash do you know?
• Ask from parents
• Borrow from a friend
• Fund raising activities
• Pawnshops
• 5/6
• Banks
All your answers are sources of funds. When faced with financial difficulties (in this case,
the lack of funds to meet the current expenses) we look for people or institutions that will give us
the money we need.
However, you will know more about where to get funds on Lesson 4 – Sources of short
term and long term funding.
For individuals, Finance is concerned with decisions about:
- How much of your earnings you spend
- How much you save or how much you need
- How you invest your savings
- How you raise additional funds you need (Gitman)

Once you graduate from school, you will no longer receive your daily allowance. Either
you would be employed by a company, manage your family business, or start up your own
business.
Do you want to own a business? What type of business organization is owned by one person
who operates it for his or her own profit?
Recall from ABM 1 the forms of business organizations:
- Sole Proprietorship - A business owned by one person and operated for his or her
own profit.
- Partnership - A business owned by two or more people and operated for profit.
- Corporation – An entity created by law owned by shareholders.
How you can be shareholders of a corporation? Of course, by buying stocks. At this point,
are you aware of big listed companies like PLDT, Globe, JFC, BPI, Banco De Oro, San Miguel
Corporation?
How and where can you buy stocks?
- Corporations may either be privately owned or publicly owned.
- Privately owned corporations are often owned by family members whose stocks
may not be offered to outsiders unless consent by the family members is secured.
- Companies which are publicly listed are owned by unrelated investors and are
traded in organized exchanges like the Philippine Stock Exchange. While there are
many stockholders, there is generally a group of investors or a family which

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 controls each listed company. For example, in the case of BPI, the biggest
stockholder is Ayala Corporation and in the case of Banco De Oro, it is SM
Investment Corporation. Prices of stocks of listed corporations are driven by several
factors such as the earnings of the companies, the prospects of the industry where
these companies operate, the general market sentiment, and the economic prospects
of the country, among others.
Assume that you are the biggest shareholder in a corporation. What are the objectives you
want to achieve as owners of the corporation?
Be profitable. Have a lot of cash.
Do you think a profitable company is a successful company? Can success be attributed to
profitability only? Recall that the determination of profit is based on the accrual method. Is it
possible that a company can have profits but still does not have enough cash to pay its obligations
(i.e. suppliers, lenders)? What will happen if the company cannot pay its obligations?
What do you think of a company who has very large amount of cash? (You may say that
this is good because the company will always have enough cash to pay its obligations.) Though
having a lot of cash has its advantages, it also signals unhealthy company practices. It may tell that
management has not been putting the company’s resources into good use. Also, keeping too much
cash in the books is like hiding your extra allowance under your bed. They will be missing out on
investment opportunities.
The overall objective of a shareholder should be wealth maximization. What defines a
shareholder’s wealth?

Measurement of a shareholder’s wealth

How do we measure shareholders wealth? Simplify the example.
Assume a learner bought 10 shares of Globe Telecom at PHP2,510 each on
September 9, 2010. This brings his investments to PHP25,100. What happens to
the value of his investment if the price goes up to PHP2,600 per share or it goes
down to PHP2,300 per share?

Take Note!
An increase of the share price to PHP2,600 per share means that people are willing to buy the
shares for that amount. If the learners were to sell their shares at this point, it will result to a profit of
PHP90 per share or PHP900 on their whole investment. Hence, the value of their investment increased
from PHP25,100 to PHP26,000. Therefore, there is an increase in shareholder’s wealth.

On the other hand, a decrease in the share price to PHP2,300 per share means that people are only
willing to buy shares for PHP2,300. If the learners were to sell their investment at this point, they will
receive PHP23,000 which would result to a loss of PHP2,100. The decrease in value of their investment
leads to a decrease in shareholder’s wealth.

Shareholders’ wealth is measured based on the current market price of the corporation’s
stocks. The market price changes across different periods. Hence, the value of your investment
changes in different points on time based on the market value at that time.
At this point, let’s start with the factors which can affect prices.

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Factors that Influence Market Price
Group the factors into two: Factors that the Management can control and external factors
that cannot be controlled by management.

How each factor influences market price?

- Profitability
Profit is a measure of the financial performance of a company for a period
of time. Although it is a major driver for increasing the value of stock, an investor
should not rely on profits alone. As discussed earlier, it is possible that the company
has profits but its cash flow is negative.
Examples: Suppose the following Income Statements and Cash Flow Statements of
companies A, B and C were presented to you. Which do you think is a more
attractive company?

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 • Company A is profitable but generated negative cash flows which
resulted from the uncollected accounts receivable of PHP100,000. Without
adequate cash inflows to meet its obligations, the company will face liquidity
problems, regardless of its level of profits.
• Company B on the other hand has a positive cash flow but is unprofitable.
This is a result of the company’s delay in payment of its costs. Accordingly, the
Company will soon have to pay the remaining PHP100,000 liability and its cash
will no longer be sufficient. Again, without adequate cash inflows to meet its
obligations, the company will face liquidity problems.
• Company C is profitable and has a positive cash flow. Based on the
information provided, Company C seems to be the best.

- Good liquidity and reasonable leverage position.

Liquidity and leverage refers to the company’s management of the type and
amount of assets and liabilities that it will hold in the course of its operations. This
will further be discussed in Lesson 2.

- Dividends.
Holders of shares receive dividends from a corporation as returns on
their investments in form of cash or other properties. Companies which have
better dividend policies are generally more attractive than companies who
do not pay out dividends.
Note that there may be times that companies do not pay out
dividends because of future expansions. Same with the other factors
affecting share price, dividend policies should go hand in hand with other
factors in determining market price.

- Competent management.
Competent managers may have any of the following attributes:
1) visionary
2) decisive
3) people-oriented

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 4) inspiring
5) innovative
6) respected
7) experienced/seasoned manager.

- Corporate plans that improve the business prospects.

Example: 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? Company B. Since it has more concrete future prospects
allowing investors to hope for better revenues and net income.
• External Factors
These factors influences the general reaction of investors in making an investment decision.
Its effect is not only to a specific company but on all companies or a group of companies under
similar circumstances. Such factors are a result of the environment a company operates in rather
than the decisions of the company’s management.

Role of Financial Management

Given the factors that influence market price, how will the company ensure that such
objectives will be achieved? This is achieved through financial management.
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.
For the next parts of this course, you will fill in the shoes of a Chief Financial Officer
(CFO) and every problem that you will encounter for this course should be dealt with having
shareholders wealth maximization in mind.

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 What’s More

That was quite a reading! We have already discussed the introduction to finance and key
concept. At this moment, be ready for our next activity. Here, you will be able to use what you
have learned from our previous discussions.
Activity 2: “The CFO”
Materials: Module, extra paper, pen
Procedure:
Go to a business in your locality. Ask who is in charge of the finances of the business.
Interview the “Chief Financial Officer (“CFO”) or the Vice-President for Finance” and ask them
to report about their roles and functions within the organization. You can also search about the
roles and functions of a Chief Financial Officer via Google.

What I Have Learned

Awesome! Now, let us check your understanding based on the discussions about
introduction to finance and key concept. Answer all the activities below and let us see how much
you have learned.
Activity 3: “Fill Me!”
1. Aside from the factors, what other factors can influence the investor’s perception on the
company’s performance which would ultimately affect share price?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________

2. Why is the study of finance important to you?

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
_____________________________________________________________________________________

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 Identifying the Roles in a Corporate Organization

In a small business there often are few staff people with many duties. Because some people
must wear “several hats”, it is important to clearly identify the duties and responsibilities of each
of the “hats”. Below is a sample outline of some of the key personnel in a business. Because the
focus of businesses varies greatly, the number of key personnel and organizational structure can
also vary substantially.
Many companies encourage a team environment. Team members’ help each other succeed
to accomplish the company's goals and provide their expertise on different projects and duties.
Each team has specific roles and are typically structured in a functional way. Companies create
structural charts that clearly define the types of roles within departments. In a functional structure,
it's designed by hierarchy, which is when the roles of each group are ranked one above another
based on responsibility.
The company assigns responsibilities that each team must accomplish in order to keep the
company running and to produce profits.
Let's take a look at what these are.

What is It

How are you coping with our lesson? I hope you had fun! The previous lesson gave us the
idea about finance and key concept. So now, let us discuss the roles in a corporate organization.
The Corporate Organization Structure
The corporate organization structure and this is a particular set of people each play a role
in the decision making of the company.

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 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 does the same for the interest of the shareholders, it follows
that the goal of each individual in a corporate organization should have an objective of
shareholders’ wealth maximization.
The roles of each position identified.
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.
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. The following are among
the responsibilities of the board of directors:
- 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)
President (Chief Executive Officer): The roles of a president in a corporation may
vary from one company to another. Among the responsibilities of a president are
the following:
- Overseeing the operations of a company and ensuring that the strategies
as approved by the board are implemented as planned.
- Performing all areas of management: planning, organizing, staffing,
directing and controlling.
- Representing the company in professional, social, and civic activities.
Although the president carries out the decision making for all functions, it would be
difficult for him/her to do this alone. The president cannot manage the company on his own,
especially when the corporation has become too big. To assist him are the vice presidents of
different functional areas: finance, marketing, production and administration.
Determine from the list of roles the functions that pertain to the respective VPs.
VP for Marketing: The following are among the responsibilities of VP for
Marketing
- Formulating 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.

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 - 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.
- Promoting good relationships with customers and distributors. (Cayanan,
2015)
VP for Production: The following are among the responsibilities of VP for
Production:
- Ensuring production meets customer demands.
- Identifying production technology/process that minimizes production cost
and make the company cost competitive.
- Coming up with a production plan that maximizes the utilization of the
company’s production facilities.
- Identifying adequate and cheap raw material suppliers. (Cayanan, 2015)
VP for Administration: The following are among the responsibilities of 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)
Finally, focus to the role of the VP for finance as this is where the rest of the topics for this
course will revolve.

What’s New

Alright! Let’s have a short activity. I hope this will awaken your interest about the topic.
Enjoy!
Activity 4: “Message from the CFOs”
Materials: Module, extra paper, pen
Procedure:
1. Share the following quotes from the Chief Financial Officers (CFOs) of the respective
corporations:
- Unilever: “Finance plays a critical role across every aspect of our business. We enable
the business to turn our ambition and strategy into sustainable, consistent and superior
performance” - Jean-Marc Huët (Unilever)

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 - Jollibee: “It’s very exciting because you are not just thinking of today but what the
company will need in the future” - Ysmael V. Baysa (Morales, 2013)
- Globe Telecom: “Yesterday’s solutions are never adequate for the future” - Albert De
Larrazabal (Klobucher, 2015)
- SM Corporation: “Now, we don’t go out because we need funds. We go out because it’s
an opportunity.” – Jose T. Sio (Montealegre, 2015)
2. Reflect on the quotes cited how critical and dynamic working in the finance field is.

What is It

Fantastic! The previous lesson gave us the idea about the corporate organization structure.
So now, let us discuss the functions of a financial manager.
Functions of a Financial Manager
Identify the four functions of a VP for finance (CFO) as follows:
- Financing
- Investing
- 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.).

Take Note!
Financing – to determine the appropriate
capital structure of the company and to
raise funds from debt and equity.

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:

21
 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.
Accordingly, the capital structure is 60% debt and 40% equity.

Is there an ideal mix of debt and equity across corporations?

No. 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.
Moreover, the advantages of debt and equity financing will be discussed in Lesson 5:
Sources and Uses of Funds.
Previously, you learned investing as 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 which will be
discussed in Lesson 3: Financial Planning Tools and Concepts.

22
 • Moreover, the company should choose which type of investment it should
invest in that would provide an most optimal risk and return trade off. We
will learn more about this on Lesson 6: Introduction to investments.
- 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 and will be further discussed in Lesson 5: Basic
Long Term Financial Concepts. 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.

Take Note!
A. Investing
• Short term investments:
1. Plan for expected excess in cash using Financial Planning tools such as budgeting
and forecasting
2. Choose which type of investment should it invest in that would secure the best
profits
• Long term investments:
Prepare a capital budgeting analysis to determine if the long term investment will be
profitable
B. Operating - determine how to finance working capital accounts such as accounts
receivable and inventories (short term vs. long term)

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?
- 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 long-term loans.
Hence, this would lead to a lower financing cost.
- Suppliers’ credit are the amounts owed to suppliers for the inventories they
delivered or services they provided. While suppliers’ credit is generally free of
interest charges, the obligations with them have to be paid on time to maintain good
supplier relationship. Such relationships should be nurtured to ensure timely
delivery of inventories.
- Short term sources pose a trade-off between profitability and liquidity risk.
Because this source matures in a short period, there is a possibility that the company
may not be able to obtain enough cash to pay their obligation (i.e. liquidity risk).
- 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

23
 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.
- Hence, the choice between short and long term sources depends on the risk and
return trade off that management is willing to take. Moreover, you will learn more
about this on Chapter 4: Sources and uses of funds.

Take Note!
There are two types of liquidity risk:
A. Risk that the company will fail to pay its short term obligations.
B. Risk that you will not be able to sell investments in financial assets
immediately.

Dividend Policies. 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 will affect the decision of management in paying dividends? Dividends come from
the company’s cash and availability of unrestricted retained earnings.
- Availability of financially viable long-term investment
- Access to long term sources of funds
- Management’s Target Capital structure

Take Note!
Dividend Policies - These determine
when the company should declare cash
dividends.

24
 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, a company which has 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 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. Hence, the need for equity financing (e.g. internally generated funds or
issuance of new shares).
- Examples of these companies are publicly listed companies such as 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).

For companies which have limited access to capital and have target capital structure, they
may end up with a residual dividend policy. This means that when companies are faced with
investment opportunities, internally generated funds will be used first to finance these investments
and dividends can only be declared if there are excess funds.

25
 What I Have Learned

Awesome! Now, let us check your understanding based on the discussions about
identifying the roles in a corporate organization structure. Answer all the activities below and let
us see how much you have learned.

Activity 5: “Fill Me!”

1. Explain why shareholder wealth maximization should be the overriding objective of

management.
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________

2. What other positions can you think of that are related to financial management?
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________

26
 The Concept of a Financial System

The proper circulation of funds in an economy is necessary for the economic development
of the country. Effective circulation and utilization of funds leads to the industrial development of
the country thereby supporting the economic growth. If the funds are not effectively circulated in
an economy, then the funds will be frizzed which will negatively affect in the economic
development thereby blocking the establishment and growth of industries. Along with the effective
circulation, effective utilization of funds is also equally important. The economic development
could not be possible if the circulated funds are not properly utilized in the productive sectors.
Financial system helps to circulate the funds in an economy.
A system that aims at establishing and providing a regular, smooth, efficient and cost
effective linkage between depositors and investors is known as financial system.
An efficient financial system not only encourages savings and investments, it also
efficiently allocates resources in different investment avenues and thus accelerates the rate of
economic development.

What’s In

Hello! How are you? I am glad that you are excited to take this module as you continue
this subject. Let us first review our previous topic through this activity.
Activity 6: “Savings and Shortages”
Procedure:
1. Recall from the previous topics that one of the functions of a financial manager is financing and
investing of funds.
2. Suppose learner (A) present a scenario that during his/her management of money, some cash
will remain. What he/she should do with that cash?
- Save or Invest
3. If you are going to save your money, where would you keep it?
- Banks, Piggy bank, Investments – stocks, mutual funds, insurance
4. Suppose learner (B) had the business running and is profitable for some time. B then decides to
expand his/her business but does not have enough cash to pay for the expansion. Where can B get
the additional funding?
- Ask from parents, ask from friends, banks, lending institutions.
5. Suppose B knew that A had excess money and approached A to lend him/her the capital he/she
needs to expand his/her business for a 20% interest. Since A observed that B’s business has been
profitable, A is willing to lend B the money since he/she is confident that B can repay his loan. A
is now expecting to be 20% richer from his lending to B and B can now expand his operations to
gain more profit from his business.

27
6. This scenario where the lender and the borrower are present at the right time and at the right
place may not happen all the time. In fact, it seldom happens. What happens if they did not meet?
A will not be able to find someone to invest his money to and B cannot get funds to start his
expansion. Here is where the Financial System comes in.

What’s New

Great start! You are now motivated to proceed to the next level of learning. In this part
of module, you will learn the concept of saving and investing.
Let’s have a short activity. I hope this will awaken your interest about the topic. Enjoy!
Activity 7: “Savers or Users?”
Materials: Module, two boxes, extra paper, pen
Procedure:
1. Draw two boxes and label with names of learners A and B. Below [A], write “Saver”, and below
[B], write “users of funds”.
2. If A knows that B is in need of funds, or if B knows that A is willing to invest funds, A and B
may agree to make a Private Placement. . (Draw the box for Private Placement between A and B
and link the boxes as shown in Figure 1.)
3. However, if these facts are unknown to them, A and B can go to a Financial Market which is
an organized forum that lets A, along with other suppliers of funds, and B, along with other users
of funds, meet and make transactions. Once A and B have met in the Financial Market, they can
now agree to make a private placement. (Draw the box for Financial Markets and link this to A
and B as shown in Figure 1.)
4. If A and B do not want to make an effort to find a counterparty in the Financial Markets, A and
B may go to a Financial Institution. A Financial Institution will receive A’s supply of funds and
match it with B’s demand of funds. Unlike the Financial Markets were A and B knows to whom
the fund went and from whom the funds came, Financial Institutions serve as an intermediary to
the suppliers and users of funds. (Draw the box for Financial Institutions and link this to A and B
as shown in Figure 1.)
5. Moreover, Financial institutions actively participate in the financial markets as both suppliers
and users of funds. (Draw the link between Financial Institutions and Financial Markets as shown
in Figure 1.)
6. The resulting diagram illustrates the Financial System.

28
 Take Note!
Financial Markets – organized forums in which
the suppliers and users of various types of funds
can make transactions directly.
Financial Institutions – intermediaries that
channel the savings of individuals, businesses, and
governments into loans or investments.
Private Placements - the sale of a new security
directly to an investor or group of investors.
Public Offering - The sale of either bonds or
stocks to the general public.
Financial Instruments – is a real or a virtual
document representing a legal agreement
involving some sort-of monetary value (Source:
Investopedia - Sharper Insight. Smarter Investing.
| Investopedia. (2016). Investopedia. Retrieved 8
May 2016, from http://investopedia.com). These
can be debt securities like corporate bonds or
equity like shares of stock.

Financial System

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?
- Verbal agreement

29
 - Written agreement
Due to the increased need for security for the performance of obligations arising from these
transactions and due to the growing size of the financial system, the transfers of funds from one
party to another are made through Financial Instruments.
Note that on the diagram presented, the solid lines represent the flow of cash/funds, while
the broken lines represent the flow of financial instruments which represent obligations to transfer
cash or other assets in the future.

What is It

Good Job! In the latter activity it gave you knowledge on the concept of saving and
investing. Now, let us begin the discussion on the concept of financial system.

The composition of the Financial System and identify the types of Financial Markets,
Financial Institutions and Financial Instruments
1. 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.

Recall from ABM1 the following definitions:

- A Financial Asset is 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 favorable. (IAS 32.11)
• Examples: Notes Receivable, Loans Receivable, Investment in Stocks,
Investment in Bonds
- A 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 unfavorable. (IAS 32)
• Examples: Notes Payable, Loans Payable, Bonds Payable
- An Equity Instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all liabilities. (IAS 32)

30
 • Examples: Ordinary Share Capital, Preference Share Capital
Who are the holders of Financial Assets?
- Suppliers of Funds
Who are the makers of Financial Liabilities and Equity instruments?
- Users of Funds
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 hopes of receiving returns through interest, dividend income or appreciation in the
financial asset’s price.
Identify common examples of Debt and Equity Instruments.
- Debt Instruments generally have fixed returns due to fixed interest rates.
Examples of debt instruments are as follows:
• Treasury Bonds and Treasury Bills are issued by the Philippine
government. These bonds and bills have usually low interest rates and have
very low risk of default since the government assures that these will be paid.
• Corporate Bonds are issued by publicly listed companies. These bonds
usually have higher interest rates than Treasury bonds. However, these
bonds are not risk free. If the company which issued the bonds goes
bankrupt, the holder of the bonds will no longer receive any return from
their investment and even their principal investment can be wiped out.
- Equity Instruments generally have varied returns based on the performance of
the issuing company. Returns from equity instruments come from either dividends
or stock price appreciation. The following are types of equity instruments:
• Preferred Stock has priority over a common stock in terms of claims over
the assets of a company. This means that if a company were to be liquidated
and its assets have to be distributed, no asset will be distributed to common
stockholders unless all the claims of the preferred stockholders have been
given. Moreover, preferred stockholders have also priority over common
stockholders in cash dividend declaration. Dividends to preferred
stockholders are usually in a fixed rate. No cash dividends will be given to
common stockholders unless all the dividends due to preferred stockholders
are paid first. (Cayanan, 2015)
• Holders of Common Stock on the other hand are the real owners of the
company. If the company’s growth is spurring, the common stockholders
will benefit on the growth. Moreover, during a profitable period for which
a company may decide to declare higher dividends, preferred stock will
receive a fixed dividend rate while common stockholders receive all the
excess.
Which of the financial instruments presented you find most appealing?
Moreover, you will learn more about the advantages and disadvantages of debt and equity
instruments in Lesson 4: Sources and Uses of Funds and Lesson 5: Introduction to Investments.

31
2. Financial Markets
Recall the definition of financial markets from earlier topic.
Classify Financial Markets into comparative groups:
- Primary vs. Secondary Markets
• To raise money, users of funds will go to a primary market to issue new
securities (either debt or equity) through a public offering or a private
placement.
• The sale of new securities to the general public is referred to as a public
offering and the first offering of stock is called an initial public offering.
The sale of new securities to one investor or a group of investors
(institutional investors) is referred to as a private placement.
• However, suppliers of funds or the holders of the securities may decide to
sell the securities that have previously been purchased. The sale of
previously owned securities takes place in secondary markets.
• The Philippine Stock Exchange (PSE) is both a primary and secondary
market.
- Money Markets vs. Capital Markets
• Money markets are a venue wherein securities with short-term maturities
(1 year or less) are sold. They are created because some individuals,
businesses, governments, and financial institutions have temporarily idle
funds that they wish to invest in a relatively safe, interest-bearing asset. At
the same time, other individuals, businesses, governments, and financial
institutions find themselves in need of seasonal or temporary financing.
• On the other hand, securities with longer-term maturities are sold in
Capital markets. The key capital market securities are bonds (long-term
debt) and both common stock and preferred stock (equity, or ownership).

Take Note!
Primary Market - Financial market in which securities are
initially issued; the only market in which the issuer is
directly involved in the transaction.
Public offering - The sale of either bonds or stocks to the
general public.
Private placement - The sale of a new security directly to an
investor or group of investors.
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.

32
3. Financial Institutions
Recall the definition of Financial institutions from the earlier topic.
Identify examples of financial institutions:
- Commercial Banks - Individuals deposit funds at commercial banks, which use
the deposited funds to provide commercial loans to firms and personal loans to
individuals, and purchase debt securities issued by firms or government agencies.
- Insurance Companies - Individuals purchase insurance (life, property and
casualty, and health) protection with insurance premiums. The insurance
companies pool these payments and invest the proceeds in various securities until
the funds are needed to pay off claims by policyholders. Because they often own
large blocks of a firm’s stocks or bonds, they frequently attempt to influence the
management of the firm to improve the firm’s performance, and ultimately, the
performance of the securities they own.
- Mutual Funds - Mutual funds are owned by investment companies which enable
small investors to enjoy the benefits of investing in a diversified portfolio of
securities purchased on their behalf by professional investment managers. When
mutual funds use money from investors to invest in newly issued debt or equity
securities, they finance new investment by firms. Conversely, when they invest in
debt or equity securities already held by investors, they are transferring ownership
of the securities among investors.
- Pension Funds - Financial institutions that receive payments from employees and
invest the proceeds on their behalf.
- Other financial institutions include pension funds like Government Service
Insurance System (GSIS) and Social Security System (SSS), unit investment trust
fund (UITF), investment banks, and credit unions, among others.

33
 The figure above illustrates how the key financial institutions serve as intermediaries for
suppliers and users of funds.
Which type of financial institution do you think is most critical for firms?

What I Have Learned

Amazing! You did well. Now, try this next activity to check your knowledge about what
has been discussed in this module.
Keep moving. Do not get bored because you are almost done.
Activity 8: “Let’s Reflect!
How would you relate the role of financial managers, role of financial markets and role of
investors?
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________

34
 Assessment

Bravo! You have come this far. Before we end this module, let us evaluate what you have
learned about finance and key concept by answering the following questions below.
Test I. True or False. Goal of the Firm (Gitman & Zutter, 2012). Read and understand the
questions carefully. Write true if the statement is correct and false if the statement is wrong.
Write the correct answer on the space provided before each number.
_____1. High cash flow is generally associated with a higher share price whereas higher risk tends
to result in a lower share price.
_____2. When considering each financial decision alternative or possible action in terms of its
impact on the share price of the firm's stock, financial managers should accept only those actions
that are expected to increase the firm's profitability.
_____3. To achieve the goal of profit maximization for each alternative being considered, the
financial manager would select the one that is expected to result in the highest monetary return.
_____4. Dividend payments change directly with changes in earnings per share.
_____5. The wealth of corporate owners is measured by the share price of the stock.
_____6. Risk and the magnitude and timing of cash flows are the key determinants of share price,
which represents the wealth of the owners in the firm.
_____7. When considering each financial decision alternative or possible action in terms of its
impact on the share price of the firm's stock, financial managers should accept only those actions
that are expected to maximize shareholder value.
_____8. An increase in firm risk tends to result in a higher share price since the stockholder must
be compensated for the greater risk.
_____9. Stockholders expect to earn higher rates of return on investments of lower risk and lower
rates of return on investments of higher risk.

Test II. Multiple Choice. Read and understand each item very carefully. Then, encircle the
letter of the correct answer.
1. The primary goal of the financial manager is
A. minimizing risk.
B. maximizing profit.
C. maximizing wealth.
D. minimizing return.
2. Corporate owner's receive realizable return through
A. earnings per share and cash dividends.
B. increase in share price and cash dividends.
C. increase in share price and earnings per share.

35
 D. profit and earnings per share.
3. The wealth of the owners of a corporation is represented by
A. profits.
B. earnings per share.
C. share value.
D. cash flow.
4. Wealth maximization as the goal of the firm implies enhancing the wealth of
A. the Board of Directors.
B. the firm's employees.
C. the federal government.
D. the firm's stockholders.
5. The goal of profit maximization would result in priority for
A. cash flows available to stockholders.
B. risk of the investment.
C. earnings per share.
D. timing of the returns.
6. Profit maximization as a goal is not ideal because it does NOT directly consider
A. risk and cash flow.
B. cash flow and stock price.
C. risk and EPS.
D. EPS and stock price.
7. Profit maximization as the goal of the firm is not ideal because
A. profits are only accounting measures.
B. cash flows are more representative of financial strength.
C. profit maximization does not consider risk.
D. profits today are less desirable than profits earned in future years.
8. Profit maximization fails because it ignores all EXCEPT
A. the timing of returns.
B. earnings per share.
C. cash flows available to stockholders.
D. risk.
9. The key variables in the owner wealth maximization process are
A. earnings per share and risk.
B. cash flows and risk.

36
 C. earnings per share and share price.
D. profits and risk.
10. Cash flow and risk are the key determinants in share price. Increased cash flow results in
________, other things remaining the same.
A. a lower share price
B. a higher share price
C. an unchanged share price
D. an undetermined share price
11. Cash flow and risk are the key determinants in share price. Increased risk, other things
remaining the same, results in
A. a lower share price.
B. a higher share price.
C. an unchanged share price.
D. an undetermined share price.
12. Financial managers evaluating decision alternatives or potential actions must consider
A. only risk.
B. only return.
C. both risk and return.
D. risk, return, and the impact on share price.
13. 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.
Based on the profit maximization goal, the financial manager would choose

A. Asset 1.
B. Asset 2.
C. Asset 3.
D. Asset 4.

14. 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

37
 A. choose Asset 1.
B. choose Asset 2.
C. choose Asset 3.
D. be indifferent between Asset 1 and Asset 2.
Test III. True or False. Financial Markets, Financial Institutions, Financial Instruments
(Gitman & Zutter, 2012). Read and understand the questions carefully. Write true if the
statement is correct and false if the statement is wrong. Write the correct answer on the space
provided before each number.
_____1. Primary and secondary markets are markets for short-term and long-term securities,
respectively.
_____2. Financial markets are intermediaries that channel the savings of individuals, businesses,
and government into loans or investments.
_____3. The money market involves trading of securities with maturities of one year or less
while the capital market involves the buying and selling of securities with maturities of more
than one year.
_____4. Holders of equity have claims on both income and assets that are secondary to the
claims of creditors.
_____5. Preferred stock is a special form of stock having a fixed periodic dividend that must be
paid prior to payment of any interest to outstanding bonds.
_____6. Commercial banks obtain most of their funds from borrowing in the capital markets.
_____7. Credit unions are the largest type of financial intermediary handling individual savings.
_____8. A mutual fund is a type of financial intermediary that obtains funds through the sale of
shares and uses the proceeds to acquire bonds and stocks issued by various business and
governmental units.
_____9. IPO stands for Interest and Principal Obligation.
Test IV. Multiple Choice. Read and understand each item very carefully. Then, encircle the
letter of the correct answer.
1. 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.
A. life insurance company
B. commercial bank
C. savings bank

38
 D. credit union
2. The key participants in financial transactions are individuals, businesses, and governments.
Individuals are net ______ of funds, and businesses are net ______ of funds.
A. suppliers; users
B. purchasers; sellers
C. users; suppliers
D. users; providers
3. 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
4. A ______ is set up so that employees of corporations or governments can receive income after
retirement.
A. life insurance company
B. pension fund
C. savings bank
D. credit union
5. A ______ 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.
A. mutual fund
B. savings and loans
C. savings bank
D. credit union
6. Most businesses raise money by selling their securities in a.
A. a direct placement.
B. a stock exchange.
C. a public offering.
D. a private placement.
7. Which of the following is not a service provided by financial institutions?
A. Buying the businesses of customers
B. Investing customers’ savings in stocks and bonds
C. Paying savers’ interest on deposited funds
D. Lending money to customers
8. Government usually
A. borrows funds directly from financial institutions.

39
 B. maintains permanent deposits with financial institutions.
C. is a net supplier of funds.
D. is a net demander of funds.
9. By definition, the money market involves the buying and selling of
A. funds that mature in more than one year.
B. flows of funds.
C. stocks and bonds.
D. short-term funds.
10. The ______ is created by a financial relationship between suppliers and users of short-term
funds.
A. financial market
B. money market
C. stock market
D. capital market
11. Firms that require funds from external sources can obtain them from
A. financial markets.
B. private placement.
C. financial institutions.
D. All of the above.
12. The major securities traded in the capital markets are
A. stocks and bonds.
B. bonds and commercial paper.
C. commercial paper and Treasury bills.
D. Treasury bills and certificates of deposit.
13. Long-term debt instruments used by both government and business are known as
A. bonds.
B. equities.
C. stocks.
D. bills.

Great work in finishing the quiz! You have worked really hard to get this far. You are
amazing!

Here are your 5 stars for a job well done. You are
now ready to answer the next module on financial
planning tools and concept.

40
 41
Assessment Assessment
III. I.
1. False 1. True
2. False 2. False
3. True 3. True
What I Have Learned
4. True 4. False Activity 8: “Let’s Reflect!”
5. False 5. True
6. False 6. True
7. False 7. True
8. True 8. False
9. False 9. False
II. II.
1. A 1. C
2. A 2. B What I Know
3. B 3. C What I Have Learned I.
4. B 4. D Activity 5: “Fill Me!” 1. True
5. A 5. C 2. 2. False
6. C 6. A Treasurer 3. True
7. A 7. C Controller 4. False
8. D 8. B 5. True
9. D What I Have Learned
9. B II.
Activity 3: “Fill Me!”
10. B 10. B 1. B
1. (Possible answer)
11. D 11. A 2. D
Ethics
12. A 12. D 3. A
Corporate Social Responsibilities
13. A 13. B 4. C
Employee Relationships
14. A 5. B
Answer Key
References

https://oldpodcast.com/why-personal-finance/
https://www.extension.iastate.edu/agdm/wholefarm/html/c5-111.html
https://study.com/academy/lesson/team-members-in-an-organization-roles-responsibilities-
characteristics.html
http://itheamc.blogspot.com/2017/12/financial-system-meaning-definition.html
https://www.slideshare.net/AshishHande/financial-systems-and-markets-concept-nature-and-scope-of-
financial-services-regulatory-framework-for-financial-service
file:///F:/Business%20Finance.pdf (Business Finance Teaching Guide pp. 1-36)

images
https://pin.it/oTRIIwu
https://pin.it/4ftoEIE
https://pin.it/3B7GGIP
https://pin.it/3X7cXr4
https://www.pinterest.ph/

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