Reviewer for Finance 1 (Module 1 and 2)
management of a person's assets and
Module 1 Part 2- OVERVIEW OF FINANCE
 What is Finance?
 fi·nance | \ fə-ˈnan(t)s
 1. (noun)
 money or other liquid resources of a
government, business, group, or individual
 the system that includes the circulation of
money, the granting of credit, the making of
investments, and the provision of banking
facilities
 the science or study of the management of
funds
 2. (verb)
 to raise or provide funds or capital for
 Finance
 Finance is defined as the management of
money and includes activities such as investing,
borrowing, lending, budgeting, saving, and
forecasting (1)
 Finance is a term for matters regarding the
management, creation, and study of money and
investments.
Module 1 Part 2- OVERVIEW OF FINANCE
 AREAS OF FINANCE
 PRIVATE/PERSONAL FINANCE
 CORPORATE / BUSINESS FINANCE
 PUBLIC/GOVERNMENT FINANCE
 PERSONAL FINANCE
 management of someone’s income which
he/she is earning, or of someone’s
expenses, their investments they have
made in the market, and obligations.

debts
 CORPORATE/BUSINESS FINANCE
 It refers to the financial activities related to
running a corporation (1)
 It is concerned with the effective use of
money for commercial purposes. It
determines how a corporation raises the
funds it needs to conduct business, as well
as how it will reinvest its profits or
distribute them to shareholders
 NON-PROFIT FINANCE
 management of money for a nonprofit
organization
 nonprofits are focused on the efficient use
of money to grow their organization and
better fulfill their mission
 PUBLIC FINANCE
 is the management of funds for public use
 is the study of the financial activities of
governments and public authorities. It
describes and analyzes the expenditures of
government and the techniques used by
governments to finance its expenditures
 IMPORTANCE OF PERSONAL FINANCE
 Ensures That You Meet Your Needs
 Easily Manage Your Income
 Budgeting, Spending, and Saving
 Cash Flow
 Offering Family Security
 Offers Better Financial Understanding
 Keeps You Off Unmanageable Debts
 Growing Your Assets
 Raising Your Standards of Living
 IMPORTANCE OF PUBLIC FINANCE
 Steady state economic growth
 Price stability
 Economic stability
 Equitable distribution
 Proper allocation of resources
 Balanced development
 Promotion of export
 Infrastructural development
 IMPORTANCE OF CORPORATE FINANCE
 Managing Risk
 Decision Making
 Research and Development
 Minimizing Manufacturing Cost
 Raising Capital
  Effective Functioning
 Growth and Diversification
 Short Term and Long Term Goals
 Marketing a Company / Product
 Dividend and Interest
 IMPORTANCE OF FINANCE TO NON-FINANCE
MANAGERS
 Analyze Financial Statements
 Understand the nature of cost and ways to
reduce cost
 Take decision regarding price
 Decide a product mix and opt for the best
suited option of financing the need
 Reducing risk in their day-to-day activities
 Simplest types of organizational structures
 Authority flows from top to bottom
 TEAM-BASED ORGANIZATIONAL STRUCTURE
 made of teams working towards a common
goal while working on their individual tasks
 FINANCE IN ORGANIZATIONAL STRUCTURE
 IMPACT ON LEADERSHIP
 IMPACT ON THE MANAGEMENT
 IMPACT ON THE EMPLOYEES
 ORGANIZATIONAL STRUCTURE AND
ADAPTABILITY
 LEGAL FORMS OF BUSINESS ORGANIZATIONS
 SOLE PROPRIETORSHIP
 Business structure owned by an individual
who has full control/authority of its
business and owns all the assets, personally
owes answers to all liabilities or suffers all
losses but enjoys all the profits to the
exclusion of others
 Must apply for a business name and be
registered with the Department of Trade
and Industry (DTI)

 ISSUES OF SOLE PROPRIETORSHIP

 TYPES OF ORGANIZATIONAL STRUCTURES
 HIERARCHICAL STRUCTURE ISSUES SOLE PROPRIETORSHIP
 Employees are grouped with every Liability of Owners The owner is personally
employee having one clear supervisor liable for all the
 Function, Geography, Product obligations of the sole
 MATRIX STRUCTURE proprietorship.
 People with similar skills are pooled for
work assignments, resulting in more than Tax Treatment Taxed as individuals. The
one manager to report to percentage ranges from
5%-32% depending on
 HORIZONTAL / FLAT STRUCTURE
the taxable amount.
 Mostly adopted by small companies and
Control and The owner has full
start-ups in their early stage Management control of the business.
 many levels of middle management are Ease of Raising Capital Limited by the credit-
eliminated worthiness of the owner.
 NETWORK STRUCTURE Ease of Establishment Sole Proprietorships are
 Structure relies on open communication the easiest to establish as
and reliable partners; both internal and only registration with the
external DTI is required.
 DIVISIONAL STRUCTURE
 Each organizational function has its own
division which corresponds to either
products or geographies
 LINE ORGANIZATIONAL STRUCTURE
 PROS & CONS OF SOLE PROPRIETORSHIP  ISSUES OF PARTNERSHIP

PROS CONS ISSUES PARTNESHIP

 The owner × The owner incurs Liability of Owners Partners are personally
enjoys all the all the losses liable for all the
profits of the obligations of the
business partnership.
Tax Treatment Generally, fixed at 30% of
 Quick Decision × Unlimited net income
Making liability Control and Management is directed
 in case the Management by the partners holding a
business runs majority stake.
bankrupt, the Ease of Raising Capital Partners jointly raise
assets of the capital for the business
business owner and agree on
will be sold to contribution and sharing.
clear off the Ease of Establishment Partnerships are
debts registered with the
SEC. BIR registration and
 Easy to Manage × The business local business permits
owner pays are also required. Joint
personal income Ventures are not
taxes on the required to be
business net registered. They may be
profits. created by agreement of
the parties.
 Flexibility  PROS & CONS OF PARTNERSHIP

 Easy to Start PROS CONS

 Easy to start × Unlimited
liability
 in case the
 PARTNERSHIP (JOINT VENTURES) business runs
 Formed when two or more persons bind bankrupt, the
themselves to contribute money, property or personal assets
industry to a common fund with the intention of the partners
of dividing the profits and ownership among are at risk of
themselves getting sold to
 Under the Civil Code of the Philippines, a clear off the
debts
partnership is treated as juridical person, having
 Requires Less × Internal
a separate legal personality from that of its
Capital Wrangles /
members. Disputes
 A partnership with more than PHP3,000 capital
must register with the Securities and Exchange  Consultation
Commission (SEC) must apply for a business between the
name and be registered with the Department of partners
Trade and Industry (DTI)  Quick Decision
Making
 PARTNERSHIP  ISSUES IN CORPORATION
 General Partnerships - partners have unlimited
ISSUES PARTNESHIP
liability for the debts and obligation of the
Liability of Owners Limited to their share in
partnership
the capital.
 Limited Partnerships - one or more general
Tax Treatment Generally, fixed at 30% of
partners have unlimited liability and the limited net income
partners have liability only up to the amount of Control and Controlled by Board of
their capital contributions Management Directors which are
elected by the
shareholders.
Ease of Raising Capital Various options in
raising capital such as
equity financing, debt
financing, stock-option
plan, debt-to-equity
conversion, etc.
Ease of Establishment Corporations are
registered with the SEC.
BIR registration and local
business permits are also
required. The SEC and
the BIR require annual
reports in the form of
General Information
Sheets and Financial
 CORPORATION Statements.
 Owned by several people, called shareholders,
and has a personality separate and distinct from
 PROS & CONS OF CORPORATION
them
 Composed of juridical persons established PROS CONS
under the Corporation Code and regulated by  Owners have × Setting up is very
the SEC limited liability expensive
 It consists of at least 5 to 15 incorporators, each  Possibility to × Starting a
of whom must hold at least one share. lower taxes corporation
Minimum paid up capital is PHP5,000. involves a lot of
 A corporation can either be stock or non-stock paperwork
company regardless of nationality.  Benefits may be × Entitled to pay
 If 60% Filipino – 40% foreign-owned is deducted as taxes
business
considered a Filipino corporation
expenses
 If more than 40% foreign-owned, it is
 Ownership of a × Slow decision
considered a domestic foreign-owned corporation is making
corporation easily
transferable
 COOPERATIVES
 or co-op, as “an autonomous association of
persons united voluntarily to meet their
common economic, social, and cultural needs
and aspirations through a jointly-owned and
democratically controlled enterprise.”
 cooperatives are created by people who have a
specific need and who are willing to work
together to operate and organize a company
that will meet that
Module 2 Concepts of Money
 Money
 commonly referred to as currency
 economic unit that functions as a generally
recognized medium of exchange for
transactional purposes in an economy
 market-determined, officially issued legal
tender or fiat moneys, money substitutes and
fiduciary media, and electronic cryptocurrencies
 Evolution of Money
I. Commodity Money
 any commodity that was generally
demanded and chosen by common
consent was used as money
 goods like furs, skins, salt, rice, wheat,
utensils, weapons etc. were commonly
used as money
 ‘Barter Exchange’ - system of exchange
where participants in a transaction
directly exchange goods or services for
other goods or services without using a
medium of exchange, such as money
 Advantages
 it can be utilized when money is
in short supply
 when there is little information
about the credit worthiness of
trade partners
 when there is a lack of trust
between those trading
 Limitations
 There needs to be a 'double
coincidence of wants‘
 There is no common measure
of value
 Indivisibility of certain goods
 Lack of standards for deferred
payments
 Difficulty in storing wealth
II. Metallic Money
 metals like gold, silver, copper, etc.
were used as they could be easily
handled and their quantity can be easily
ascertained
 it was the main form of money
throughout the major portion of
recorded history
 Sometime around 770 B.C., the Chinese
moved from using actual usable
objects–such as tools and weapons–as a
medium of exchange to using miniature
replicas of these same objects that had
been cast in bronze. Eventually
abandoned for objects in the shape of a
circle.
 First Official Currency Is Minted
 European region called Lydia (now
western Turkey)
 In 600 B.C., Lydia's King Alyattes minted
the first official currency. The coins
were made from electrum, a mixture of
silver and gold that occurs naturally,
and the coins were stamped with
pictures that acted as denominations.
 In the streets of Sardis, in
approximately 600 B.C., a clay jar might
cost you two owls and a snake.
 Lydia's currency helped the country
increase both its internal and external
trading systems, making it one of the
richest empires in Asia Minor.
III. Paper Money
 around 700 B.C., the Chinese moved
from coins to paper money.
 by the time Marco Polo–the Venetian
merchant, explorer, and writer who
travelled through Asia along the Silk
 Road between A.D. 1271 and 1295–
visited China in approximately A.D.
1271, the emperor of China had a good
handle on both the money supply and
various denominations
IV. Credit Money
 The first paper currency issued by
European governments was actually
issued by colonial governments in North
America.
 Because shipments between Europe
and the North American colonies took
so long, the colonists often ran out of
cash as operations expanded.
 Instead of going back to a barter
system, the colonial governments
issued IOUs that traded as a currency.
 The first instance was in Canada (then a
French colony). In 1685, soldiers were
issued playing cards denominated and
signed by the governor to use as cash
instead of coins from France.
V. Plastic Money
 Latest type of money is plastic money in
the form of Credit cards and Debit
cards.
 They aim at removing the need for
carrying cash to make transactions
 Plastic cards began to be used widely
after 1970 when the specific standards
were set for a magnetic strip.
 In 1981, the concept of Credit cards was
introduced in India and was on the
verge of an exceptional boom.
Advantages Disadvantages
Convenience Shops using other
Vendors
Check Counterfeiting Less Availability
Long life of Plastic An issue with Magnetic
Currency Notes Strip
Check on Black Money Increased Debt and rates
of high-interest
Supports Growth of E- Fraud
commerce
Power of Purchasing
Time-Saving
Safety
VI. Electronic Money
 A novel form of currency that rise in
21st century
 Mobile payments are money rendered
for a product or service through a
portable electronic device, such as a cell
phone, smartphone, or a tablet device
 Mobile payment technology can also be
used to send money to friends or family
members
 Electronic money refers to money that
exists in banking computer systems that
may be used to facilitate electronic
transactions
VII. Virtual Currency
 type of unregulated digital currency
that is only available in electronic form
 It is stored and transacted only through
designated software, mobile or
computer applications, or through
dedicated digital wallets, and the
transactions occur over the internet
through secure, dedicated networks
 considered to be a subset of the digital
currency group, which also includes
cryptocurrencies, which exist within the
blockchain network
 Bitcoin, released in 2009 by the
pseudonymous Satoshi Nakamoto,
quickly became the standard for virtual
currencies.
 appeal of virtual currency is it offers the
promise of lower transaction fees than
traditional online payment
mechanisms, and virtual currencies are
operated by a decentralized authority,
unlike government-issued currencies
 Example of Virtual Currency:
 Functions of Money
I. Medium of Exchange
 use of money as a medium of exchange
overcomes the drawbacks of barter
 money provides the most efficient
means of satisfying wants of the
individual
II. Unit of Account
 money can be used to keep track of the
money gained or lost across multiple
transactions, and to compare money
values of various combinations of
different quantities of different goods
and services mathematically
 makes things such as accounting for
profit and loss of a business, balancing a
budget, or valuing the total assets of a
company all possible
III. Store of Value
 provides a means to store value
obtained through current production or
trade for use in the future in the form
of other goods and services
 facilitates saving for the future and
engaging in transactions over long
distances possible
IV. Standard of Deferred Payment
 used to transfer value for exchange use
at different times between people
through the tools of credit and debt
 one person can loan a quantity of
money to another for a period of time
to use, and repay another agreed-upon
quantity of money at a future date
Others in Video Clip
 1st Video- Bangko Sentral ng Pilipinas (bsp.gov.ph)
THE COLOR OF MONEY
 This video features a short history of the
Philippine Peso and explains BSP’s general
procedure of printing money and changing the
designs of its currency. It also answers the
question, “Why can’t BSP just print a lot of
money?” Finally, it shows the salient design and
security features of the New Generation
Currency banknotes.
 Printing Our Money
 1st in the DEPARTMENT OF ECONOMIC
RESEARCH the currency demand based
on the price movement as well as the
growth of population and economy.
 After this, the cash department places
the order of SECURITY PLANT COMPLEX
which procures the needed material to
produce and print the banknotes
 Next in the BSP NUMISMATIC
COMMITTEE and MONETARY BOARD
 When the design of banknotes was
change, final approval of THE
PRESIDENT is required. From the
Approved design, the prototype
banknotes was prepared.
 Process of Banknotes:
 Plate Making
 Special Security Paper with 80%
Cotton and 20% Philippine ABACA
 Offset Printing with 15 to 20 colors
to design
 Intaglio printing
 Cutting and Finishing after
checking the banknotes and their
serial number.
 1 Box with 100,000 pieces each
 These are now delivered by
SECURITY PLAN COMPLEX to
CURRENCY MANAGEMENT GROUP
and go BANKS and find their way
to the ECONOMY in our wallets.
 2 Video- Bangko Sentral ng Pilipinas Coins And
nd
Notes - Polymer Banknotes (bsp.gov.ph) SMARTER,
CLEANER, and STRONGER: THE 1000-PISO
POLYMER BANKNOTE
 Efforts against counterfeiting respond to
pressing public health and safety concerns due
to the COVID-19 pandemic and promote
environmental sustainability
 The BSP will release the new banknote in
phases starting on April 2022
 COMPLEX DESIGN AND SECURITY FEATURES-
Advanced technology intricate design and
complex features make counterfeiting
significantly more difficult or CHALLENGING and
costly.
 SECURITY FEATURES:
 Sampaguita clear window
 Serial Numbers
 Shadow Thread
 Vertical Clear Window
  Metallic Features
 Blue Iridescent Figure
 Polymer Substrate
 Tactile dots
 Embossed Prints
 Flying Eagle
 Enhanced Value Panel
 Polymer banknotes can also be sanitized with
less risk of damage, making them cleaner and
more hygienic.
 Polymer banknotes also have a smaller carbon
footprint as their production requires less
water, energy, and other resources
 Polymer banknote can also be MECHANICAL
RECYCLING or recycled into other use of forms
such as compost bins, building components,
furniture, and other household products
 Polymer banknote is STRONGER because it can
last 2.5 to 5 times longer than paper banknotes.
 Given it resistance to water, oil, dirt, and
general wear and tear.
 The lifespan of polymer banknote makes it
more COST-EFFECTIVE in the long run.
 COUNTRY AND OTHER FEATURES:
 RICH CULTURE: FLORA AND FAUNA-
Showcasing
 PHILIPPINE EAGLE: To exemplify the Filipino
strength, courage and love for freedom
 SAMPAGUITA: To symbolized purity and
hope
 SOUTH SEA PEARL, TUBBATAHA REEFS
NATIONAL PARK AND T’NALAK WEAVE
DESIGN to celebrate our natural resources
and culture heritage
 3RD VIDEO- (597) Bigyan ng Sagot, Please! -
Mutilated Banknotes - YouTube MUTILATED
BANKNOTES
 Mga sira sirang perang papel at polymer,
katulad ng nasunog, inanay o nginatngat ng aso.
 May mga halaga pa ba ang mga perang ganito?
Alinsunod sa BSP or BSP Circular No. 829, series
of 2014.
 3 requirements ang BSP upang ang mga sirang
pera ay mapalitan, ito ay ang 3S, Size,
Signature and Security Thread.
 Size- kailangan may natira na atleast 60% ng
nasirang pera
 Signature- kailangan may natirang alin
mang portion o parte ng signature ng BSP
Governor or President of the Philippines.
 Security Thread- Kailangan visible pa din
ito.
 Ano ang mga dapat gawin sa mga Mutilated
Banknote? Dalhin ito sa pinakamalapit na
authorized bank, at dadalhin naman ito ng
bangko sa BSP, upang masuri kung ito ay may
halaga pa. Ang BSP ay magbibigay ng Official
Result sa bangko at ang mga sirang pera na may
halaga pa ay idedeposito ng BSP sa account ng
bangko, upang ang kaukulang halaga ng pera ay
maibalik sa client nila. An pera naman na hindi
pumasa sa requirement ng BSP at wala nang
halaga ay ipagbibigay alam ng bangko sa
kanilang client batay sa inilabas na result ng
BSP.
TRADE NAME
-brand name used for advertising and marketing purposes
-carried from the intn’l name
REGISTERED NAME (LEGAL NAME)
- Used on official documentation
**ex.** BURGER KING -TRADE NAME
but LEGAL TO THE JOLLIBEE FOOD CORP.
If pag nagloan ang magbabayad si Jollibee food corp.
CREDIT WORTHINESS
- If individual is suitable to receive financial
- Ability to pay the loan thru ur income means
- Basis of credit score is base on owners credit worthiness
Ex. Ur business needs some funds, so the owner took a loan
and used for personal use and didn’t pay. Bec. his personal loan
and business isn’t separate coz he’s the business owner.
Maccarry over yung ginawa nya (personally) sa business.
Connected as one (single proprietor)
Be mindful on your credit standing if u have a business or
planning for one.
*Separate personality and distinct from others*
-By this attribute, a stockholder may not generally, be made to
answer for the acts and liabilities of the corporation, and vice
versa. Thus, one significant advantage of setting up a corporation
is this “separate personality”, which insulates and separates
stockholders from the liabilities of the corporation.
ex. utang ng stockholder ay kanya lang at hindi sa corp.