Business

position. This balance is crucial for the long-term

stability and success of the business.

Finance o Allocation of Funds

Once the funds are raised through different

channels the nest important functions is to allocate
Business – business also refers to the efforts and the funds. The funds should be allocated in such a
activities undertaken by individuals to produce and sell manner that they are optimally used.
goods and services for profit.
o Profit Planning
Finance – the system or study of creating circulating,
managing money. Finance is about managing your Profit is essential for a business to survive and
money – knoqing what’s coming in and going out. thrive. Profit planning involves using profits wisely.
Factors like pricing, competition, the economy, and
production costs all influence a company's
profitability. A good balance of fixed and variable
What is Business Finance?
factors in production can lead to increased profits.
 The raising and managing by business
o Understanding Capital Markets
organizations
This includes a range of activities such as Shares of a company are traded on stock exchange
planning and budgeting, raising capital, and there is a continuous sale and purchase of
managing cash flow, and making financial securities. Hence a clear understanding of capital
decisions that impact profitability. market is an important function of a financial
Who is responsible for Financial Management? manager. When securities are traded on stock
market there involves a huge amount of risk
A financial manager is a person who takes care of all the involved. Therefore a financial manager understands
important financial functions of an organizations. The and calculates the risk involved in this trading of
person in charge should maintain a far sightedness in shares and debentures.
order to ensure that the funds are utilized in the most
efficient manner.

Financial Management

 Financial management is also called managerial

finance, corporate finance, and business
finance, and business finance.
 It’s a decision-making process concerned with
planning, acquiring and utilizing funds in a way
that achieves the firm’s desired goals.
 This process involves evaluating assets,
liabilities, and equity, and making decisions
based on that evaluations.

MAIN FUNCTIONS OF A FINANCIAL MANAGER

o Raising of Funds

Businesses need sufficient cash and liquidity to

meet their obligations. Financial managers must
determine the right balance between debt and
equity financing to ensure a healthy financial
 : Bank of the Philippine Islands
: BDO Unibank, Inc.
: United Coconut Planters Bank
FINANCIAL INSTITUTIONS : China Banking Corporation
: East West Banking Corporation
: Metropolitan Bank and Trust Company
WHAT IS FINANCIAL INSTITUTIONS?
: Philippine National Bank
A financial institution (FI) is a company engaged in the : Philippine Trust Company
business of dealing with financial and monetary
transaction such as deposits, loans, investments, and
 Commercial Banks
currency exchange. Financial Institutions encompass a
broad range of business operations within the financial Commercial banks are privately owned institutions that
services sector including banks, trust companies, accept deposits and lend money to projects to earn
insurance companies , brokerage firms and investments interests. They also offer personal, business, and
dealers. mortgage loans checking accounts services and basic
financial products like savings accounts and certificates
Types of Financial Institutions
of deposits to individuals and businesses. They are
1. Bank primarily owned by shareholders and are profit-based.

A bank is a financial institutions that is licensed to

accept checking and savings deposits and make loans. •Mega International Commercial Bank Co., Ltd.
Bank also provide related services such as individual •The Bank of Tokyo-Mitsubishi UFJ, Ltd.
retirement accounts (IRAs), certificates of deposits •First Commercial Bank, Ltd., - Manila Branch
(CDs), currency exchange and safe deposits boxes. •Cathay United Bank Co., Ltd., - Manila Branch
•Shinhan Bank - Manila Branch
 Universal banks
•Sumitomo Mitsui Banking Corporation - Manila Branc
Universal banks are financial service conglomerates that •Industrial Bank of Korea - Manila Branch
combine investments banking, commercial banking, •United Overseas Bank Ltd., - Manila Branc
development banking, and insurance to encompass a •Hua Nan Commercial Bank, Ltd., - Manila Branch
wider variety of services. They are also authorized to
engage in other functions such as merchant banking,
2. Credit Union
mutual funds, factoring, housing finance.
A credit union is a group of people, connected by a
According to bangko sentral, there are 21 universal bank 'common bond' based on the area they live in, the
with active operations in the ph. occupation they work in, or the employer they work for,
who save together and lend to each other at a fair and
: Land Bank of the Philippines reasonable rate of interest. Credit unions offer members
: Australia and New Zealand Banking Group Limited the chance to have control over their own finances by
: Deutsche Bank AG making their own savings work for them. Every credit
: ING Bank AG union is owned by its members and borrow from it.
: Mitzuho Bank, Ltd. – Manila Branch Credit unions exist only to serve members – not to profit
from their needs. Surplus income generated is returned
: Standard Chartered banks
to the members by way of a dividend and/or is directed
: Asia United Bank Corporation to improved or additional services for members.
: Rizal Commercial Banking Corporation Members' savings are used to fund loans to other credit-
: Security Bank Corporation worthy members of the credit union. So, the money in a
: Union Bank of the Philippines credit union always remains in the local community or
: Development Bank of the Philippines 'common bond' that the credit union serves.

How does a credit union work?

Members save with their credit union and create a 3. Government Lenders
communal pool of money available to be used for
providing loans to others members. Interest charged on A government-backed loan is a loan subsidized by the
loans to members generates an income for the credit government, which protects lenders against defaults on
union. Any additional savings not lent out to members payments, thus making it a lot easier for lenders to offer
can be invested to return a further income to the credit potential borrowers lower interest rates. Its primary aim
union. is to make home ownership affordable to lower income
From this income, the credit union pays any operational household.
expenses. Any remaining income is referred to as the
a government loan is offered by the government as a
credit union surplus and funds the dividend paid on
members' shares and/or is directed to improved or means to help certain sectors of the Philippines.
additional services for members. Credit unions may also Government loan programs are not always available and
choose to pay a loan interest rebate, which is a refund can change according to the needs of the country.
of loan interest paid to all members who borrowed Recently, many of the loan programs are targeted to
during the preceding financial year. help people get through the pandemic and its effects on
the economy.
Credit Unions in the Philippines
Due to their nature, most government loans are interest
: UE Cooperative Credit Union and collateral-free. But they do still charge a service fee.
: COA Credit Union, Inc.
: Union Credit Corporation
: Federation of Mutual Savings and Credit Cooperatives :
of the Philippines - Imus FINANCIAL INSTRUEMENTS
: PREMIUM TRUST CREDIT UNION – Makati WHAT IS FINANCIAL INTRUMENTS?
: Bayanihan Credit Union – Bocaue Bulacan - Financial instruments are contracts for monetary
assets that can be purchased, traded, created, modified,
Community development financial institutions or settled for. In terms of contracts, there is a
Community Development Financial Institutions (CDFIs) contractual obligation between involved parties during a
are private sector financial institutions that focus financial instrument transaction.
primarily on personal lending and business
development efforts in poorer local communities.
Community Development Financial Institutions (CDFIs)
focus on serving the needs of the poor and working
class within urban and rural communities, as many of
these citizens are underserved or ignored by traditional
commercial banks and lending processes. The goal is to
help this group of people become more financially self-
sufficient and contribute more to overall economic
growth through community redevelopment.

1. Cash Instruments
The services offered vary by type of institution and can
include individual depository services (i.e., checking Securities: A security is a financial instrument that has
accounts, mortgages and consumer loans, and monetary value and is traded on the stock market.
individual development accounts), small business and When purchased or traded, a security represents
microenterprise loans to new and growing businesses, ownership of a part of a publicly-traded company on the
and funding for infrastructure projects such as stock exchange.
affordable housing and community facilities such as
schools, childcare centers, and health care facilities. 2. Derivative Instruments
Many CDFIs also provide technical assistance, financial Derivative[di-'ri-va-tiv]
education, and business development services.
A type of financial contract whose value is dependent The flow of funds within an organization refers to the
on an underlying asset, group of assets, or benchmark. movement of money throughout the business, from its
source to its uses.

INFLOWS – Money coming into the business.

TYPES OF DERIVATIVE INTRUMENTS
OUTFLOWS – Money going out of the business.
Futures - A futures contract, or simply futures, is an
agreement between two parties for the purchase and NO FLOW – it occurs only between non-current
delivery of an asset at an agreed-upon price at a future accounts. It do not affect the flow of fund.
date. Futures are standardized contracts that trade on
The flow of funds, therefore demotes the earning and
an exchange. Traders use a futures contract to hedge
spending of cash or the growth and reduction of
their risk or speculate on the price of an underlying
working capital ----i.e., fund inflows and outflows.
asset. The parties involved are obligated to fulfill a
commitment to buy or sell the underlying asset. FUND INFLOWS – include activities designed to produce
revenues such as selling products, services, investments
3. Foreign Exchange Instruments
and other company assets, as well as issuing stocks and
Foreign Exchange Instruments are financial instruments bonds.
that are represented on the foreign market and
FUND OUTFLOWS – include paying wages, obtaining
primarily consist of currency agreements and
insurance, purchasing company assets and materials,
derivatives.
making long-term investments, and paying dividends
4. Commodities and taxes.

A commodity is a basic good used in commerce that is CAHS FLOW – refers to the currents format for reporting
interchangeable with other goods of the same type. the inflows and outflows of cash. Cash flow is derived
Traditional example of commodities include grains, gold, from the statement of cash flows. Moreover a cash flow
beef, oil and natural gas. statements shows the inflows and outflows of cash and
cash equivalents. Cash includes cash in hands and
FINANCIAL MARKET demand deposits with the banks while cash equivalents
are highly liquid investments, they can be readily
converted into cash like marketable securities
FINANCIAL MARKET commercial papers, and short-term governments bonds.
•Financial markets refer broadly to any marketplace It explains changes in the cash in hand and cash at bank
where the trading of securities occurs. at the beginning and the end of the accounting period.

•There are many kinds of financial markets, including FUNDS FLOW – refers to an outmoded format for
(but not limited to) forex, money, stock, and bond reporting a subset of the same information.
markets.

•These markets may include assets or securities that are THE ROLE OF FINANCIAL MANAGER
either listed on regulated exchanges or else trade over-
the- counter (OTC). Financial

•Financial markets trade in all types of securities and Managers perform data analysis and advise senior
are critical to the smooth operation of a capitalist managers on profit-maximizing ideas. Financial
society. managers are responsible for the financial health of an
organization. They produce financial reports, direct
investments activities, and develop strategies and plans
for the long-term financial goals of their organizations.
THE FLOW OF FUNDS AND THE ROLE
OF THE FINANCIAL MANAGER THE ROLE OF FINANCIAL MANAGER
  Particularly in business is changing in response identifying potential risks in advance, analyzing them
to technological advances that have significantly and taking steps to diminish or eliminate them.
reduced the amount of time it takes to produce
financial reports. Financial managers' main
responsibility used to be monitoring a Managing financial accounting, monitoring; reporting
company's finances, but they now do more data systems and producing accurate financial reports to
analysis and advise senior managers on ideas to specific deadlines; and liaising with auditors to ensure
maximize profits. They often work on teams, annual monitoring is carried out - Accountability is a
acting as business advisors to top executives. key feature of the financial systems. The budget is the
 As to skills, financial managers need to show financial plan for the year and it is essential for the
evidence of commercial and business financial manager to monitor actual progress against
awareness, high numeracy and sound technical this plan to ensure that the desired fiscal result will be
skills, problem-solving skills and initiative, achieved. The monthly reports are the main tool of
negotiation skills and the ability to influence financial control enabling cost centers to monitor
others and strong attention to detail and an income and expenditure against budget.
investigative nature.
 The roles of financial managers can vary Keeping abreast of changes in financial regulations
enormously. In larger companies for instance, and legislation- New laws, regulations and public
the role is more concerned with strategic expectations have pushed governance and compliance
analysis, while in smaller organizations, a even higher up the boardroom agenda. Financial
financial manager may be responsible for the managers everywhere recognize it's essential to make
collection and preparation of accounts. sure their companies have effective, robust and reliable
governance and financial compliance tools.
In general, tasks across roles may include:

Providing and interpreting financial information-

Knowing how to work with the numbers in a
company's financial statements is an essential role for
financial manager. The meaningful interpretation and
analysis of balance sheets, income statements, and
cash flow statements to discern a company's
investment qualities is the basis for smart investment
choices.
Formulating strategic and long-term business plans- A
strategic plan with key long-term objectives serves as a
framework for making decisions and provides a basis for
planning. Putting together a strategic plan can provide
the insight needed to keep a company on track by
setting goals and measuring accomplishments.

Developing financial management mechanisms that

minimize financial risk- Business establishments
routinely face different types of risks in the course of
their operations. Risk stems from uncertainty of
financial loss and can potentially cripple the business if
not managed in time. This demands that mechanisms to
manage risk be created via a risk management
philosophy, with the objective of minimizing negative
effects risks can have on the financial health of the
institution. In this way financial manager's role involves