Business finance- art and branch of study concerns on: business activity, acquisition (procurement), conservation ( efficient management)

and allocation of capital funds to meet the firms objectives. OBJECTIVES: -maximize profit -increase firms value - perform/ fulfill socialresponsibilities. 1. allocation- distribution, segregation of funds for the needs of company. Needs may be: a. short-term financing need- recovery of cost or payback period is usually one year. Day to day operational needs or operational expenses (OPEX) Ex: office supplies, payment for salaries, taxes, utilities, interest from loans, insurance, merchandise. b. long- term financing needs- more than a year usually five years to recover. CAPEX capital expenditures. Also a tool or technique in capital budgeting ranking of long-term financing needs according to its profitability. Ex: land, building, equipment, tools. 2. acquisition/ procurement- sourcing of funds LEAST COST OF CAPITAL- choosing to procure funds or cost related to procurement of funds Ex: interest, processing fee, legal fee, professional fee. 3. conservation/ effective management-working capital OPEX working capital- inventory management, manage cash, manage market securities, manage accounts receivables. How will you maximize bottom line/ net income? -minimize cost and maximize revenue -less expense and increase revenue - increase profit and decrease expenses Increase the value of the firm- ability of company to meet its investors and employee needs. Measures the wealth of stockholders. How to measure the value of the firm? *stock price- the higher the stock price the higher the value of the firm. LIQUIDITY- ability of the company to meet short maturity or short term loans and obligations. SOLVENCY- ability of the company to pay its long term obligations or loans. notes: business finance working capital- current assets or current liabilities of the firm. part of assets/ liabilities or resources which can be used in day-to-day operation of the firm. MANAGEMENT OF WORKING CAPITAL ADEQUACY- sufficient/ enough materials and supply in production. LIQUIDITY- availability of cash to meet the daily needs. CONVERSION- preventing wastages PROFITABILITY ( wala ako meaning neto haha enxia ) * managing cash by acceleration of cash collection and deferment of cash disbursements without sacrificing credit standing. * cash is non- productive ACCELERATING CASH COLLECTION cash discount, concentration banking, lock box system * cash disbursement- stretching payable * accounts receivable- should be tolerable amount only

* factoring- selling of accounts receivable * assigning- collateral of accounts receivable/ pledge THE MONEY MARKET TYPES OF FINANCIAL MARKETS 1. capital market 2. foreign exchange market 3. money market *money market- is where the short- term funds are raised through the buying and selling of short-term debt securities such as commercial papers. PARTICIPANTS IN THE MONEY MARKET OPERATIONS 1. the dealer ( financial institutions) 2. the fund user (borrowers) 3. the fund supplier (investors) money market instruments 1. treasury bill 2. tax anticipation bills FINANCING COMPANY- an organization that provides loans for both businesses and consumers. FINANCING FACILITIES 1. COMMERCIAL FINANCING- involved either in the purchase of receivables on a " with recourse" basis or extension of loans to firms using receivables as collateral. 2. FACTORING- sale of receivables to factor houses on a " without recourse" basis. 3. FLOOR STOCKING CREDIT- refers to advances generally granted by finance companies to motor vehicle dealers to finance purchases of new or used vehicles from suppliers for the purpose of maintaining a stock of goods for sales. 4. DIRECT LOAN- involves transfer of funds from the ultimate lender to the ultimate borrower, most often through a third party. 5. FINANCE LEASE/ CAPITAL LEASE- involves medium or long-term leasing of fixed assets with the finance company as lessor. 6. REVOLVING CREDIT- useful for a person or a business that experiences sharp fluctuations in cash income. useful for individuals and businesses that need to borrow funds quickly and as needed. 7 CONSUMER FINANCING- is the practice whereby the finance company supports the credit purchases of the consumer. useful for manufacturers because this lessen build up of inventories and dealers with unpaid receivables. SOURCES OF SHORT TERM CAPITAL * short term capital is also known as working capital :) * capital- anything that can be used in establishing a business. INTERNAL SOURCES 1. gross revenue - primary - seconday

2. unutilized reserves- reserves cash for different purposes. 3. unappropriated retained earnings * retained earnings- accumulated earnings of the company. a basisof a company in declaring/ issuing their dividend. a capital, reported on stockholder's equity in balance sheet. 4. proceeds from sales of fixed assets. 5. accrued expenses and advances from customers. EXTERNAL SOURCES A. TRADE CREDITS 1. accounts payable 2. notes payable 3. acceptance: trade acceptances, bankers acceptances 4. post dated checks 5. seasonal dating- advance payment/ sale of goods. deferred payment. credit terms 1. net amount, no discount 2. cash discounts: 2/10 n/30 3. stretching payables