WHAT IS FINANCE?

FINANCE
•Is study of how the players in
financial system acquire, spend
manage, and make other sound
financial decisions concerning
money and other financial
resources’
•Money performs three basics
functions:
•Medium of exchange
•Store of value
•Standard of value
4 REASONS TO STUDY FINANCE
• 1. To be able to manange money or financial
resources
• 2. to be able make sound economic decisions
• 3. to be able to arrive at sound personal and
business investment decisions
• 4 . To be able to understand the career path
available to finance professionals
CARRER IN FINANCE
•Commerce and industry
•Government
•Academe
COMMERCE AND INDUSTRY

Financial analyst- evaluating financial

performance and preparing financial plans
Cash Management analyst– monitoring
daily cash inflows and outflows
Capital expenditures analyst–
estimating cash flows and evaluating
asset investment opportunities
Credit analyst– evaluating credit
applications
Loan analyst– evaluating consumer and
commercial loan applications
Bank teller—assisting customers with their
banking transactions
Investment researcher-conducting research on
investment opportunities
Insurance agent—selling insurance policies to
individuals and businesses and assisting them
in the process of claims
Real estate agent– marketing, selling, or leasing
residential or commercial properties
Stockbroker—assisting clients in purchasing stocks
and bonds and building investment wealth
Security analyst—analyzing and making
recommendations on the investment potential or
specific securities
GOVERNMENT
Administrative Clerk- assisting in
daily unit administration functions.
Examiner-performing compliance
field work
ACADEME
•Lecturer- teaching basic finance
subjects
•Research Assistant- assisting lead
researchers in data gathering
FINANCIAL ENVIRONMENT

•3 Interacting Areas
• 1. Financial Institutions and markets
• 2. Investments
• 3. Financial management.
FINANCIAL INSTITUTIONS AND MARKETS
•Are organizations or intermediaries that
help the financial system operate
efficiently and transfer funds from
depositors and investors to invidividual,
business, and government that seek to
spend or invest the funds tangible assets
INVESTMENT
•This area focuses on the decisions
made by businesses and
individuals as they choose
securities for their investment
portfolios.
FINANCIAL MANAGEMENT
• It involves financial planning, asset management, and
decisions to increase the value of the stakeholders.
• This area is often attributed to business finance because
it deals with the concerning cash flows,including both
inflows and outflows.
-Decisions can range from the strategic (like business
expansions)
-operational (like how much cash or inventory the
business should carry)
“SECURITIES”
FINANCIAL INSTRUMENT AND SECURITIES

• A financial instrument is any physical or electronic

document that has intrinsic monetary value or transfers
value.
• Securities are primarily issued by corporations to
generate cash or to acquire an asset. It could be either
take the form of a debt security or an equity security.
• DEBT SECURITY- refers to corporate bonds
• EQUITY SECURITY- corporation shares.
 VARIOUS FINANCIAL INSTITUTIONS OR
INTERMEDIARIES

BANKS-supervised and regulated by the

BANGKO SENTRAL NG PILIPINAS(BSP)
-an establishment for deposit, custody,
and issue of money, for making loans and
for making the exchange of funds easier.
 4 TYPES OF BANKS
• Universal and Commercial Banks—
Represent the largest single group, resource-
wise, of financial institutions in the Philippines.
Thrift Banks—represent noncommercial banks
composed of savings and mortage banks,
private development banks, stock savings, anda
loan associations and microfinance thrift banks.
SAVINGS BANK– ACCEPT THE SAVINGS OF
INDIVIDUALS AND LEND POOLED SAVINGS
INDIVIDUALS PRIMARILY IN THE FORM OF
MORTAGE LOANS
RURAL AND CORPORATE BANK– REPRESENTS
THE MORE POPULAR TYPE OF BANK IN THE
RURAL COMMUNITIES.
Insurance companies-
Surpervised and regulated by the insurance
commission, these are companies that offer
insurance policies to the public, either by selling
directly to an individual or through another
source.
•Lending institutions- similar to
non-banks with quasi –banking
functions they make loans
available to individuals and
businesses
VARIOUS FINANCIAL MARKETS

• Financial markets are physical or electronic media that facilitate the flow of funds among individuals,
business, and governments.
 money markets are the markets in which debt securities with maturities of one year or less are traded.

 Capital markets are the markets in which debt instruments with maturities longer than one year and equity
securities are traded.

 Primary markets are markets in which financial instruments and securities are initially offeres or sold with the
proceeds going to the issuer.

 Secondary markets are the markets in which previously issued instruments or securities are traded
• Securities markets- where previously issued debt and equity
securities are sold and traded
• Mortgage Markets- where mortgage instruments or loans,
backed by real property in the form of buildings and houses
are originated and traded.
• Derivatives markets- where derivatives securities are
purchased and sold
• Currency Exchange Markets- also called foreign exchange
(FOREX) markets where banks and institutions traders buy and
sell various currencies on behalf of business and other clients.
FINANCE IN OTHER AREAS

•Finance also complements other

functions of business such as
managements, marketing,
accounting, information and
communication technology and
economics.
FINANCIAL MANAGEMENT IN AN ORGANIZATION
• Finance is among the core functions of business..Depending
the size of the business, finance is always headed by financial
manager.
• The task of the financial manager is to ensure that financial
decisions are made with the due regard to prudent use of
financial resources in the hope of increasing stakeholder value
• There are two managers reporting to the vice- president for
the finance------
They are the treasurer and the controller
•The treasurer– oversees the traditional
functions of financial analysis such as
capital budgeting short-term and long-
term financing decisions and asset
management.
•The controller- usually manages
accounting, cost analysis, and tax
planning.
FINANCIAL MANAGER AND THE ORGANIZATIONAL GOALS

• A business may take any form of organization

such as sole proprietorship, partnership, or
corporation.
• It could also be engaging in service,
merchandising or manufacturing.