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BF Q3 Review Module

The document provides an overview of financial management, highlighting its importance in achieving goals and managing financial resources effectively. It covers key concepts such as wealth maximization versus profit maximization, the roles of financial managers, and the structure of financial markets and institutions. Additionally, it includes practice questions to reinforce understanding of the material.

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4 views3 pages

BF Q3 Review Module

The document provides an overview of financial management, highlighting its importance in achieving goals and managing financial resources effectively. It covers key concepts such as wealth maximization versus profit maximization, the roles of financial managers, and the structure of financial markets and institutions. Additionally, it includes practice questions to reinforce understanding of the material.

Uploaded by

ciaralei.mallari
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

Business Finance – Quarter 3 Review Module

LESSON 1.1 – FINANCIAL MANAGEMENT

Financial Management is the science and art of managing money. It involves planning,
organizing, directing, and controlling financial resources to achieve goals.

Importance:

• Helps individuals, businesses, and governments achieve goals

• Ensures proper acquisition, spending, and investing of money

Financial Management in Business:

• Determines how much funds are needed

• Decides how to obtain funds

• Identifies how, where, and when to invest excess funds

Financial System Components:

• Financial Institutions

• Financial Markets

• Financial Instruments

Wealth Maximization vs Profit Maximization:

Wealth Maximization focuses on long-term company value. Profit Maximization focuses on


short-term earnings.

Corporate Organizational Structure:

Board of Directors, CEO/President, VP for Finance (CFO), Treasurer, Controller


Roles of a Financial Manager:

• Financing decisions

• Investing decisions

• Operating decisions

• Dividend policy

LESSON 1.2 – FINANCIAL MARKETS

A financial market is a place where buyers and sellers trade financial securities.

Types:

Money Market – short-term, low-risk instruments

Capital Market – long-term securities like stocks and bonds

Primary vs Secondary Market:

Primary: first sale of securities (IPO)

Secondary: trading among investors (stock exchange)

Functions:

Price determination, funds mobilization, liquidity, risk sharing, easy access, lower
transaction cost, capital formation

LESSON 1.3 – FINANCIAL INSTITUTIONS

Financial institutions facilitate financial transactions and serve as intermediaries.

Types:

Depository Institutions – accept deposits (banks, credit unions, savings & loan associations)
Non-Depository Institutions – provide financial services (investment banks, insurance
companies, brokerage firms, mortgage companies)

Deposits and Loans:

Depositing money makes you a lender; banks use deposits to issue loans. PDIC insures bank
deposits.

Practice Questions:

1. Difference between wealth and profit maximization?

2. What are the two major types of financial markets?

3. How do financial institutions act as intermediaries?

4. Give an example of a depository and non-depository institution.

5. Why is the financial market important to the economy?

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