LESSON 1.

INTRODUCTION TO FINANCIAL MANAGEMENT

As a senior high student taking this subject and read this module, you will learn to become financial
literate in all aspect in life. If you are thinking that only working individuals, entrepreneurs, businesses make
financial decisions, then you will be benefiting more from this subject than the rest.

Banks, credit cars, business owner’s, piggy banks.

Guide Questions and Expected Responses

1. What do these pictures have in common?

Expected Answer:

All the pictures are related to money and finance.

They involve saving, borrowing, spending, investing, and managing money.

They show how individuals and businesses handle financial resources.

Teacher's Processing:

"Very good! All these pictures are connected to money and financial activities. They show
different aspects of how people and businesses manage their finances."

2. Why is money important in our daily lives?

Expected Answer:

Money is used to buy goods and services.

It helps us meet our basic needs such as food, clothing, shelter, and education.

It allows us to save for future needs and emergencies.

It helps businesses operate and grow.

Teacher's Processing:

"Excellent! Money plays an important role in our daily lives because it helps us satisfy our
needs and wants. Proper management of money helps individuals and businesses achieve their
goals."

3. How do businesses manage their money?

Expected Answer:

Businesses prepare budgets.

They monitor their income and expenses.

They save and invest money wisely.

They borrow funds when needed.

They make financial plans to earn profits and sustain operations.

 Teacher's Processing:

"Correct! Businesses manage their money through planning, budgeting, controlling expenses,
investing, and making sound financial decisions. This process is called Financial Management."

Transition to the Lesson

"Just as individuals need to manage their money wisely, businesses must also carefully plan
and control their financial resources. Today, we will learn about Introduction to Financial Management,
its importance, and how it helps businesses achieve their goals and maximize their resources."

Scenario:

"Maria plans to open a small coffee shop. She needs money to buy equipment, rent a space, and pay workers.
She goes to a bank for a loan and carefully plans how to spend her money."

1. What financial decisions did Maria make?

Maria decided to:

Start a coffee shop business

Borrow money from a bank

Plan how to use her money (equipment, rent, workers)

This shows financial management because she is making decisions on how to get
money and how to spend it wisely.

2. Who helped her obtain funds?

The bank helped Maria by giving her a loan

Financial management includes finding sources of money, and banks are one of the main
sources of funds for businesses.

[Link] is planning important in business?

Planning is important because it helps Maria:

Use money wisely

Avoid wasteful spending

Make sure the business can operate smoothly

Financial management needs planning so that money is organized, controlled, and used
properly to help the business succeed.

________________________________________________________________________________________

What is Finance and Financial Management?

Finance is always of great importance, be it in a business or in one's everyday life. It is important to

manage risks in business, it is equally important to manage risks in life as well. Risk is nothing but an uncertain
event that might damage your assets and when it is financial risks, it creates loss of Finance.

Finance as the science and art of managing money. (Gitman & Zutter, 2012)

Simple Explanation:

 Science means that finance uses rules, principles, calculations, and analysis to make good financial
decisions.

 Art means that finance also requires judgment, experience, and decision-making skills because not all
situations are the same.

In simple words:

Finance is the science and art of managing money. It involves planning, saving, investing, borrowing,
and spending money wisely to achieve financial goals.
 Example:

A business owner studies sales reports and expenses (science) and then decides whether to expand the
business or save money for the future (art).

Financial Management deals with that decisions that are supposed to maximize the value of shareholder’s
wealth (Cayanan).

Simple Explanation:

 Financial Management is the process of planning, organizing, directing, and controlling a company's
money.

 Shareholders are the owners of a corporation because they invest money by buying shares of stock.

 Maximize shareholders' wealth means increasing the value of the owners' investment and helping the
business earn more profits over time.

In simple words:

Financial management is about making smart money decisions that help a business grow and increase the
wealth of its owners or shareholders.

Example:

If a company invests in better equipment that increases production and profits, the value of the company may
increase, benefiting the shareholders.

ROLES DEFINED:

1. Shareholders:

They are the owners of the company because they invest money by buying shares of stock.

They expect the business to grow and earn profits.

2. Board of Directors

They are elected by the shareholders to oversee the company's activities.

They make major policies and important business decisions.

3. President (Chief Executive Officer or CEO)

The CEO is the highest-ranking executive in the company.

They manage the overall operations and ensure that business goals are achieved.

4. VP for Marketing

Responsible for promoting and selling the company's products or services.

Develops marketing strategies to attract and retain customers.

5. VP for Production

Oversees the production of goods or delivery of services.

Ensures products are made efficiently, on time, and meet quality standards.

6. VP for Administration

Manages the company's administrative and support functions.

Oversees human resources, office operations, and company policies

Differentiate Financial Institutions, Financial Markets, and Financial Instruments

Financial Institution - Organizations that provide financial services. Financial institutions are organizations that
help people and businesses with money. They are companies that save money, give loans, and provide
financial services.

Examples:

 Banks (like savings banks)

 Insurance companies
 Credit unions

Financial Market - Place where buyers and sellers trade financial assets. Financial markets are the places
where people buy and sell money-related items. They are the trading places for stocks, bonds, and other
financial assets.

Examples:

 Stock market (Philippine Stock Exchange)

 Bond market
 Forex market (currency exchange)

Financial Instrument - Documents or contracts. Financial instruments are documents or contracts that
represent money, ownership, or debt. They are paper or digital agreements used in investing or borrowing
money.

Examples:

 Stocks (ownership in a company)

 Bonds (loan agreements)
 Loans (borrowed money contracts)

ACTIVITY 1:

Reflection Writing (Short Answer)

Title: “Money in My Life”

1. How do you use money in your daily life?

[Link] is financial management important for students like you?

3. How can you start practicing financial management now?

Purpose:

Develop financial awareness

Relate lesson to personal life

ACTIVITY 2:

Title: “My First Business Plan”

Students will create a simple plan including:

 Business name

Source of capital (financial institution)

Type of financial instrument used

Basic budgeting plan

Purpose:

Integrate all lesson concepts

Develop basic financial planning skills

My First Business Plan - Sample

Budgeting Plan
Example Business: Janice’s Snack Corner

Basic Budgeting Plan (1 Month)

Expenses Estimated Cost (PHP) Explanation

Capital (Loan from Bank) ₱20,000 Start-up money from a

bank (financial institution)

Food Ingredients ₱8,000 Bread, drinks, snacks, etc.

Rent ₱3,000 Small space for selling

snacks

Equipment ₱4,000 Tables, chairs, utensils

Utilities ₱1,500 Electricity and water

Marketing ₱1,000 Posters, online ads

Emergency Fund ₱1,500 Extra money for

unexpected expenses

Total Expenses: ₱19,000

Remaining Capital (Profit/Savings): ₱1,000

Simple Explanation
The budgeting plan shows how the business will spend its money wisely. It helps the owner control expenses,
avoid overspending, and ensure smooth operation.

Financial Management Connection

Planning = deciding where money goes
Organizing = dividing money into categories
Controlling = making sure expenses stay within budget