Business Finance Lesson 3 PDF

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BUSI NESS FINANCEModul e 3 - Quarter 1Short Term and Long TermFundsDepartment of Education • Republic of the PhilippinesSENIOR HIGH SCHOOLWWW.GOOGLEBusiness Finance Alternative Delivery Mode Module 3 - Quarter 1: Short Term and Long Term Funds First Edition, 2020Republic Act 8293, section 176 states...

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SENIOR HIGH SCHOOL

BUSI NESSFI NANCE Modul e3-Quar t er1

Short Term and Long Term Funds

WWW.GOOGLE.COM

Department of Education • Republic of the Philippines

Business Finance Alternative Delivery Mode Module 3 - Quarter 1: Short Term and Long Term Funds First Edition, 2020 Republic Act 8293, section 176 states that: No copyright shall subsist in any work of the Government of the Philippines. However, prior approval of the government agency or office wherein the work is created shall be necessary for exploitation of such work for profit. Such agency or office may, among other things, impose as a condition the payment of royalties. Borrowed materials (i.e., songs, stories, poems, pictures, photos, brand names, trademarks, etc.) included in this book are owned by their respective copyright holders. Every effort has been exerted to locate and seek permission to use these materials from their respective copyright owners. The publisher and authors do not represent nor claim ownership over them. Published by the Department of Education Secretary: Leonor Magtolis Briones, PhD Undersecretary: Diosdado M. San Antonio, PhD Assistant Secretary: Alma Ruby C. Torio, PhD Development Team of the Module Author: Content Editor: Language Editor: Proofreader: Illustrator/s: Layout Artists: Development Team: Chairperson:

Jessa C. Herrera Monina C. Raagas Cynthia M. Garrido Vanessa Joyce B. Manoop Irish Joy Q. Nacua Shem C. Tayanes Jr. Daryl H. Bao

Dr. Arturo B. Bayocot, CESO III Regional Director Co-Chairpersons: Dr. Victor G. De Gracia Jr. CESO V Assistant Regional Director Jonathan S. dela Peña, PhD, CESO V Schools Division Superintendent Rowena H. Para-on, PhD Assistant Schools Division Superintendent Mala Epra B. Magnaong, Chief ES, CLMD Members: Neil A. Improgo, PhD, EPS-LRMS; Bienvenido U. Tagolimot, Jr., PhD, EPS-ADM; Erlinda G. Dael, PhD, CID Chief; Ferminia M. Labis, EPS (Araling Panlipunan); Celieto B. Magsayo, LRMS Manager; Loucile L. Paclar, Librarian II; Kim Eric G. Lubguban, PDO II

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SENIOR HIGH SCHOOL I I

BUSI NESSFI NANCE Module 3 - Quarter 1

Short Term and Long Term Funds

This instructional material was collaboratively developed and reviewed by educators from public and private schools, colleges and universities. We encourage teachers and other education stakeholders to email their feedback, comments, and recommendations to the Department of Education at [email protected].

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Department of Education ● Republic of the Philippines

I I I

TABLE OF CONTENTS Page No. Cover page

III

Table of Contents

V I V

Overview

VI

General Instructions

VI

Lesson 3: Short Term and Long-Term Funds

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What I Need to Know?

1

What I Know

1

What’s In?

2

What’s New?

2

What is it?

3

What’s More?

4

What I Have Learned?

6

What Can I Do?

6

Assessment

6

Answer Key

7

References

8

OVERVI EW Fi nanci ngi san i mpor t antpar tofev er ybus i nessbe caus ei tpr ovi de sf unds f orbusi nessac t i vi t i e s,acqui r epur c hasesori nv es t i ng.Fi nanci ali ns t i t ut i ons ,suc h asbanks ,c ooper at i v esandot herfinanci alcompani esar et heonet hatwi l lpr ovi de l oansf ort hei rcapi t alt ohe l pt hem ac hi ev et hei rbusi nessgoal s.

V

Thi smodul ef ocuseson t het wocommon sour ceoffinanci ng,t hedebtand Equi t y financi ng.Fi nanci ngcan beei t herLongt er m ors hor t t er m f unds .Shor t t er mi sde btschedul edt obepai dwi t hi nay earwhi l el ongt er mi sdebtt obepai di n mor et han ayear .Theg oaloft hi smodul ei shavet heknowl edgeon how t oavai l and pr ocesst hesour c esoff undswhen t her ei scash needed wi t hi nt hebusi ness and al so he l ps t he st udent st oi dent i f y di r ec t l y whatt ypes ofsour c es off unds av ai l abl ei nt hei rr e s pec t i v ecommuni t y .

GENERAL INSTRUCTIONS

For the teacher: To facilitate and ensure the students’ learning from this module, you are encouraged to do the following:

For the learners: To be guided in achieving the objectives of this module, do the following: 1. Read and follow instructions carefully.

1. Clearly communicate learning competencies and objectives

2. Write all your ANSWERS in your Activity Book

2. Motivate through applications and connections to real life.

3. Answer the pretest before going through the lessons.

3. Give applications of the theory

4. Take note and record points for clarification.

5. Give time for hands-on unguided classroom work and discovery

4. Discuss worked-out examples

5. Compare your answers against the key to answers found at the end of the module.

6. Use formative assessment to give feedback

6. Do the activities and fully understand each lesson.

7. Introduce extensions or generalizations of concepts

7. Answer the self-check to monitor what you learned in each lesson.

8. Engage in reflection questions 9. Encourage analysis through higher order thinking prompts

8. Answer the posttest after you

VI

Lesson

3

THE SOURCESAND USESOFSHORTTERM & LONGTERM FUNDS

WhatINeedt oKnow

Af t ergoi ngt hr ought hi smodul e,youar eg oi ngt o: 1.Di s t i ngui shde bt& Equi t yFi nanci ng 2.I de nt i f yt heBankandNonbanki ns t i t ut i onsi nt hevi ci ni t yt hatar epossi bl e sour cesoff undsandenumer at et hei rr e qui r ement sandpr ocessf orl oan appl i cat i on.

WhatIKnow Le tusde t er mi nehow muchy oual r eadyknow aboutt hesour c esandusesofshor t t er m & Longt er mf unds Di r ect i on:TRUE OR FALSE.Wr i t eT i ft hes t at ementi scor r ec tandFi fi ti s wr ong.Wr i t eyouranswer si nyournot e book. _ _ __ _ 1.Coope r at i vebanksandcr edi tcoope r at i vear ej ustt hesame. _ _ __ _ 2.Al lcoope r at i v ei nt hePhi l i ppi nesr egul at edandsuper vi sedbyt he Cooper at i v eDev el opmentAut hor i t y . _ _ __ _ 3.Byr e sor t i ngt odebtfinanci ng,busi nessowner s hi phaskeptand mai nt ai ned. _ _ __ _ 4. Oneoft heai msofcoope r at i v esi st opr ovi degoodsandser vi c est oi t s member st oenabl et hem t oat t ai ni ncr ease,savi ngs ,i nv es t ment s , pr oduc t i vi t y ,andpur c hasi ngpower edi nc ome ,andpr omot eamong t hemsel v esequi t abl edi s t r i but i onofne ts ur pl ust hr oughmaxi mum ut i l i z at i onofe conomi esofs cal e ,c os tshar i ngandr i s kshar i ng. _ _ __ _ 5.Capaci t yr e f er st ot heappl i cant ’ sne twor t h,whi chcanbear r i v edatby deduct i ngt ot all i abi l i t i esf r om t ot alasse t s .

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What ’ sI n The r ol e oft he VP f or Fi nance/ Fi nanci alManager i st o de t er mi ne t he appr opr i at e capi t als t r uct ur e oft he company .Capi t alst ruct ur er ef er st o how much ofyourt ot alasse t shasfinanced by de btand how much has financed by equi t y . -Tobeabl et oacqui r easse t s,ourf undsmus thav ec omes omewher e .I fi t hasboughtusi ngcashf r om ourpocke t s ,i thasfinancedbyequi t y. -On t he ot her hand,i fwe used money f r om our bor r owi ngs,t he asse t boughthasfinancedbydebt .

What ’ sNew Di r ect i on:Wr i t eyouransweri nt heboxpr ovi dedbel ow. Ques t i on:Whatcomest oyourmi nd when y ou heart hewor dsdebtfinanci ngand equi t y financi ng based on your knowl e dge and unde r s t andi ng i nt he pr evi ous l esson?Copyt her ec t angul arboxandwr i t eyouranswer si nyournot e book.

Whati si t ? 2

Debt Financing Versus Equity Financing?

https://www.credibly.com/incredibly/trending/debt-vs-equity-financing/

De btfinanc i ngi sbei ngdonet hr ough bor r owi ng,whe t hershor t t er m orl ongt er m,and i tusual l y comes wi t hi nt er es t .Thi s,t oge t her wi t h ot her c har ges ,i s r e f er r ed t o as t he costofbor r owi ng or c os t ofdebt .Common de bt financi ng ar r angement si ncl ude bank l oans, i ssuanc e of de bt i nst r ument sl i ke bonds, financi ng f r om nonbank i ns t i t ut i ons l i ke l endi ng c ompani es and c ooper at i v es, assi gnmentofacc ount sr ecei vabl e,and sel l i ngofnot esr ecei vabl es.I n her e,t her e exi s t s a bor r owe r l ender r e l at i onshi p.I nt he case ofbanks and ot hernonbank i ns t i t ut i ons,bor r owi nge nt ai l scompl i anceofcer t ai nr equi r ement s . Equi t yFi nanc i ng,on t heot herhand,r e f e r st ot hesal eofowner s hi pi nt er es t , mos t of t en r e pr esent ed by shar es, t or ai se f und f or busi ness pur poses . To c ompensat ef ort heuseoff undsf r om equi t yfinanci ng,di vi dendsorpr ofit sshar es has dec l ar e d,se t asi de ,and pai d by t he busi ness.Common Equi t y financi ng ar r angement si nc l ude f unds r ai se by t he ent r epr eneur orbusi ness owner f r om f r i endsand f ami l y ,capi t ali nf usi on t hr ough di r ectsal eofshar esort hr ough i ni t i al publ i c offer i ngs,and financi ng by pr i vat ec ompani es.I n her e,t her e exi st s an i nves t eei nv es t orr e l at i onshi p. Shor t t er m financi ngi sde btschedul edt opaywi t hi n ayearwhi l el ongt er m financi ngi sde btpai di nmor et hanayear .

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What ’ smore? Di r ect i on: Li st t he sour ces off unds t hat ar ef ound i n your c ommuni t y and descr i be .Copyt het abl ebe l ow andwr i t ey ouransweri nyournot e book. Sour cesoff und Exampl e:Bankoft hePhi l i ppi neI sl and ( BPI )

Descr i be A bank i s a financi al i ns t i t ut i on i nvol v ed i n bor r owi ng and l e ndi ng money . Banks t ake c us t omer deposi t s i n r e t ur n f or payi ng c us t omer s an annual i nt er es t payment .

1. 2. 3. 4. 5.

Whatar et hesour cesoff unds ? The mos tc ommon sour c es of f unds i nc l ude banks ,c ooper at i v es, and c ommer ci alFi nanc e compani es .Cooper at i v es and c ommer ci alfinance c ompani es ar eexampl eofnonbanki ns t i t ut i ons.  Bank-Super vi sed and r egul at ed byt heBangkoSent r alngPi l i pi nas( BSP) ,an es t abl i shmentf ort hedeposi t ,cus t ody ,andi ssueofmone yf ormaki ngl oansand di scount s,and f ormaki ng easi er t he e xc hange off unds.I nt he Phi l i ppi nes, banks i nc l ude uni ver saland commer ci albanks,t hr i f tbanks,and r ur aland c oope r at i v ebanks.  Cr e di tCoope r at i v es-Wi t ht hepr i mar yobj ect i v eofhel pi ngi mpr ovet hequal i t yof l i f e ofi t s member s.One ofi t s ai ms i st o pr ovi de goods and ser vi c es t oi t s member st o enabl et hem t o at t ai ni ncr eased i ncome,savi ngs ,i nv es t ment s , pr oduc t i vi t y and pur chasi ng power ,and pr omot eamong t hemse l v es equi t abl e di st r i but i on ofne tsur pl ust hr ough maxi mum ut i l i z at i on ofeconomi esofscal e , c os t shar i ng and r i s ks har i ng.I n par t i cul ar ,cr edi tc ooper at i ves pr omot e and under t ake savi ngs and l endi ng s er vi ces among i t s membe r s .I tgener at es a c ommonpooloff undsi nor dert opr ovi definanci alassi s t anc et oi t smembe r sf or pr oduc t i v eand pr ovi de ntpur poses .Al lc ooper at i v esr egul at ed and super vi sed byt heCooper at i v eDev el opmentAut hor i t y( CDA) .TheBSP,i nc oor di nat i on wi t h t he CDA, s hal lpr e scr i be t he appr opr i at e pr udent i alr ul es and r egul at i ons appl i cabl et ot hefinanci alser vi cec oope r at i v es.  Commer ci alfinancec ompani es-t he yar eor gani z at i onswi t houtabank char t er t hatadvances f unds t o busi nesses by di sc ount i ng not es r ecei vabl e,maki ng l oanssecur ed bymor t gage ,orfinanci ngde f er r e dpaymentsal esofcommer ci al andi ndus t r i alequi pment . Whatar et heusuall oanr equi r ement sandappl i cat i on?Seet abl ebel ow.

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LoanAppl i cat i onsRequi r ement s LoanAppl i cat i onpr oc ess  Re cei ptofappl i cat i on f or m and Demogr aphi cs –i nc l ude st he name or busi ness name, bi r t hdat e, addr ess, r equi r e ddoc ument s; SSS no.TI N no.phone no.and ot her i dent i f yi ng i nf or mat i on suc h as val i d gov er nment i ssuedi dent i ficat i oncar ds I ncome or r evenue r e f er st o cur r ent  Ver i fic at i on ofi nf or mat i on i nt he appl i c at i on f or m and r equi r ed per s onal i ncome and empl oy er , doc ument s may i nc l ude empl oyment and sal ar y hi s t or y , and i nt er vi ew; busi nessr evenue,i ft her ei sal r e adyan exi s t i ngbusi ness.  Chec ki ngc r edi thi s t or y Asset sand Li abi l i t i esappl i cant smay as kt o di sc l ose t hei rchecki ng savi ngs and i nv es t ment acc ount s and t hei r  Wr i t i ng c r edi t r epor t wi t h out st andi ng l oans and cr edi tcar ds,i f appr opr i at er ec ommendat i ons t her ear eany .  Doc ument i ngfinaldec i si on Cont act or r ef er encesr e qui r e i dent i ficat i on and cont ac ti nf or mat i on of exi s t i ng e mpl oy er s, pr evi ous  I f appr oved, final doc ument s empl oy er s ,orev en near es tr e l at i v enot si gnoff ( i nt er es tr at e and ot her l i vi ngwi t ht hei dent i fiedc ont ac t t er ms)andl oanr el e ase fr ej ec t ed,r ej ec t i on l e t t ersentt o At t est and aut hor i zat i on r equi r e  I affixi ng appl i cant ’ ssi gnat ur e on t he appl i c ant cr edi t appl i cat i on s t at i ng t hat ev er yt hi ng on t he appl i cat i on i st r ue andc or r ectand aut hor i z i ngt hel ender t ov er i f yt hei nf or mat i on pr ovi ded wi t h t hei dent i fiedcont ac t sandr ef er ences . Thecr edi tdepar t menteval uat esont he basi sofChar act er ,Capac i t y ,col l at er al , capi t alandcondi t i onsor5C’ sofc r e di t Not e: Loan appl i c at i on r equi r ement s and pr oc es s var y among banks, c r edi t c ooper at i v esandc ommer c i alfinanc ec ompani e s.

Di r ect i on:Copyt hepr ocessques t i onsbe l ow i nyournot e bookandanswe rdi r ect l y . 1. I nl oanappl i cat i on,wheni sacomakerr equi r ed? 2. Whati st he i mpor t ance ofaffixi ng appl i cant ’ s si gnat ur e on t he l oan appl i cat i on? 3. Enumer at et hefiveC’ sofcr edi tandde scr i beeach.

WhatIHaveLearned

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Di r ect i on:Compl e t et hesent ences t em be l ow.Wr i t ey ouranswe r son a separ at e shee tofpape r . 1.Sour c esoff undsi si mpor t antbecause: _ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ __ _ _ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ __ _ _ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ __ _ _ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ _ __ __ _

WhatICanDo

Di r ect i on:Chooseonebank,onecr edi tc ooper at i v eand onecommer ci alfinanc e c ompany .Resear c h on t he f ol l owi ng:compar et he l oan appl i cat i on r equi r ement s andl oanappl i cat i onpr ocess.

Assessment Di r ect i ons: I dent i f yt he f ol l owi ng ac t i vi t yi f ei t her Longt er m or s hor t t er m financi ng. Ac t i vi t y/Need 1. Acqui si t i onofequi pment 2. Fr anc hi seofaf ast f oodout l e t 3. Pur chaseofi nve nt or yf oracl ot hi ngshop 4. Loanf oragr i cul t ur alneeds ( ex.Pal aypr oduct i on) 5. Loanf orpur c haseofacommer c i als pace 6. Aut ol oan 7. Housi ngl oan 8. Emer ge ncyl oans 9. Dev el opmentofasubdi vi si on 10. Loanf orsar i sar is t or esuppl i es

Congratulations! You have completed your journey in this subject. Great job!

Answer

AnswerKey

WhatIKnow

Assessment

1.F 2.T 3.T 4.T 5.F

1.Longt er m 2.Longt er m 3.Shor t t er m 4.Shor t t er m 5.Longt er m 6.Longt er m 7.Longt er m 8.Shor t t er m 9.Longt er m 10.Shor t t er m

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Ref er ences

Book: Vi balgr oup I nc.and Fl or enzC.Tugas,Aeson Lui zC.Del aCr uz ,Al l oysi usJoshua S.Par i l ,andAl ge rC.Tang.Busi nessFi nance ,Ar ane t aAvenue,Quez onCi t y

TheCommi ssi on on Hi gherEducat i on i nc ol l abor at i on wi t ht hePhi l i ppi neNor mal Uni ver si t y:Teachi nggui def orSeni orHi ghSchool ,

I nt er ne tl i nk: Image:https://gbr.pepperdine.edu/2017/12/religious-beliefs-influence-financial-decision-making/ Image:https://smallbiztrends.com/2016/01/small-business-finance-basics.html Image:https://www.dmu.ac.uk/study/courses/postgraduate-courses/international-business-andifinance-msc-degree/international-business-and-finance-msc.aspx Image:https://www.credibly.com/incredibly/trending/debt-vs-equity-financing/

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