Scribd
Upload
120 views

Business Finance Lesson 1 Financial System

1. The document provides an overview of the Philippine financial system, including the roles of various financial institutions and instruments. It explains that the financial system links savers and borrowers through financial intermediaries like banks, insurance companies, stock exchanges, and mutual funds. 2. Banks accept deposits from savers and lend funds to borrowers, while also investing in securities. Insurance companies collect premiums from policyholders and invest the funds. Stock exchanges like the PSE facilitate trading of equities through brokerage firms. Mutual funds allow small investors to invest in a variety of instruments managed by professionals. 3. Prominent financial institutions in the Philippines include the Government Service Insurance System, Social Security System, unit investment

Uploaded by

Matthew Suck
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
120 views

Business Finance Lesson 1 Financial System

1. The document provides an overview of the Philippine financial system, including the roles of various financial institutions and instruments. It explains that the financial system links savers and borrowers through financial intermediaries like banks, insurance companies, stock exchanges, and mutual funds. 2. Banks accept deposits from savers and lend funds to borrowers, while also investing in securities. Insurance companies collect premiums from policyholders and invest the funds. Stock exchanges like the PSE facilitate trading of equities through brokerage firms. Mutual funds allow small investors to invest in a variety of instruments managed by professionals. 3. Prominent financial institutions in the Philippines include the Government Service Insurance System, Social Security System, unit investment

Uploaded by

Matthew Suck
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
You are on page 1/ 3

HOLY ROSARY ACADEMY OF LAS PIÑAS CITY

BUSINESS FINANCE
GRADE 12 - ABM
FIRST SEMESTER

I. FINANCIAL SYSTEM
II. SUBJECT DESCRIPTION
Introduction to Business Finance
Money required for carrying out business activities is called business finance. Almost all business activities
require some finance. Finance is needed to establish a business, to run it to modernize it to expand or diversify
it. It is required for buying a variety of assets, which may be tangible like machinery, furniture, factories,
buildings, offices or intangible such as trademarks, patents, technical expertise etc.

Also, finance is central to run a day-to-day operation of business-like buying materials, paying bills, salaries,
collecting cash from customers etc. needed at every stage in the life of a business entity. Availability of
adequate finance is very crucial for survival and growth of a business.

Learning Objectives
At the end of the lesson, the students should be able to:
1. explain the major role of financial management and the different individuals involved; and
2. distinguish a financial institution from financial instrument and financial market.
To have an OVERVIEW OF THE FINANCIAL SYSTEM, let us study this chart.

Financial system is the system that enables lenders and borrowers to exchange funds. Simply put, it links the
savers and the users of funds.
Explain to the class that savings can come from households, individuals, companies, government agencies, or
any other entity whose cash inflows are greater than their cash outflows. The financial system through financial
intermediaries provides a mechanism by which these savings can be channeled to users of funds, borrowers,
and investors.
NOTE: That the same entities can be savers and users of funds One entity may have savings today but may be
needing funds in the future, for example, for expansion.

What FUNCTION(S) do BANKS as a financial intermediary perform in the financial system?


 Banks provide mechanism where savers can put their excess funds through deposits, which will earn
interests as incentives. To cover for the interests, banks lend the money to borrowers after performing a
credit investigation. Some of the deposits can also be invested in some financial instruments like
government securities and corporate bonds.
 Banks can also serve as outlets of investors in buying and selling both government securities and
corporate bonds.
WHAT FUNCTION(S) do INSURANCE COMPANIES as a financial intermediary perform in the
financial system?
 Insurance companies offer different products, which may be broadly categorized into life insurance and
non-life insurance products. In exchange for the protection, the insured pays premiums to the insurance
companies. These premiums are used to fund claims. Generally, the cash collected from the premiums
may more than cover claim for most periods. Hence, the excess cash can be invested by insurance
companies.
Life insurance products protect the insured from loss of life while non-life insurance products protect the
insured from the loss of or damage to properties.

What FUNCTION(S) does STOCK EXCHANGE as a financial intermediary perform in the financial
system?
 The Philippine Stock Exchange (PSE) provides a system for the trading of equity securities of publicly
listed companies. These equity securities are common stocks and preferred stocks.
 An individual who wants to invest and trade in the stock market cannot go directly to PSE to buy and
sell stocks. He/she has to open an account with an accredited stock brokerage firm where he/she can
channel his/her buy and sell orders of equity securities.

At present, there are ONLINE BROKERS and LIVE BROKERS.


Online brokers
 With online brokers, one can trade in the stock market through the Internet.
 To trade online, one must have an account and deposit with the online broker.
Live brokers:
 With live brokers, one needs a telephone to call brokers and place orders.
 Settlement of the transaction can be arranged with the broker.
 Live brokers normally have their messengers who deliver confirmation receipts as well as collect and
deliver checks.
Note that investing in the stock market has to be coursed through stock brokerage firms.
Note that confirmation receipts are forms of evidence regarding the executed buy or sell transaction that a
client placed with his/her broker.

What are the important concepts we need to know about MUTUAL FUNDS?
 Mutual funds provide opportunities for big and small investors to invest in financial instruments which
they would not have considered on their own, or they may have considered but do not have the time or
the expertise to do it including investments in the stock market, bonds, treasury notes, and other money
market instruments like treasury bills.
 With mutual funds, investments are pooled and the funds are invested by professional managers for a
fee. The fees are a small percentage of the funds invested.
What different INVESTMENT OBJECTIVES do mutual funds cater to?
 There are mutual funds which are limited only to stocks.
 There are also mutual funds that are restricted to fixed income instruments like bonds and treasury notes.
 Other mutual funds provide a combination of both stocks and fixed income instruments.
Note to the students that as of January 31, 2016, the top mutual funds in the Philippines are Philam Strategic
Growth Fund, Inc., ALFM Growth Fund, Inc., PAMI Equity Index Fund, Inc., Sun Life Prosperity Philippine
Stock Index Fund, Inc., and United Fund, Inc.

What are some of the more PROMINENT FINANCIAL INSTITUTIONS in the Philippines?
Other financial institutions in the Philippines include pension funds like Government Service Insurance System
(GSIS) and Social Security System (SSS), Unit Investment Trust Fund (UITF), investment banks, and credit
unions, among other
EVALUATION
Write your answers 2 – 3 sentences per questions.
1. Why is it that the same company can be a saver and a user of funds?
2. What is the role of financial intermediaries in the financial system?
3. What is the role or function of the Philippine Stock Exchange in the financial system?
4. What are the differences between the Philippine Stock Exchange and the stock brokerage firms?
5. How can you describe the role of the banks in the financial system?

III. REFERENCES:
https://www.toppr.com/guides/business-studies/sources-of-business-finance/meaning-nature-and-
significance-of-business-finance/
Cayanan A. S; Borja D. V (2017). Business Finance (1 - 8 pages). REX Book Store

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy