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Business Finance
Quarter 3 – Module 3:
Sources and Uses of
Short-Term and
Long-Term Funds
Business Finance – Grade XII
Self-Learning Module (SLM)
Quarter 3 – Module 3: Sources and Uses of Short-Term and Long-Term Funds
First Edition, 2021

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Development Team of the Module

Writers: Dennis M. Aujero
Editors: Dr. Luzviminda R. Loreno, Ma. Rowena Manansala
Reviewers: Dr. Luzviminda R. Loreno
Illustrator:
Layout Artist:
Cover Art Designer: Ian Caesar E. Frondoza
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Fiel Y. Almendra, CESO V – Assistant Regional Director
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Gilbert B. Barrera – Chief, CLMD
Arturo D. Tingson Jr. – REPS, LRMS
Peter Van C. Ang-ug – REPS, ADM
Juliet F. Lastimosa - CID Chief
Sally A. Palomo - Division EPS In- Charge of LRMS
Gregorio O. Ruales - Division ADM Coordinator
Dr. Luzviminda R. Loreno – Senior High School Division Coordinator

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Business Finance
Quarter 3 – Module 3:
Sources and Uses of Short-Term and
Long-Term Funds
Introductory Message
For the facilitator:

Welcome to the Business Finance Self-Learning Module (SLM) on Sources and Uses of Short-Term
and Long-Term Funds!

This module was collaboratively designed, developed and reviewed by educators both from public
and private institutions to assist you, the teacher or facilitator in helping the learners meet the
standards set by the K to 12 Curriculum while overcoming their personal, social, and economic
constraints in schooling.

Notes to the Teacher

This contains helpful tips or strategies that
will help you in guiding the learners.

For the learner:

Welcome to the Business Finance – Grade 12 Self-Learning Module (SLM) on Sources and Uses of
Short-Term and Long-Term Funds!

The hand is one of the most symbolized part of the human body. It is often used to depict skill,
action and purpose. Through our hands we may learn, create and accomplish. Hence, the hand in
this learning resource signifies that you as a learner is capable and empowered to successfully
achieve the relevant competencies and skills at your own pace and time. Your academic success lies
in your own hands!

This module was designed to provide you with fun and meaningful opportunities for guided and
independent learning at your own pace and time. You will be enabled to process the contents of the
learning resource while being an active learner.

This module has the following parts and corresponding icons:

What I Need to Know This will give you an idea of the skills or
competencies you are expected to learn in the
module.

What I Know This part includes an activity that aims to

check what you already know about the
lesson to take. If you get all the answers
correct (100%), you may decide to skip this
module.

What’s In This is a brief drill or review to help you link

the current lesson with the previous one.

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 What’s New In this portion, the new lesson will be
introduced to you in various ways such as a
story, a song, a poem, a problem opener, an
activity or a situation.

What is It This section provides a brief discussion of the

lesson. This aims to help you discover and
understand new concepts and skills.

What’s More This comprises activities for independent

practice to solidify your understanding and
skills of the topic. You may check the
answers to the exercises using the Answer
Key at the end of the module.

What I Have Learned This includes questions or blank

sentence/paragraph to be filled in to process
what you learned from the lesson.

What I Can Do This section provides an activity which will

help you transfer your new knowledge or skill
into real life situations or concerns.

Assessment This is a task which aims to evaluate your

level of mastery in achieving the learning
competency.

Additional Activities In this portion, another activity will be given

to you to enrich your knowledge or skill of the
lesson learned. This also tends retention of
learned concepts.

Answer Key This contains answers to all activities in the

module.

References This is a list of all sources used in developing

this module.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of the module. Use a
separate sheet of paper in answering the exercises.
2. Don’t forget to answer What I Know before moving on to the other activities included in the
module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.

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 What I Need to Know

This module was designed and written with you in mind. It is here to help you master the Sources
and Uses of Short-Term and Long-Term Funds. The scope of this module permits it to be used in
many different learning situations. The language used recognizes the diverse vocabulary level of
students. The lessons are arranged to follow the standard sequence of the course. But the order in
which you read them can be changed to correspond with the textbook you are now using.

The module discusses the topic on:

• Lesson 3 – Sources and uses of short-term and long-term funds

After going through this module, you are expected to:

1. compare and contrast the loan requirements of the different banks and nonbank
institutions and cite these institutions in the locality. (ABM_BF12- IIIe-f-14)

What I Know

Let’s begin with challenging our minds about the short-term and long-term funds. Are you ready
now?
Let’s answer this!
Instruction: Read the questions carefully, choose the answer from the box and write it on your answer
sheets.

short term financing − long term financing – financial institution – banks – lending
companies – bonds – character – capital – condition – collateral – capacity – pawnshops –
BDO – debt financing – equity financing – credit cooperatives

1. ______________is a customer’s ability to generate cash flows.

2. ______________ is the willingness of the borrower to repay the loan.
3. ______________ is the current economic or business conditions.
4. ______________ is the security pledged for payment of the loan.
5. ______________ is a customer’s financial resources.
6. ______________ is debt scheduled to be paid within a year.
7. ______________ is debt to be paid in more than a year.
8. ______________ provides funds in exchange for collateral, usually jewelry, or other items of value.
9. ______________ provided lending services to its members. Members usually pay contributions to the
cooperative.
10. _____________ companies that are dedicated to lending.
11. _____________ these are debt investments where an investor loans money to an entity which borrows the
funds.
12. _____________ serves as intermediary between the investor and borrower.
13. _____________ is an example of a commercial bank.
14. _____________ is borrowing money from lenders and not giving up ownership.
15. _____________ provides several loan products catering to different types of needs.

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 Lesson
Sources and Uses of Short-
5 Term and Long-Term Funds

Financing is to provide funding for a particular need. Companies can choose between two sources
of financing, either debt or equity. Matching of sources and uses of funds saves the business from
encountering defaults on obligations and incurring losses and maximizing profits. This module
would assist you as Senior High School learner compare and contrast the loan requirements of
the different banks and nonbank institutions and cite these institutions in the locality.

What’s New

In order to proceed with the next topic, let’s challenge your understanding about short- and long-
term funds.
Activity 1:
Instruction: Identify whether the following are short-term or long-term sources of financing. Write
the answers on your answer sheets.
1. Acquisition of an equipment
2. Housing loan
3. Car loan
4. Loan for sari-sari store supplies
5. Franchise of a fast food outlet
6. Purchase of inventory for a computer shop
7. Loan for purchase of a commercial space
8. Development of a subdivision
9. Loan for agricultural needs (palay production, mango)
10. Emergency loans

Guided question:
1. Why is it important to distinguish between long-term or short-term financing?
__________________________________________________________________________________
__________________________________________________________________________________

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Activity 2:
Instruction: Classify the following as to bank or non bank institution.

Bank Non Bank

________________________ ________________________
________________________ ________________________
________________________ ________________________
________________________ ________________________

What is It

Financing is to provide funding for a particular need. Short term financing is debt scheduled to be
paid within a year such as loan for sari sari store supplies, purchase inventory for a computer shop,
loan for agricultural needs and emergency loans while long-term financing is debt to be paid in more
than a year such as acquisition of an equipment, housing loan, car loan and etc.
Examples of short term funds
• Suppliers Credit
• Advances from stockholders or other owners
• Credit cooperatives – provided lending services to its members. Members usually pay
contributions to the cooperative.
• Banks – provides several loan products catering to different types of needs.
• Credit Cards – just take note of the high interest rates on this source of funds.
• Lending Companies – companies that are dedicated to lending. They usually charge higher
interest than banks but their credit requirements are more lenient compared to banks.
• Pawnshops – provides funds in exchange for collateral, usually jewelry, or other items of
value.
• Informal lending sources (5/6)

Examples of long term funds

• Equity investors – these are the individuals/corporations which are issued common stock.
They share in the ownership of the company. There are also equity investors who do not
have voting rights in the company but have a share in dividends, usually a fixed
percentage. These investors are issued preferred stock. Holders of preferred shares are first
to receive dividends than common stockholders.

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 • Internally generated funds – not all profits are distributed to stockholders. Most of the
profits are re-invested and used by companies to finance their needs.
• Banks – they provide long-term loans, depending on the nature of the need. For example, a
5-year to 10-year loan may be granted if the purpose of the loan is construction of an office
building.
• Bonds – these are debt investments where an investor loans money to an entity which
borrows the funds.
• Lending companies – they can also provide long-term loans.

Bank Loan Requirements

1x1 ID Picture
Payslip
Service Record
Notarized Application Form
Business Permit (for business owners)
Service Record

Non-Bank Loan Requirements

For Pawnshop: For Cooperatives: For Gov’t Insurance:

Application Form Application Form (2 co-makers) Valid ID
Valid ID Cedula Notarized Application Form
Item for appraisal Payslip (latest 1 month) Payslip, Service Record

Know-Your-Customers (KYC) initiatives. Banks are required to verify the identity of their customers
to ensure that the funds will not be used for illegal activities such as, but not limited to, money
laundering and terrorist financing.

The institution’s primary consideration in approving loan applications.

5 C’s of Credit
• Character –the willingness of the borrower to repay the loan
• Capacity – a customer’s ability to generate cash flows
• Collateral – security pledged for payment of the loan
• Capital – a customer’s financial resources
• Condition – current economic or business conditions

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 What’s More

Now, let us practice what you have learned from the topic discussed. Challenge your mind by doing
this activity.

Instruction: Compare and contrast bank and non-bank loan requirements. Write at least three
differences and three similarities.

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 What I Have Learned

Great Job! You did well in your previous activity. Now, let us check your understanding of the
lesson by underlining the highlighted word/s that complete the thought of each sentence. (10 points)

1. (Short, Long) term financing is debt payable more than one year.
2. (Short, Long) term financing is debt payable within one year.
3. (Character, Capacity, Collateral) is the willingness of the borrower to repay the loan.
4. (Character, Capacity, Collateral) is the security pledged for payment of the loan.
5. (Character, Capital, Condition) is the current economic or business conditions.
6. (Character, Capital, Condition) is a customer’s financial resources.
7. (Capacity, Capital, Condition) is a customer’s ability to generate cash flows.
8. (Financing, Accounting) is to provide funding for a particular need.
9. (Application form, Item for appraisal, Payslip) is not a loan requirement for pawnshop.
10. How do you plan to finance P 10 million? (Short term financing, Long term financing)

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 What I Can Do

Wow! It’s good to know that are you are almost done. I hope you now have a deeper understanding
and appreciation of the topic.

Activity 1: Provide the loan requirements for the following scenarios.

Applying loan for Pawnshop Applying cash loan for Bank.

Activity 2:
Instruction: Identify different banks and non-bank institutions in your barangay.

BANK NON BANK

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 Assessment

Congratulations! You are now about to test what you have learned from this module.

Instruction: Read the questions carefully, choose the answer from the box and write it on your answer
sheets.

short term financing − long term financing – financial institution – banks – lending
companies – bonds – character – capital – condition – collateral – capacity – pawnshops –
BDO – debt financing – equity financing – credit cooperatives

1. ______________is a customer’s ability to generate cash flows.

2. ______________ is the willingness of the borrower to repay the loan.
3. ______________ is the current economic or business conditions.
4. ______________ is the security pledged for payment of the loan.
5. ______________ is a customer’s financial resources.
6. ______________ is debt scheduled to be paid within a year.
7. ______________ is debt to be paid in more than a year.
8. ______________ provides funds in exchange for collateral, usually jewelry, or other items of value.
9. ______________ provided lending services to its members. Members usually pay contributions to the
cooperative.
10. _____________ companies that are dedicated to lending.
11. _____________ these are debt investments where an investor loans money to an entity which borrows the
funds.
12. _____________ serves as intermediary between the investor and borrower.
13. _____________ is an example of a commercial bank.
14. _____________ is borrowing money from lenders and not giving up ownership.
15. _____________ provides several loan products catering to different types of needs.

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 Additional Activities

I hope you have a learned a lot from the activities in this module. This
additional activity is expected to enrich your knowledge about the sources and uses
of short-term and long-term funds.

Mr. Joe Y. De Lion applied for a PHP 1.5 million loan in behalf of his business, “Joe’s
Restaurant”, for additional capital in 2019. He is the Chairman of the Board of Joe’s
Restaurant. In their meeting, the Board decided to open an additional branch for the
restaurant. Joe’s Restaurant currently has 3 branches in General Santos City and would
like to open up a small branch in Davao City. Joe’s Restaurant has been in the business
for 12 fruitful years and has been a previous borrower of the bank. The company had
previous late payments before but the reasons are usually justifiable, and the balance of
the loan, along with any penalties, if any, is paid. The three branches earn a net income
of PHP 900,000/year. The lot where the main restaurant is located is pledged as collateral
to the bank. This property is valued at PHP 2 million. Shown below is an excerpt from
Joe’s Restaurant’s 2018 consolidated audited financial statements.

As of 31 December 2018 As of 31 December 2017

Current Assets 1,200,000 900,000
Non-current Assets 4,400,000 4,200,000
Current Liabilities 500,000 460,000
Non-current liabilities 2,300,000 3,500,000
Equity 2,800,000 1,140,000
Net Income 900,000 950,000
Cash Flow from Operations 500,000 450,000

Identify the information to be used in analyzing 5 C’s of credit.

• Character_________________________________________________________________
• Capacity__________________________________________________________________
• Collateral__________________________________________________________________
• Capital____________________________________________________________________
• Condition_________________________________________________________________
 What I Know What’s New What’s More
1. Capacity 1. long-term
2. Character 2. long-term
3. Condition 3. long-term
4. Collateral 4. short-term
5. Capital 5. long-term
6. Short-term financing 6. short-term
7. Long-term financing 7. long-term
8. Pawnshop 8. long-term
9. Credit Cooperatives 9. short-term
10. Lending Companies 10. short-term
11. Bonds
12. Financial
institutions
13. BDO
14. Debt financing
15. Banks
Answer Key
 Additional Activities
Character – payment history and experience in the business.
Capacity – positive cash flows from operations proves the borrower’s capacity.
Collateral - the property pledged serves as collateral.
Capital - the audited financial statements give a preview of the borrower’s resources.
Condition - The income statement shows that the business is earning and is even growing. Grown
to 3 branches.
What I Have What I Can Assessment
Learned Do
1. Short 1. Capacity
2. Long 2. Character
3. Character 3. Condition
4. Collateral 4. Collateral
5. Condition 5. Capital
6. Capital 6. Short-term financing
7. Capacity 7. Long-term financing
8. Financing 8. Pawnshop
9. Payslip 9. Credit Cooperatives
10. Long-term 10. Lending Companies
financing 11. Bonds
12. Financial
institutions
13. BDO
14. Debt financing
15. Banks
References

Teaching Guide for Senior High School, Business Finance Published by the
Commission on Higher Education,2016 Chairperson: Patricia B. Licunan, Ph.D.

Internet
 DISCLAIMER
This Self-learning Module (SLM) was developed by DepEd – Division of General
Santos City with the primary objective of preparing for and addressing the
new normal. Contents of this module were based on DepEd’s Most Essential
Learning Competencies (MELC). This is a supplementary material to be used
by all learners in General Santos City in all public schools beginning SY 2020-
2021. The process of LR development was observed in the production of this
module. This is version 1.0. We highly encourage feedback, comments, and
recommendations.

For inquiries or feedback, please write or call:

Department of Education – Division of General Santos City

Learning Resource Management System (LRMS)

Tiongson St., Lagao, General Santos City

Telefax No.: (083) 552-8909

Email Address: depedgensan@deped.gov.ph