12-ABM

JOVIT R. ALERIA
INSTRUCTOR
WHAT IS FINANCE?

Finance is a broad term that

describes two related activities:
1. the study of how money is
managed and
2. the actual process of acquiring
needed funds.
Because individuals, businesses and
government entities all need funding to
operate, the field is often separated
into three sub-categories:
1. personal finance,
2. corporate finance and
3. public finance.
THE ROLE OF BUSINESS
1. Business is responsible for bringing
into the market a wide array of
products and services which were not
previously available.
2. Business allows profit-making.
3. Business raises the standard of living
depending to a large extent on the
performance of business firms.
What is business?
Business is any lawful economic
activity concerned with the
production and/or distribution
of goods or services for profit.
Kinds of business
1. Commerce
2. Industry
3. services
Commerce
Business firms which are engaged in the
buying and selling of goods and services are
classified as those falling under commerce.
Also included:
Trading
Merchandising
Buy and sell
marketing
Some Examples of Commerce
1. Supermarkets
2. Dry goods stores
3. Peddlers
4. Sari-sari stores
5. Importers
Industry
Industries are those which are mainly
concerned with production.
Goods produced and which are called
consumers goods, or those which are
intended for use of business and
industry and which are called
producers goods.
Types of Industry
1. Genetic industries
2. Extractive industries
3. Manufacturing industries
4. Construction industries
 Genetic Industries
Involved in agriculture, forestry, and
fish culture
 Extractive Industries
Involved in the extraction of goods
from natural resources.
Mining, lumbering, hunting, and
fishing
 Manufacturing Industries

Those which convert raw

materials into finished
products
 Construction Industries

Firms engaged in building

infrastructures like airports,
seaports, dams, highways, etc.
Those involved in the
construction of dwelling houses
are included.
Services
service business is one which
sells services to buyers. Service
firms maybe classified as:
1. Recreation
2. Personal
3. finance
Recreation
Examples:
1. Movie houses
2. Television and radio stations
3. Theaters for drama and stage
presentations
Personal
Examples:
1. Restaurants
2. Barber shops
3. Transportations
4. Hotels
5. Tailoring shops
Finance
Examples:
1. Banks
2. Insurance companies
3. Investment houses
4. Financing institutions
5. Credit unions
6. Savings and loans associations
GOALS OF BUSINESS
To attain:
1. Political influence
2. Family control of the
business
3. Community involvement
OBJECTIVES OF BUSINESS
For a business to survive and grow, it must
attain:
1. The provision of products and services to
the community
2. The satisfaction of personal objectives like:
a. Profits for owners
b. Adequate salaries and compensation for
executives and employees
c. Psychic income for all, including pride in
work, security, recognition, and acceptance
3. Protection and
enhancement of the human
and physical resources of
society; and
4. Economy and effectiveness
of operation.
Most common reasons for
business failures include the
following:
1. Bad or improper management
practices, including poor cost
controls and poor hiring
practices;
2. Poorly focused and executed
marketing or inadequate
marketing;
4. Poor location;
5. Failure to invest in new
products and efficient
technology; and
6. Lack of adequate financing.
Why persons engage in business?
1. Provision of employment
to people
2. Profits
3. Service to the
community
4. Personal satisfaction
5. Means to earn a living
6. Achievement of power; and
7. Protection of ones self and
family.
ENTREPRENEURSHIP
Two options to engage in
business:
a. To buy an existing business
b. To create a business that he
will operate
Entrepreneurs Functions:
1. To supply the capital of
the firm
2. To organize production
by buying and combining
inputs
3. To decide on the rate of
output in the light of his
expectations about demand;
and
4. To bear the risk involved in
these activities
BUSINESS PROSPECTING
Do not automatically grab the first
opportunity that comes along.
You should carefully scan the
environment for other possible
openings.
You should prepare a list of alternative
business opportunities and you should
make your choice from that list.
Business Opportunities
1. Increasing demand for basic
commodities due to an increase in
population
2. Rising prices (or costs) of existing
products like construction materials;
3. Relaxation of government policies like
the lifting of import restrictions
4. The development of a new
service concept like the
issuance and delivery of
passports through courier
service;
5. The development of a new
product concept like the
engine that runs on water;
6. The increasing demand for
specialized services like manpower
export services, health and fitness
services, management consultancy,
and skills training;
7. The increasing requirements of
the wholesale and retail industry.
BUSINESS PROMOTION
It refers to discovery and
exploration of a business
opportunity with the purpose
of converting it into a going
concern.
The three steps involved in business
promotion:
1. Discovering the idea for a new
business;
2. Determining the feasibility of the
idea; and
3. Assembling the needed resources to
start the business.
MEANING OF FEASIBILITY STUDY
It is a detailed
investigation and analysis
of a proposed business
venture to determine its
variability.
It must contain the following:
1. Management study
2.Marketing study
3.Production facilities
and the product
4. Taxation and legal
aspects
5. Financing aspects
6. Profitability
7. Social desirability
MANAGEMENT STUDY
It is in this particular portion of the
feasibility study where the following
aspects are determined:
1. The appropriate form of organization
2. The internal structure of the
organization
3. The owners and
4. The staffing pattern of the organization.
Marketing Study
1. The future total demand for the
product
2. The competitive situation of the
product in the industry
3. An estimated annual sales volume
4. Future selling prices
5. The marketing program
TECHNICAL STUDY
The tax burden applicable to
the project should be shown in
this portion of the feasibility
study.
The design of it must be
considered so that the tax
burden is legally minimized.
ASSEMBLING THE NEEDED
RESOURCES
It should include the ff:
1. Initial capital required
2. The essential properties
3. Processes
4. Personnel
INITIAL CAPITAL REQUIRED
1. cost of organization
2. Working capital
3. Acquisition of fixed
assets
4.Reserves