Business Finance

CHAPTER 1: THE NATURE AND AIMS OF BUSINESS

THE PHILIPPINE ECONOMY
THE ROLE OF BUSINESS

 Responsible for bringing into the market wide array of products and
services which were not previously available.
 Provide mankind with basic necessities like food and shelter
 Profit making has been adapted as a measure to motivate enterprising
persons to engage in business
BUSINESS is…..

 Any lawful economic activity concerned with the production and/or

distribution of goods or services for profit.
 Considered as business if objective is to make profit
KINDS

 Commerce
 Industry
 Services
Business Finance
CHAPTER 2: ORGANIZING A BUSINESS
 First stage in the life cycle of the business
 Importance of the organizational stage
 Business failures resulted because of defects in planning
a. Bad or improper management practices
b. Poorly focused and executed marketing or inadequate marketing
c. Poor location
d. Failure to invest in new products and efficient technology
e. Lack of adequate financing
WHY PEOPLE ENGAGE IN BUSINESS?

Hope to enjoy certain values like:

 Provision of employment to people
 Profits
 Service to the community
 Personal satisfaction
 Means to earn a living
 Achievement of power
 Protection of one’s self and family
ENTREPRENEURSHIP

 Who creates a business to operate

Functions:
a. Supply the capital of the firm
b. Organize production by buying and combining inputs
c. Decide on the rate of output in the light of his expectations about
demand
d. Bear the risk involved in these activities
Marketing Study

 Future total demand for the product

 Competitive situation of the product in the industry
 An estimated annual sales volume
 Future selling prices
 Marketing program
Technical Study

 Manufacturing process selected

 Rated capacity of the plant
 Design of the machinery
 Location and layout of the plant
 Specifications of the structures
 Requirements for operation
Taxation Study

 Tax burden applicable to the project should be shown in this portion of

feasibility study.
 Tax burden is legally minimized
Financing Study

 Source of financing for the project

 Select the most attractive financing scheme using factors of cost and
availability
Profitability

 Rate of return using various approaches

 the degree to which a business or activity yields profit or financial gain.
 measure of the business's ability to generate revenue compared to the
amount of expenses it incurs. Let's look at a few of the primary analytical
approaches.
Initial Capital Requirements

 Cost of organization
 Working capital
 Acquisition of fixed assets
 reserves
Sources of Initial Capital

 Main sources of capital: (1) owners; and (2) creditors

Retention of Control

 Important that certain control measures be instituted to protect the

interests of the promoters and founders.
 Can be attained by using combination of the following:
a. leases
b. options and contracts
c. franchises and concessions
d. patents and copyrights