12
BUSINESS FINANCE
Second Quarter
LEARNING ACTIVITY SHEETS
Republic of the Philippines
Department of Education
Enclosure No. 2.c to Regional Memorandum No ______________ , s 2020
Policy Guidelines on the Conduct of Online Quality Assurance of Learning Resources
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Learning Activity Sheet in ENTREPRENEURSHIP
(Grade 12)
Copyright © 2020
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RIZALINO CARONAN, PhD
. , Regional LR Supervisor
Printed by: DepEd Regional Office No. 02
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Note: Practice Personal Hygiene Protocols at all times.
2
Table of Contents
Page
number
Compentency
Compare and contrast the different types of
investments
.....................
4
Measure and list ways to minimize or reduce
investment risks in simple case problems
.....................
16
Enumerate Money Management Philosophies
.....................
26
Illustrate the money management cycle and
give examples of sound practices in earning,
spending, saving, and investing money
.....................
36
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BUSINESS FINANCE
Name of Learner:
Grade Level:
Section:
Score:
LEARNING ACTIVITY SHEET
DIFFERENT TYPES OF INVESTMENT
Background Information for Learners
We simply define investment as money which is committed with an intention to earn a
return over a period of time. However, Brown and Reilly (2014) defined investment as “the
current commitment of dollars for a period of time in order to derive future payments that will
compensate the investor for:
 the time the funds are committed
 the expected rate of inflation during this time period; and
 the uncertainty of future payments.”
Although investments do not have to be in dollars but may be denominated in any other
currency.
There are different types of investments which can be grouped into three like:
1) Fixed Income and Equity, such as:
a) Bank Deposits. These are money placed into a banking institution for safekeeping.
Bank Deposits are of different types but the most popular of them are: Savings account,
Checking or Current account, and Time deposit account.
A typical savings account provides a low fixed rate of return but provides the
convenience of availability.
Checking account, also, has a very low rate of return but a depositor can issue checks
from his account to pay various expenditures instead of delivering bills or coins as payment.
A Time deposit account usually requires a minimum amount of deposit with a fixed
term to maturity but with higher return compared to savings and checking account. The time
depositor cannot withdraw from his account before the fixed date, but sometimes Time deposits
are pre-terminated.
Deposits with banks are insured with the Philippine Deposit Insurance Corporation
(PDIC) up to P500,000 per depositor for every bank.
Depositors need to determine the bank’s overall financial position and performance
before transacting with them. A comprehensive rating system was developed in assessing the
overall condition of the bank. This CAMELS rating system is based on the following
components:
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1.
2.
3.
4.
5.
6.
Capital adequacy
Asset quality
Management indicators
Earnings quality
Liquidity
Sensitivity to risk factors
A bank may be graded with a CAMELS rating of 1 as the highest and 5 as the lowest
rating possible. The depositor may ask the bank for the CAMELS rating assessed by the
Bangko Sentral ng Pilipinas (BSP).
How is this type of investment assessed? Simply go to a bank (BDO, BPI, Metrobank,
Landbank, etc.) and open a bank account by signing the necessary account opening form.
Minimum amount will also be required depending on which bank and the type of bank deposit
you want to open.
b) Stocks- type of security that signifies ownership in a corporation and classified under
two main categories: Common stock and Preferred Stock.
Preferred stocks differ from common shares in terms of preference as to dividends,
seniority over claims to assets, and the absence of voting rights. Corporations are not required
to pay dividends annually to preferred stockholders but when they declare dividends, preferred
shareholders are paid first before common shareholders. In case of liquidation, preferred
shareholders also have preference over claims to the assets relative to common shareholders
but not over creditors. Preferred shareholders also do not have voting rights in stockholder’s
meetings.
How to avail of stock investment? Go to a stock brokerage firm (i.e. COL Financial,
AB Capital Securities, etc.) or a bank with a stock brokerage arm and open a stock market
account by signing necessary account opening forms. Minimum capital amount, depending on
the broker, will be required to be deposited to successfully open the account (i.e. PHP5,000 for
BPI Trade, PHP10,000 for AB Capital Securities, etc.) most of these brokerage firms now
provide online access to their client’s stocks account (i.e. www.colfinancial.com,
www.bpitrade.com, www.abcapitalsecurities.com.ph, etc).
c) Bonds- debt investments where an investor loans money to an entity which borrows
the funds for a defined period of time at a variable or commonly, fixed interest rate.
Government Securities fall under the category of debt securities and most of them are
also classified as fixed income instrument. The National Government through the Bureau of
Treasury issues debt securities known as Treasury bills (T-bills) and Treasury Bonds (Tbonds).
Treasury bills have maturities of one year or less while Treasury bonds or Treasury
notes have maturities longer than one year which could range from 2 to 25 years.
There are other government securities issued by government agencies aside from the
Bureau of Treasury such as the bonds issued by local government units (LGUs). The primary
difference is that these bonds are not backed unconditionally and are not direct and general
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obligations of the National Government. Because of this difference, a higher rate of return is
required compared to treasury securities.
Corporate Debt Securities are debt instruments issued by corporations. They are in the
form of commercial paper and corporate bonds. Commercial papers are short-term instruments
issued by a corporation for their immediate needs. Corporate bonds are long term debt
instruments.
Corporate bonds are also traded like government securities using the Philippine Dealing
Exchange (PDEx) platform. Investors would need to transact with their dealer banks in order
to invest in these securities. Minimum purchase of bond is normally higher relative to stocks
and bank deposits. Clients may also view their bond’s performance online depending on which
bank they bought it from.
2) Alternatives to Fixed Income & Equity (Pooled Funds)
Instead of investing in specific securities, an individual may invest in the shares of
mutual funds, units in the Unit Investment Trust Funds (UITFs) offered by banks or in
Exchange Traded Funds (ETFs) traded in the stock exchange
a) Mutual Funds- are investments made up of a pool of funds collected from many
investors for the purpose of investing in stocks, bonds, and other similar assets. To
access this type of investment, go to an insurance company or a financial institution
that offers mutual funds like Philequity, Sunlife, Manulife, etc. and sign the
necessary account opening forms. As with stocks, minimum amounts will be
required to successfully open the account. Some of these financial institutions also
provide online access to monitor their mutual fund performance.
b) Unit Investment Trust Fund (UITF)- is similar to a mutual fund but is managed
by banks. How to access UITF? The same procedure as a mutual fund except that UITFs are
accessed through banks.
Investing in pooled funds avoids the transaction costs incurred in buying individual
securities and avoids the required time spent if one was to manage his own portfolio.
Investment professionals with the appropriate knowledge and skill also manage these pooled
funds. However, numerous fees and charges are levied against the investor for the management
service rendered.
The initial price and returns derived from mutual funds and UITFs are based on the
movement of the net asset value (NAV) per share or per unit. Gains are incurred when the
NAV per share of per unit increases from the price a share or a unit was bought. Losses are
incurred when the NAV per share or per unit decreases.
Investments in ETFs incur gains and losses similar to how listed equity investment
works. Currently, only one ETF, First Metro Philippine Equity Exchange Traded Fund, Inc.,
is traded at the PSE.
3) Other Investment Assets
a) Currencies- generally accepted form of money, including coins and paper notes,
which is issued by a government and circulated within an economy (i.e. USD, Peso,
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JPY, EUR). How to access this type of investment? Open a foreign currency/forex
account (i.e. oanda, fxcm, cboe, etc.) online. Minimum amount required for forex
accounts varies and usually higher vs. stocks and usually in US dollar. Investment
can be monitored online.
b) Commodities- a basic good used in commerce that is interchangeable with other
commodities of the same type (i.e. gold, nickel, oil). Accessing this type of investment has the
same procedure as in Currencies.
c) Insurance- a contract (policy) in which an individual or entity receives financial
protection or reimbursement against losses from an insurance company (i.e. life insurance,
educational plans, Variable Universal Life Insurance). Variable Universal Life Insurance is a
life insurance that offers both death benefit and investment features. Just visit insurance
companies directly to avail of this investment.
d) Real Estate- land and any improvement on it (i.e. land, house and lot,
condominiums). To access this type of investment, contact or visit real estate companies
directly (i.e. Ayala Land, Megaworld, SM Prime, etc., or contact real estate brokers.
Investment Scams, on the other hand, usually involve getting you to put up money for
a questionable investment – or one that doesn’t exist at all. In most cases, you’ll lose some or
all of your money. Some common scams are: Advance fee scam, Boiler room scam, Exempt
securities scam, Forex scam, Offshore investing scam, Pension scam, Ponzi or Pyramid
Scheme, Pump and Dump Scam, Investment cold calls, Share promotions and hot tips, and
many more. A sign of scam can be ‘High returns and low risk’, ‘Hot tip or insider information,’
Pressure to buy now,’ or ‘Seller not registered to sell investments.’
Learning Competency with Code
Compare and contrast the different types of investments, Quarter 2, Week 1-2) ABM_BF12ivm-n-23)
Exercise 1. MATCH ME.
1.1. Directions: Match the investment asset in column A with its description in column B by
writing the capital letter on the left side of column A.
(A)
Investment (B) Description
Asset
1 Stocks (Equity)
A. An investment that is made up of a pool of funds
collected from many investors for the purpose of investing
in stocks, bonds, and similar assets.
2 Bank
Deposits B. It is a property consisting of land and any improvements
(Fixed Income)
on it.
3 Mutual Funds
C. It a type of security that signifies ownership in a
corporation and represents a claim on part of the
corporation's assets and earnings.
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4 Real Estate
D. A contract (policy) in which an individual or entity
receives financial protection or reimbursement against
losses from an insurance company.
E. Money placed into a banking institution for safekeeping.
5 Insurance
1.2. Directions: Match the investment asset in column A with its advantage/disadvantage in
column B by writing the capital letter on the left side of column A.
(A)
Investment (B) Advantage/Disadvantage
Asset
1 Stocks (Equity)
A. Disadvantage: On some of traditional plans, no
sickness/death until a certain age may mean not getting any
benefits at all.
2 Bank
Deposits B. Advantage: It is shorter, if any, holding period vs. bonds.
(Fixed Income)
3 Mutual Funds
C. Advantage: It can be a source of recurring rental income.
4 Real Estate
D. Disadvantage: It is the riskiest of all assets (can lose as
much as 50% of their money in one day).
5 Insurance
E. Disadvantage: Pay management fees.
Exercise 2. Directions: True or False. On the space provided before each number, write T if
the statement is True and F if the statement is false.
1. Corporate bonds are long-term debt instruments issued by corporations.
2. A typical savings account provides a low fixed rate of return but provides the
convenience of availability.
3. Treasury bills and bonds are issued by banks and corporations.
4. Investors would only need to look for a stockbroker in order for them to
purchase or sell shares in the stock market.
5. Insurance and bonds are both equity investments.
6. Stock is the riskiest of all assets.
7. Just like a time deposit, bonds can also be pre-terminated by the investor.
8. If you invest in mutual fund, it’s not necessary for you to pay management fees.
9. If you invest in Real Estate, maintenance is needed to preserve its value.
10. Every investment is associated with risk.
Exercise 3. ARRANGE ME. Directions: Unscramble the letters to reveal the word(s)
identified in the following sentences. Write your answer on the space provided for.
1. The ability of an asset to be converted into cash.
U T I
L Y D I
I
Q
2. The general increase in prices.
I
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N O N A T I
F L
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3. The amount paid on a regular basis to the insurance company in return for the
insurance/protection provided.
A R U S I
N E C N
R P
U I
M E
M
4. Distribution of the company’s income to its shareholders.
I
D V I
D S
D E N
5. The process of investing in different kinds of assets to lessen exposure in market/price
volatility.
T I
O N A C I
F R S I
E V D I
6. Money which is committed to earn a return over a period of time.
S
M E N T E V N I
T
7. The uncertainty of returns.
S
K R I
8. A debt security issued by the government that have maturities of one year or less.
S
U R E T Y A R
B L I
L S
9. How price of an asset moves with respect to another asset.
R O C E L R A T I O N
10. This usually involve getting you to put up money for a questionable investment- or one
that doesn’t exist at all.
T S E I N V M E N T
M A C S
Exercise 4. ESSAY. Directions: In not less than three (3) paragraphs, answer the question
below.
If you have PHP1,000,000 today which you can invest for the next 10 years, where will
you put it and why?
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Rubric Scoring for Exercises 6 and 7
Name:
Topic:
Date:
Hour:
5 points
4 points
Learner
is
very
knowledgeabl
e about the
topic.
Organization
of thoughts is
excellent.
Learner is
knowledgea
ble about the
topic.
Grammar
No errors at
all.
Spelling
No
misspelled
word at all
With
one
error
in
grammar.
With
one
misspelled
word
Knowledge
about
the
topic
Organization
of thoughts
3 points
Learner
is
partly
knowledgeabl
e about the
topic.
Organizatio
Organization
n of thoughts of thoughts is
is very good. good.
With
2-3
errors
in
grammar.
With 2-3
misspelled
words
2 points
1 point
Learner has
a
little
knowledge
about
the
topic.
Organizatio
n of thoughts
is somewhat
good.
With
4-5
errors
in
grammar.
With
4-5
misspelled
words
Learner does
not
have
knowledge
about
the
topic.
Needs
improvement
Total/
Comments
With 6 or
more errors in
grammar.
With 6 or
more
misspelled
Words
References:
Cayanan, A. & Borja (2017). Business Finance. Quezon City: Rex Bookstore
Commission on Higher Education, K to 12 Transition Program Management Unit. Teaching
Guide for Senior High School. Business Finance. Quezon City
https://www.getsmarteraboutmoney.ca, 8 Common Investment Scams / Protecting Against
Fraud
https://www.scamwatch.gov.au Investment Scams
Prepared by:
ROLANDO A. SEGURO JR.
Matucay National High School
Writer
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BUSINESS FINANCE
Name of Learner:
Section:
Grade Level:
Score:
LEARNING ACTIVITY SHEET
WAYS TO MINIMIZE OR REDUCE INVESTMENT RISKS
Background Information for Learners
Risk management is the process of identification, analysis and acceptance or mitigation of
uncertainty in investment decisions. Risk is inseparable from return in the investment world.
(https://www.investopedia.com/terms/r/riskmanagement.asp). Putting your money into an investment
is always accompanied by a risk.
Brown and Reilly (2014) identified the major sources of risks as follows:
1.
2.
3.
4.
5.
Business risk
Financial risk
Liquidity risk
Exchange rate risk
Country risk
Business risk is related to the nature of the company’s products and operating strategy.
Companies with stable sources of sales and earnings have relatively low business risk.
Financial risk refers to the risk created by the choice of capital structure—the financing
mix of the issuing company. A company usually funds its operation through debt and equity
financing. As the debt portion increases, financial risk increases.
Liquidity risk is the uncertainty that an investment can be converted to cash at a known
price. The existence of exchange facilities eases in liquidating an investment. If there is no
ready market for the investment, it is considered illiquid and a higher liquidity premium is
required by investors. The presence of many ready buyers and sellers reduces liquidity risk.
Exchange rate risk exists if the investment is denominated in another currency different
from that of the local currency of the investor. An additional uncertainty exists if the investor
needs to liquidate the foreign currency-denominated investment and convert it to Philippine
peso, for example.
Country risk is associated with political and economic uncertainty of a particular
business environment. You can only entice investors to invest in countries with political
stability if a higher rate of return is expected.
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With these sources of risks that an investor may encounter for his investment, here are
the steps on how to minimize or reduce risk on your investment.
STEPS TO MINIMIZE OR REDUCE INVESTMENT RISK
Source:https://www.clearrisk.com/risk-management-blog/bid/47395/the-risk-managementprocess-in-5-steps
1. Identify Risks. The four main risk categories of risk are hazard risks, such as fires or
injuries; operational risks, including turnover and supplier failure; financial risks, such
as economic recession; and strategic risks, which include new competitors and brand
reputation. Being able to identify what types of risk you have is vital to the risk
management process.
An organization can identify their risks through experience and internal history,
consulting with industry professionals, and external research. They may also try
interviews or group brainstorming.
2. Measure Risk. A risk map is a visual tool that details which risks are frequent and
which are severe (and thus require the most resources). This will help you identify
which are very unlikely or would have low impact, and which are very likely and would
have a significant impact.
Knowing the frequency and severity of your risks will show you where to spend
your time and money, and allow your team to prioritize their resources.
3. Examine Solutions. Organizations usually have the options to accept, avoid, control,
or transfer a risk.
Accepting the risk means deciding that some risks are inherent in doing business
and that the benefits of an activity outweigh the potential risks.
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To avoid a risk, the organization simply has to not participate in that activity.
Risk control involves prevention (reducing the likelihood that the risk will
occur) or mitigation, which is reducing the impact it will have if it does occur.
Risk transfer involves giving responsibility for any negative outcomes to
another party, as in the case when an organization purchases insurance.
4. Implement Solution. Once all reasonable potential solutions are listed, pick the one that
is most likely to achieve desired outcomes.
Find the needed resources, such as personnel and funding, and get the necessary
buy-in. Senior management will likely have to approve the plan, and team members
will have to be informed and trained if necessary.
Set up a formal process to implement the solution logically and consistently
across the organization, and encourage employees every step of the way.
5. Monitor Result. Risk management is a process, not a project that can be “finished” and
then forgotten about. The organization, its environment, and its risks are constantly
changing, so the process should be consistently revisited.
Determine whether the initiatives are effective and whether changes or updates
are required. Sometimes, the team may have to start over with a new process if the
implemented strategy is not effective.
Risk Measure and Risk Reduction
Risk Measure – Single asset
A basic risk measure for a single asset is the variance and standard deviation (square root
of the variance) of returns. The variance ( is computed as follows:
n


[Rt – Rmean]2
t=n
n
Where:
Rt = Return for a Particular Period
Rmean = Average return
n = Number of Periods
Computing the variance involves the following steps:
1.
2.
3.
4.
5.
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Get the mean.
Get the difference of each return and the mean.
Get the squared difference.
Add the squared difference.
Divide by the number of periods.
Note: Practice Personal Hygiene protocols at all times
For example, the following returns pertain to the years indicated for stock A:
2011
2012
2013
2014
2015
Stock A
13.25%
16.25%
13.80%
20.70%
11.20%
Using the steps above:
1. Get the mean—average return for the 5-year period.
Rmean = 75.20% / 5 years
= 15.04%
2. Get the difference of each return and the mean.
In percentage
Stock A
(In percentage)
2011
13.25%-15.04% -1.79%
2012
16.25%-15.04% 1.21%
2013
13.80%-15.04% -1.24%
2014
20.70%-15.04% 5.66%
2015
11.20%-15.04% -3.84%
In decimal (In
decimal)
-0.0179
0.0121
-0.0124
0.0566
-0.0384
3. Get the squared difference.
Stock A
2011
2012
2013
2014
2015
13.25%-15.04%
16.25%-15.04%
13.80%-15.04%
20.70%-15.04%
11.20%-15.04%
Difference (In
percentage)
-1.79%
1.21%
-1.24%
5.66%
-3.84%
Difference (In
decimal)
-0.0179
0.0121
-0.0124
0.0566
-0.0384
Squared
Difference
0.00032041
0.00014641
0.00015376
0.00320356
0.00147456
4. Add the squared difference.
Sum = 0.00529870
5. Divide by the number of periods.
Variance = 0.00529870 / 5 years = 0.00105974
The standard deviation is equal to the square root of the variance:
  he standard deviation of the returns of Stock A is equal to 3.26%. The
greater the standard deviation of the returns, the greater is the risk of the single asset.
Risk-Return Measure
Assets should be compared based on both risk and return. The coefficient of variation
is a simple risk-return measure to compare various assets. It is computed by dividing the
standard deviation of returns by the mean return.
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Coefficient of variation =   Rmean
Using our Stock A example, the coefficient of variation is equal to:
Coefficient of variation = 0.0326 / 0.1504 = 0.21676
Based on this simple measure, investors should prefer assets with a low coefficient of
variation.
Risk Reduction
From a portfolio perspective, risk, as measured by the portfolio variance or standard
deviation, can be reduced by combining assets whose returns do not move in the same direction
or at least do not move perfectly together.
This will accomplish the same objective of minimizing risk for a given level of return.
It is then the objective of the investor to look for these assets, whose returns are not correlated,
less correlated, or better yet, negatively correlated.
It is recommended that an investor should not pull out his money in a single asset and
diversify his portfolio into various assets associated with differing industries and businesses.
As they say, “Do not put all your eggs in one basket.”
LEARNING COMPETENCY
Measure and list ways to minimize or reduce investment risks in simple case problems, Quarter
2, Week 1-2) ABM_BF12-IVm-n-25
Exercise 1. Directions. Write A if the statement or phrase is related to a, write B if the
statement or phrase is related to b, write C if the statement or phrase is related to both a and b,
and write D if the statement or phrase is not related to both a and b.
1. It is used to measure risk on investment.
a. volatility
b. diversification
2. Risk management process
a. identification of risk
b. solution implementation
3. Liquidity risk
a. political and economic uncertainty
b. choice of capital structure
4. Hazard risk
a. Tsunami
b. Theft
5. Strategic risk
a. Trade mark
b. Franchise
6. Risk transfer
a. Buying of insurance policy
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b. Selling of equipment with salvage value of 50,000.
7. Risk control
a. Installation of CCTV to the whole working area
b. Installation of Biometric machine
8. Standard deviation
a. systematic investment
b. non-systematic investment
9. A risk management technique that combines a wide variety of investments within a
portfolio to reduce risk.
a. standard deviation
b. diversification
10. A risk management step which determine changes and updates are required
a. identify risk
b. measure risk
Exercise 2. Directions: Write A if the statement is correct, write B if the statement is incorrect.
Write your answer in the space provided for you.
1. The lower the standard deviation is, the lower is the risk of the single asset
2. Volatility considered systematic investment and non-systematic investment.
3. Return on investment should be considered in analyzing risk.
4. Volatility is often calculated using variance and standard deviation
5. The standard deviation is equal to the square root of the variance.
6. Assets should be compared based on both risk and return.
7. Liquidity risk exists if the investment is denominated in another currency different
from that of the local currency of the investor.
8. Companies with stable sources of sales and earnings have relatively low business risk.
9. A company usually funds its operation through debt and equity financing.
10. Risk can be defined as the uncertainty of returns.
Exercise 3. Directions. Compute the mean return, variance and standard deviation of returns
of Stock X based on the returns of the 5-year period below.
2015
2016
2017
2018
2019
Return
16.25%
19.50%
13.80%
25.50%
9.20%
Exercise 5. Directions: Read carefully the situation below and answer the guide questions
given. Write your answer in a clean sheet of paper.
ABC grocery store is the number one store in the city, with total asset of 20 million. Its
operations last for 15 years. It has 25 employees which includes the manager. For the last
quarter, the manager notices that the number of sales decreases by 10% but the number of
inventories in and out remains the same. With the number of employees, there were five
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new members who were hired few months ago.
Guide Questions:
a) State the possible problem of the organization.
b) As a manager, what are you going to do to solve the problem?
c) What solution to the problem can you recommend to the manager?
References:
Cayanan, A. & Borja (2017). Business Finance. Quezon City: Rex Bookstore
Commission on Higher Education, K to 12 Transition Program Management Unit. Teaching
Guide for Senior High School. Business Finance. Quezon City
https://www.investopedia.com/terms/r/riskmanagement.asp
https://www.clearrisk.com/risk-management-blog/bid/47395/the-risk-management-processin-5-steps
https://www.investopedia.com/terms/v/volatility.asp
Prepared by:
ROLANDO A. SEGURO JR.
MATUCAY NATIONAL HIGH SCHOOL
Writer
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BUSINESS FINANCE
Name of Learner:
Grade Level:
Section:
Score:
LEARNING ACTIVITY SHEET
MONEY MANAGEMENT PHILOSOPHIES
Background Information for Learners
Every person is doing capital budgeting, business or investment in life. As a Senior
High School student, you still rely on your parents or guardian for finances. While you are still
young, it is very important to have enough knowledge of the different ways of managing
resources in the future. As an ABM student, there will be a lot of opportunities that will come
your way. You will, later on, meet a rewarding and fulfilling job or will have your own business
to manage. Wouldn’t it be nice if you contain the awareness of properly managing your future
assets? Through it, you can avoid financial illiteracy and can take effective and efficient
personal financial decisions.
Managing personal finance is when an individual gains an understanding of proper
utilization of funds, efficient planning and controlling financial transactions, budgeting and
proper financial decision-making to meet one’s short term or long term goals. Being
knowledgeable of it, an individual can determine and predict assets based on past and future
performance. Also, he can properly assess the capability of generating future cash flows.
To give an example, the following successful individuals had accurately managed their
personal finances therefore, they were able to increase their net worth and become one of the
most successful people in our time.
Ranking
Business
Net Worth
SM Investment Inc.
$ 14.4 B
2. John Gokongwei, Jr.
Universal Robina Corp.
$ 5.5 B
3. Andrew Tan
Alliance Global Group
$ 4.5 B
1. Henry Sy
Inc.
4. Lucio Tan
Philippine Airlines Inc.
$ 4.3 B
5. Enrique Razon Jr.
International Container
$ 4.1 B
Terminal Services Inc.
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6. George Ty
Metropolitan Bank and
$4B
Trust Company
7. Aboitiz Family
Aboitiz Equity Ventures
$ 3.6 B
Ayala Corporation
$ 3.5 B
9. David Consunji
DMCI Holdings Inc.
$ 3.2B
10. Tony Tan Caktiong
Jollibee Foods Corp.
$ 2.2 B
8. Jaime Zobel de Ayala
Source: Forbes.com (Forbes Magazine : Philippine Richest Individuals 2015)
Moreover, the following are the nine (9) money management philosophies in managing
personal finance (Keown 2010).
1. The Basic Protection is Knowledge
The first step to getting your personal finances under control is to have a clear
understanding of where you are now. Determine and list your assets, liabilities and
expenses. Yes, it may be too small now, but it would soon grow when you will later on
have your job or business. You must find a way or method on how to properly determine
your cash inflows and outflows by simply listing down on your notes or making your
balance sheet. Once you understand its importance, you will learn to appreciate what
needs to be done to get there, how much you’ll spend to earn, how much you’ll need to
save and when you will be able to achieve such goals.
2. Nothing Happens without a Plan
Financial planning is not limited to companies alone. Individuals should also practice
financial planning to achieve the set goals and objectives. One must learn to practice
budgeting to properly account one’s resources. In the very basic level, budgeting is
easy. All you have to do is look at what you make, look at what you are spending, and
look at how much to be put away for the rainy season.
3. The Time Value of Money
Individuals must see the importance of investment. One may invest his resources
through debt reduction, bonds, banks, pension plans, active businesses, real estate, stock
market and mutual funds. Do not forget to select the best investment alternative by
determining its face value and future value before deciding which investment scheme
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is to be utilized. Through time value of money, one can determine how much will be
the return value one should get in entering an investment scheme.
4. Taxes Affect Personal Finance Decisions
Before entering into an investment, learn to analyze first the impact of taxes in it.
Almost 1/3 of the company’s or individual’s income will go to taxes, thus; learn to
compare the returns of your potential investment after tax basis.
5. Stuff Happens, or the Importance of Liquidity
Remember to liquidate your assets (cash and cash equivalents). Liquidating assets will
allow the individual to cover unexpected needs and expenses. Not liquidating assets
will lead the individual to a fund irregularity and chaos.
6. Waste Not, Want Not – Smart Spending Matters/Live below your means
This is the only way to ensure you save and grow your net worth. Most of us spend
beyond our means because we fail to distinguish needs versus wants. There are times
that we are impulsive in buying items that we think are our needs. But the truth is, it is
only our wants, not needs that we spent for. Therefore, one must identify which goals
should be prioritized to avoid unnecessary expenses.
7. Insure your needs
It provides another margin of safety. Most importantly, insurance is not a primarily
vehicle for creating wealth, merely protecting it. One must protect his resources from
event risks including natural calamities by securing insurance. We must accept the fact
that life has always a way of throwing unexpected curves, so it is also an advantage if
an individual ensures his financial health and not be interrupted by the things that cannot
be foreseen. While it is true that no one wants the worst things to happen, we still need
to be prepared to handle such and not sacrifice our finances and assets.
8. Risk and Return Go Hand in Hand
One must have to understand that to gain a higher return, he must face certain risks. A
concrete example of this philosophy is when an individual invests in the stock market,
e.g., Jollibee Foods Corporation. It is very risky to invest now that we are experiencing
a pandemic, but, after this, a high return will take place due to business’ high demand.
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9. Mind Games and Your Money
Now that you already know the different money management philosophies, it is now
time to adopt or practice managing your personal finances. Yes, many of these
strategies entail order and control, but, once you come to a decision, make sure that you
will stick to it. It may be hard to adjust to a new lifestyle to properly managing your
personal finance, but you have to take note that long term financial goals require short
term sacrifices. The secret is to always find a way to discipline yourself in managing
your personal finances to meet your long term objectives in life while still enjoying life
to the fullest without sacrificing all your resources.
Learning Competency
Enumerate money management philosophies
(ABM_BF12-IVo-p-26 Quarter 2 week 3-4)
Exercise 1: “NEEDS versus WANTS”
Directions:
1. Think of at least five (5) items that you had bought recently. Determine if those are
needs or wants by checking the appropriate box provided below and write
2. Analyze your cash outflows.
3. Reflect on your answer.
Item
Needs
Wants
1.
2.
3.
4.
5.
Exercise 2. “MY BUYING PLAN”
Directions: Imagine yourself buying two major items. Make a buying plan for the two major
purchases you want to obtain. Use the following questions to consider when making a buying
plan.
1. What do I want to buy? Where can I find my options?
2. How much is my budget and how much will I spend?
3. What are the criteria am I looking for?
4. What are the possible choices that can meet my criteria?
5. Which choice works best for me?
A. What you want to buy:
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Budget
Criteria
Choices
Decision
Choices
Decision
1.
2.
3.
How did you come up with your decision?
B. What you want to buy:
Budget
Criteria
1.
2.
3.
How did you come up with your decision?
Exercise 5. “MY BUDGET TOOL”
Directions: Assume that you are already employed or have your own business to manage and
is now earning your own money. Use the budget tool provided below to determine the
monthly inflow and outflow of your cash. What will you do if your total income is more than
or less than your total expense?
Month of:
Sources of Income
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Amount Gained
Salary
₱
Government
Benefits
₱
Others
₱
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TOTAL
₱
Expenses
Amount Spent
Housing
₱
Utilities
₱
Health
Expenses
₱
Transportation
₱
Education
₱
₱
Others
₱
Clothing
₱
TOTAL
Now make your budget tool using the formula
Total Income
-
Total Expense
₱
-
₱
=
₱
Answer:
Exercise 6. “MY SAVINGS FIRST AID KIT”
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Directions: Identify at least 5 unnecessary items that you are willing to give up so that you
can have your savings first aid kit. Compute for the amount that you can save over time.
ITEM
PROJECTED
SAVINGS
SAVINGS
SAVINGS
MONTHLY
AFTER 3
AFTER 6
AFTER 1
SAVINGS
MONTHS
MONTHS
YEAR
1.
2.
3.
4.
5.
Guide Questions.
1. Where will you plan to store your savings first aid kit?
2. How frequent will you make a deposit?
3. As a student, what will you do in order to increase your savings first aid kit?
References:
A. Book
Canayan, A.S. & Borja DV.H (2017). Business Finance. Quezon City: Rex Bookstore.
Domingo, JC.D (2010). Business Finance Second Edition.
B. Web Sources
www.weareteachers.com
Prepared by:
SHEILA C. LADERAS
Lal-lo National High School
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BUSINESS FINANCE
Name of Learner:
Section:
Grade Level:
Score:
LEARNING ACTIVITY SHEET
MONEY MANAGEMENT CYCLE
Background Information for Learners
Money management is the process of budgeting, saving, investing, spending or
otherwise overseeing the capital usage of an individual or group. It can also be referred to more
narrowly as "investment management" and "portfolio management."
This is also a broad term that involves and incorporates services and solutions across
the entire investment industry. In the market, consumers have access to a wide range of
resources and applications that allow them to individually manage nearly every aspect of their
personal finances. As investors increase their net worth, they also often seek the services of
financial advisors for professional money management. Financial advisors are typically
associated with private banking and brokerage services, offering support for holistic money
management plans that can involve estate planning, retirement and more.
It follows a cycle that is from earning to spending, or saving or investing. In other
words, it is a flow of earning money to spending money, or putting it into savings or investing
it. In economic point of view, the earning of an individual goes to disposable income or
spending, savings, and investment.
Essential Terms/Ideas:
Cash- money in forms of currency, checks and debit cards as distinct from checks, money or
credit
Short- term goal- something achievable in 12 months or less
Long term goal- something that takes a long time to accomplish
Opportunity Cost- the loss of potential gain from other alternatives when one alternative is
chosen
Credit- borrower receives something of value now and agrees to pay later
Budget- a financial plan for a defined period
Below is a diagram that shows money management cycle.
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Spending
70%
Earning
Investing 100%
15%
Savings
15%
SPENDING- paying out (money) in buying or hiring goods or services.
INVESTING- is allocating money in the expectation of some benefits in the future.
In finance, the benefit from an investment is called a return
SAVING -
is income not spent, or deferred consumption
Methods of saving include putting money aside in, for example, a deposit
account, a pension account, an investment fund, or as cash.
EARNING - is the amount of money that someone is paid for working.
It is the amount of profit that a business produces during a specific period.
Tips on Money Management Success
1. Build savings. This step involves allocating a portion of your income to a
saving/investment fund.
2. Pay bills on time. This step involves avoiding late payment charge and high interest
debts to build a positive credit standing.
3. Pay more than the minimum payment. This step involves minimizing interest charge
on outstanding debts.
Minimum payment- is the amount that needs to be paid to avoid late payment charges.
Example:
If you pay the P2,000 minimum payment due out of the total P75,000
total
payment due, you are saved from the late payment charge but
still liable for
interest charge of P73,000 x 3.5% x days overdue/ 30
days( days in a month).
4. Research for the best deal. This step involves comparing process of different vendors
before making a purchase.
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Learning Competency with Code
Illustrate the money management cycle and give examples of sound practices in earning,
spending, saving, and investing money (Quarter 2, Week 3-4) BF12-IVo-p-27
Exercise 1. True or False.
Directions: Use what you have learned about saving, spending, investing and earning to decide
if each statement is true or false. Write True if the statement is correct and False if the statement
is incorrect. Write your answer on the space provided for.
1. Savings is a result of income minus spending.
2. As student, you consider yourself as investment of your parents.
3. Using spending tracker app is way of managing money.
4. Investing is the process of placing our money in a bank through savings account.
5. Savings is buying a car for rentals.
6. Earning money can be through buying and selling real properties.
7. Setting an emergency fund in the bank is considered investing.
8. Cutting cost in business is considered saving.
9. Buying clothes for sale is spending.
10. Selling used clothes is earning.
Exercise 2. Identification.
Directions: From the following descriptions, identify which steps in money management
success is being described. Write the letter of your answer from the choices given in the box.
A. Build savings.
B. Pay bills on time.
C. Pay more than the minimum payment.
D. Research for the best deal.
1. It is a step which involves allocating a portion of one’s income for the future.
2. A step which involves comparing prices of different vendors before making a
purchase.
3. It is a step which involves minimizing interest charge on debts.
4. It is a step which involves avoiding late payment charge and high interest debts
to build a positive credit standing.
5. Rex is planning to buy a cellphone case. Before buying she checked Lazada,
Shopee, OLx and some stores and bazaar. What step is Rex employing?
6. It is a step where percentage allocation depends on one’s personal finance
philosophy and saving method.
7. To avoid penalty charges, it is ideal to follow this step.
8. Taking time in researching before making the purchase can save your money in
the end.
9. You will receive more credit card points if you are going to rely on this step.
10. To avoid interest charges, you should do this step regularly.
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Exercise 3. Problem Solving
Directions: Solve the following worded problem in relation to sound practices in earning,
spending, saving, and investing money. Use a clean sheet of paper for your answers.
1. Marjorie earns P50,000 a month. Her expenses per month are as follows:
Food- P 3,000
Beauty products- P800
Rent- P 5,000
Utilities- P 4,000
How much should Marjorie allocate for her physiological needs?
2. Ruth earns P30,000 a month. Her expenses per month are as follows:
Food- P2,000
Travel fund- P 1,500
Rent- P 4,000
UtilitiesP 3,000
Load- P 1,000
How much can Ruth allocate for her insurances and savings?
3. Joshua has a credit card debt of P20,000 due on August 20, 2020. Minimum payment
is P4,000. Failure to pay the minimum payment would mean a late payment charge of
P1,500 or 5% of principal amount (whichever is higher). The bank will also charge
3.5% (monthly) for the outstanding principal amount. Joshua did not pay any amount
on the due date.
How much late payment charges will Joshua have to pay?
Exercise 4. Directions: Study the diagram below, then answer the given questions.
Spending
Investing
Earning
100%
Savings
a) How many percent will you allocate from spending, investing, savings? Why?
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b) As a learner, do you have savings? How do you save? What percent of your available
resources is used for your savings?
c) Do you consider yourself as an investment of your parents? Why?
d) In your own idea, what does it mean “to spend within your means?”
References:
1.
2.
3.
4.
5.
https://www.investopedia.com/terms/m/moneymanagement.asp
https://www.tonyrobbins.com/business/money-management/
https://www.investopedia.com/terms/i/investing.asp
https://www.quicken.com/what-savings
https:// https://www.investopedia.com/terms
Prepared by:
JOHN PAUL P. GALBIS
Teacher II
DON MARIANO MARCOS NATIONAL HIGH SCHOOL
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