Chapter 1- Introduction to Finance.pptxc

notes

1. Business Finance Prepared by: Rocel I. Navaja , LPT, MBA

2. Chapter 1. The Monetary System A. Introduction to Monetary System

3. Objectives: Define what is finance 1 Know the importance of studying finance 2 Define the financial systems and functions 3 Grasp the evolution of the financial system in the Philippines. 4

4. What is Finance?

5. What is Finance?

6. Importance of Studying Finance

7. Relation of Finance to Hotel Management Students

8. What is Business Finance?

9. Financing - the act of bringing money into the organization. Methods of Financing Taking on debt Credit arrangements Investments on real assets and financial assets Definition: involves obtaining the necessary funds to support a business's operations, growth, and investment activities. It's the process of acquiring capital from various sources to meet both short-term and long-term financial needs. Effective financing decisions are crucial for sustaining and expanding a business.

10. Difference between Accountant and Financial Manager Financial Manager only makes decision involving finance and not to provide financial information. focuses on strategic financial planning and decision-making to ensure the organization's financial well-being and growth is concerned with financial record keeping, production or periodic report, statement and analysis. primarily deals with the accurate recording, analysis, and reporting of financial transactions. Accountant

11. Financial Environment It includes financial system, institution, markets and individuals that make the economy operate efficiently.

12. Finance consists of three interrelated areas, namely: Institutions and Markets – deals with securities market and financial institutions. Investments – focuses on decisions made by individual and institutional investors as they choose securities for their investment portfolios; and Financial management – which involves decisions within firms. Figure1. Three Areas of Finance

13. Areas of Finance: Financial institutions are organizations or intermediaries like banks, insurance companies and investments companies. They engage in financial activities to aid the flow of funds from savers, to borrowers or investors. They are organizations or intermediaries engage in financial activities to aid the flow of funds. Financial markets are physical or electronic forums that facilitate the flow of funds among investors, businesses, and governments. Investments involve the sale or marketing of securities, the analysis of securities and the management of investment risk. Financial management involves financial planning, asset management and fund-raising decisions to enhance the value of businesses. It involves decision making relating to the efficient use of financial resources and sale of goods and services.

14. Why Study Finance?

15. Financial System and its Function

16. Financial Systems: Financial systems encompass all institutions, regulations, markets, and intermediaries that facilitate the flow of funds within an economy. Functions of Financial Systems: Intermediation: Matching lenders with borrowers to facilitate efficient allocation of resources. Payment System: Providing mechanisms for transferring funds between individuals and businesses. Risk Management: Offering instruments like insurance to mitigate financial risks. Price Determination: Financial markets determine prices for various assets. Information and Transparency: Providing information to participants for informed decision-making.

17. Monetary system – creates money which serves as a medium of exchange. This money can be used by individuals and businesses to buy goods and services. Financial institutions – accumulate or gather savings. When deposits are accumulated, they can be used for loans and investments. Financial markets – are financial instruments and securities created and sold in the primary security markets.

18. The evolution of the financial system in the Philippines can be viewed along the major political milestones of the country :

19. 1. Pre-Spanish Period: Barter and local trading systems prevailed. During this time, the Philippines had a barter economy, where goods and services were exchanged directly for other goods and services without a standardized medium of exchange. Local trading systems and community-based economies were prevalent. 2.Spanish Colonial Era : The Spanish introduced a silver-based currency system. With the arrival of the Spanish, a more structured monetary system was introduced. The Spanish authorities established a silver-based currency system, with Spanish silver coins ( reales and pesos) becoming the dominant medium of exchange. This system facilitated trade between the Philippines and other Spanish colonies. 3.American Period: The Philippine peso was introduced as the official currency. During the American colonial period, the Philippine peso was introduced as the official currency. The United States established the Philippine Currency Act of 1903, pegging the Philippine peso to the US dollar. This established a fixed exchange rate system, aligning the Philippine economy more closely with the US economy. 4. Post-War Years: The Bangko Sentral ng Pilipinas (Central Bank of the Philippines) was established to regulate monetary policy. After World War II, the Philippines gained independence from the United States in 1946. In 1949, the Philippine Congress enacted the Republic Act No. 265, creating the Central Bank of the Philippines ( Bangko Sentral ng Pilipinas or BSP). The BSP became the sole issuer of the Philippine currency and took on the responsibility of implementing monetary policy to maintain price stability and promote economic growth. Evolution of the Financial System in the Philippines

20. 5.Modern Era and Technological Advancements : Advances in technology led to the development of electronic banking, online trading, and digital payment methods. The modern financial system in the Philippines has been shaped by technological advancements and globalization. The introduction of electronic banking, ATMs, and online transactions has transformed the way people access and manage their finances. The use of digital payment methods and mobile wallets has also gained popularity, providing convenient alternatives to traditional cash transactions. 6. Financial Reforms and Modernization: The Philippines has undergone various financial reforms to enhance its financial system's stability and efficiency. These reforms include improvements in banking regulations, the development of capital markets, and the establishment of institutions to oversee financial stability. The Philippine Stock Exchange (PSE) plays a crucial role in facilitating investment and trading of securities. 7. Inclusion and Financial Technology (FinTech): Efforts have been made to promote financial inclusion and broaden access to financial services for all segments of society. FinTech innovations have played a significant role in this endeavor, allowing people to conduct financial transactions, access credit, and manage investments through digital platforms. 8. Global Integration and International Financial Markets: The Philippines has become increasingly integrated into the global financial system. International trade, foreign investment, and participation in international financial markets have expanded. This integration has led to the Philippines being impacted by global economic trends and fluctuations. In summary, the evolution of the financial system in the Philippines reflects a journey from barter economies to structured currency systems, and from colonial influences to modernization driven by technological advancements. The establishment of the Central Bank, financial reforms, and efforts toward financial inclusion have shaped the financial landscape, positioning the Philippines as an integral player in the global economy. Evolution of the Financial System in the Philippines

21. Finance is the study of how individuals, institutions, governments and businesses acquire, spend and manage money and other financial assets. There are three areas in finance which are the institutions and markets, investments, and financial management. The three financial systems and their financial functions are monetary system which is to create and transfer money, the financial institution which is accumulating saving and lending/investing savings, and the financial market which is marketing financial assets and transferring financial assets. The evolution of the financial system in the Philippines can be viewed along the major political milestones of the country from the Spanish period to the new society period.

22. Thank You