Page 1 :
www.shsph.blogspot.com, , SENIOR HIGH SCHOOL, , BUSINESS FINANCE, Module 3 - Quarter 1, , Short Term and Long Term, Funds, , WWW.GOOGLE.COM, , Department of Education • Republic of the Philippines

Page 3 :
www.shsph.blogspot.com, , SENIOR HIGH SCHOOL, , BUSINESS FINANCE, Module 3 - Quarter 1, , Short Term and Long Term, Funds, , This instructional material was collaboratively developed and reviewed by, educators from public and private schools, colleges and universities. We, encourage teachers and other education stakeholders to email their, feedback, comments, and recommendations to the Department of, Education at [email protected]., , We value your feedback and recommendations., , Department of Education ● Republic of the Philippines, III

Page 4 :
www.shsph.blogspot.com, , TABLE OF CONTENTS, , Page No., Cover page, , III, , Table of Contents, , V, , Overview, , VI, , General Instructions, , VI, , Lesson 3: Short Term and Long-Term Funds, , 1, , What I Need to Know?, , 1, , What I Know, , 1, , What’s In?, , 2, , What’s New?, , 2, , What is it?, , 3, , What’s More?, , 4, , What I Have Learned?, , 6, , What Can I Do?, , 6, , Assessment, , 6, , Answer Key, , 7, , References, , IV

Page 5 :
www.shsph.blogspot.com, , OVERVIEW, , Financing is an important part of every business because it provides funds, for business activities, acquire purchases or investing. Financial institutions, such, as banks, cooperatives and other financial companies are the one that will provide, loans for their capital to help them achieve their business goals., This module focuses on the two-common source of financing, the debt and, Equity financing. Financing can be either Long-term or short-term funds. Shortterm is debt scheduled to be paid within a year while long-term is debt to be paid in, more than a year. The goal of this module is have the knowledge on how to avail, and process the sources of funds when there is cash needed within the business, and also helps the students to identify directly what types of sources of funds, available in their respective community., , GENERAL INSTRUCTIONS, , For the teacher:, To facilitate and ensure the students’, learning from this module, you are, encouraged to do the following:, , For the learners:, To be guided in achieving the, objectives of this module, do the, following:, , 1. Read and follow instructions, carefully., 2. Write all your ANSWERS in, your Activity Book, 3. Answer the pretest before, going through the lessons., 4. Take note and record points, for clarification., 5. Compare your answers, against the key to answers, found at the end of the, module., 6. Do the activities and fully, understand each lesson., 7. Answer the self-check to, monitor what you learned in, each lesson., 8. Answer the posttest after you, have gone over all the lessons., , V, , 1. Clearly communicate learning, competencies and objectives, 2. Motivate through applications, and connections to real life., 3. Give applications of the theory, 4. Discuss worked-out examples, 5. Give time for hands-on, unguided classroom work and, discovery, 6. Use formative assessment to, give feedback, 7. Introduce extensions or, generalizations of concepts, 8. Engage in reflection questions, 9. Encourage analysis through, higher order thinking prompts, 10. Provide alternative formats for, student work, 11. Remind learners to write their, answers in their Philosophy, Activity Notebook

Page 6 :
www.shsph.blogspot.com, , Lesson, , 3, , THE SOURCES AND USES OF SHORTTERM & LONG-TERM FUNDS, , What I Need to Know, After going through this module, you are going to:, 1. Distinguish debt & Equity Financing, 2. Identify the Bank and Nonbank institutions in the vicinity that are possible, sources of funds and enumerate their requirements and process for loan, application., , What I Know, Let us determine how much you already know about the sources and uses of shortterm & Long-term funds, Direction: TRUE OR FALSE. Write T if the statement is correct and F if it is, wrong. Write your answers in your notebook., _____1. Cooperative banks and credit cooperative are just the same., _____2. All cooperative in the Philippines regulated and supervised by the, Cooperative Development Authority., _____3. By resorting to debt financing, business ownership has kept and, maintained., _____4.One of the aims of cooperatives is to provide goods and services to its, members to enable them to attain increase, savings, investments,, productivity, and purchasing powered income, and promote among, themselves equitable distribution of net surplus through maximum, utilization of economies of scale, cost sharing and risk sharing., _____5. Capacity refers to the applicant’s net worth, which can be arrived at by, deducting total liabilities from total assets., , 1

Page 7 :
www.shsph.blogspot.com, , What’s In, , The role of the VP for Finance/Financial Manager is to determine the, appropriate capital structure of the company. Capital structure refers to how, much of your total assets has financed by debt and how much has financed by, equity., - To be able to acquire assets, our funds must have come somewhere. If it, has bought using cash from our pockets, it has financed by equity., - On the other hand, if we used money from our borrowings, the asset, bought has financed by debt., , What’s New, Direction: Write your answer in the box provided below., Question: What comes to your mind when you hear the words debt financing and, equity financing based on your knowledge and understanding in the previous, lesson? Copy the rectangular box and write your answers in your notebook., , 2

Page 8 :
www.shsph.blogspot.com, , What is it?, , Debt Financing Versus Equity Financing?, , https://www.credibly.com/incredibly/trending/debt-vs-equity-financing/, , Debt financing is being done through borrowing, whether short-term or longterm, and it usually comes with interest. This, together with other charges, is, referred to as the cost of borrowing or cost of debt. Common debt financing, arrangements include bank loans, issuance of debt instruments like bonds,, financing from nonbank institutions like lending companies and cooperatives,, assignment of accounts receivable, and selling of notes receivables. In here, there, exists a borrower-lender relationship. In the case of banks and other nonbank, institutions, borrowing entails compliance of certain requirements., Equity Financing, on the other hand, refers to the sale of ownership interest,, most often represented by shares, to raise fund for business purposes. To, compensate for the use of funds from equity financing, dividends or profits shares, has declared, set aside, and paid by the business. Common Equity financing, arrangements include funds raise by the entrepreneur or business owner from, friends and family, capital infusion through direct sale of shares or through initial, public offerings, and financing by private companies. In here, there exists an, investee-investor relationship., Short-term financing is debt scheduled to pay within a year while long-term, financing is debt paid in more than a year., , 3

Page 9 :
www.shsph.blogspot.com, , What’s more?, Direction: List the sources of funds that are found in your community and, describe. Copy the table below and write your answer in your notebook., Sources of fund, Example: Bank of the Philippine Island, (BPI), , Describe, A bank is a financial institution, involved in borrowing and lending, money. Banks take customers’, deposits in return for paying, customers an annual interest, payment., , 1., 2., 3., 4., 5., , What are the sources of funds?, The most common sources of funds include banks, cooperatives, and, commercial Finance companies. Cooperatives and commercial finance companies, are example of nonbank institutions.,  Bank- Supervised and regulated by the Bangko Sentral ng Pilipinas (BSP), an, establishment for the deposit, custody, and issue of money for making loans, and discounts, and for making easier the exchange of funds. In the Philippines,, banks include universal and commercial banks, thrift banks, and rural and, cooperative banks.,  Credit Cooperatives- With the primary objective of helping improve the quality of, life of its members. One of its aims is to provide goods and services to its, members to enable them to attain increased income, savings, investments,, productivity and purchasing power, and promote among themselves equitable, distribution of net surplus through maximum utilization of economies of scale,, cost-sharing and risk-sharing. In particular, credit cooperatives promote and, undertake savings and lending services among its members. It generates a, common pool of funds in order to provide financial assistance to its members, for productive and provident purposes. All cooperatives regulated and, supervised by the Cooperative Development Authority (CDA). The BSP, in, coordination with the CDA, shall prescribe the appropriate prudential rules and, regulations applicable to the financial service cooperatives.,  Commercial finance companies- they are organizations without a bank charter, that advances funds to businesses by discounting notes receivable, making, loans secured by mortgage, or financing deferred-payment sales of commercial, and industrial equipment., , 4

Page 10 :
www.shsph.blogspot.com, What are the usual loan requirements and application? See table below., Loan Applications Requirements, Demographics –includes the name or, business name, birthdate, address, SSS, no., TIN no., phone no., and other, identifying information such as valid, government-issued identification cards, Income or revenue refers to current, personal, income, and, employer,, employment and salary history, and, business revenue, if there is already an, existing business., Assets and Liabilities-applicants may, ask to disclose their checking savings, and investment accounts and their, outstanding loans and credit cards, if, there are any., Contact, or, references-require, identification and contact information of, existing employers, previous employers,, or even nearest relative not living with, the identified contact, Attest and authorization require, affixing applicant’s signature on the, credit, application, stating, that, everything on the application is true and, correct and authorizing the lender to, verify the information provided with the, identified contacts and references., The credit department evaluates on the, basis of Character, Capacity, collateral,, capital and conditions or 5C’s of credit, , Loan Application process,  Receipt of application form and, required documents;, , , , Verification of information in the, application form and required, documents may include interview;, , , , Checking credit history, , , , Writing, credit, report, with, appropriate recommendations, , , , Documenting final decision, , , , If approved, final documents signoff (interest rate and other terms), and loan release, If rejected, rejection letter sent to, applicant, , , , Note: Loan application requirements and process vary among banks, credit, cooperatives and commercial finance companies., , Direction: Copy the process questions below in your notebook and answer directly., 1., , In loan application, when is a co-maker required?, , 2., , What is the importance of affixing applicant’s signature on the loan, application?, , 3., , Enumerate the five C’s of credit and describe each., , 5

Page 11 :
www.shsph.blogspot.com, , What I Have Learned, , Direction: Complete the sentence stem below. Write your answers on a separate, sheet of paper., 1. Sources of funds is important because:, __________________________________________________________________________________, __________________________________________________________________________________, __________________________________________________________________________________, __________________________________________________________________________________, , What I Can Do, , Direction: Choose one bank, one credit cooperative and one commercial finance, company. Research on the following: compare the loan application requirements, and loan application process., , Assessment, , Directions: Identify the following activity if either Long-term or short-term, financing., Activity/Need, 1.Acquisition of equipment, 2.Franchise of a fast-food outlet, 3.Purchase of inventory for a clothing shop, 4.Loan for agricultural needs, (ex. Palay production), 5.Loan for purchase of a commercial space, 6.Auto-loan, 7.Housing loan, 8.Emergency loans, 9.Development of a subdivision, 6, , Answer

Page 12 :
www.shsph.blogspot.com, 10.Loan for sari-sari store supplies, , Congratulations!, You have completed your, journey in this subject. Great job!, It’s now time to go, explore, and, apply all, your learning’s here, , Answer Key, , 1. Long-term, 2. Long-term, 3. Short-term, 4. Short-term, 5. Long-term, 6. Long-term, 7. Long-term, 8. Short-term, 9. Long-term, 10. Short-term, Assessment, , 7, , 1., 2., 3., 4., 5., , F, T, T, T, F, , What I Know