This document provides an overview of the BA4 - Basic Finance course. It defines basic finance as the management of assets and money with the primary goals of increasing profit and minimizing risks. The document discusses different sources of capital for businesses, including owners' savings and loans from banks or creditors. It also outlines key goals of business finance such as maximizing profit, profitability, and present net worth while maintaining adequate cash flow and balancing risks and returns. Net present value is defined as the value now of all future cash flows from an investment discounted at a given interest rate.

1. First Semester, A.Y. 2018 – 2019
Part II
BA4 - BASIC FINANCE
MMVidanes, MBA
S u b j e c t I n s t r u c to r

2.  BASIC FINANCE
the management of assets and money. Its
primary focus is to increase profit and
minimize financial risks.
covers a multitude of diverse occupations,
such as in global finance, budget analysis,
portfolio management and financial
forecasting.

3. When anyone starts a business, capital is
obtained from their own resources, such as
savings; intermediaries such as banks.
In corporations, sources of capital are called shared capital –
those invested by stockholders; and loan capital, those
provided by creditors or lenders.

4. The capital introduced into a business always starts
as cash and then converted into the things the
business uses. When money is invested, areas are:
first, in the things that are not intended to be sold -
fixed assets or sometimes referred capital
expenditure ;

5. and second, in things intended to go into what is to be
sold – revenue expenditure , which as an investment
area is known as working capital. Third, the
investments on outside area of the business. Amounts
invested in one can be taken out of the area and
transferred to another, and vice versa.

6. Goals of Business Finance
Maximizing profit – realizing the highest possible
peso. (The ability for company to achieve a maximum profit with
low operating expenses.)
Maximizing profitability – when a firm decide on
obtaining a higher rate of return on its own
investment. (According to the risk-return tradeoff, invested
money can render higher profits only if the investor is willing to
accept the possibility of losses)

7.  Maximizing profit subjects to a cash constraint –
maintaining to maximize profits, while at the same
time maintaining a cash balance that will satisfy both
requirements.
 Maximizing net present worth– objective of the firm is
to maximize the current value of the company to its
stockholders.
• Net present worth – is equal to the value NOW of the firm
including values arising in the FUTURE.
 Seeking at optimum position along a risk-return
frontier.

8.  In finance, the net present value (NPV)
or net present worth (NPW) is a
measurement of profit calculated by
subtracting the present values (PV) of cash
outflows (including initial cost) from
the present values of cash inflows over a
period of time.
NPV – Net Present Value

9. https://www.mathsisfun.com/money/net-present-value.html
https://www.mathsisfun.com/money/net-present-value.html#NetPresentValue

20. A Net Present Value (NPV) that is positive is good (and negative is bad).
But your choice of interest rate can change things!