1. Chapter II

2.  Finance is the efficient acquisition, allocation, and
utilization of funds.
 Finance’s functions entail the:
a) Allocating available funds
b) Acquiring needed funds
c) Utilizing these funds to achieve set goals.

3. A. Form of Negotiation
1. Direct Finance- involves direct borrowing.
2. Indirect Finance- involves the use of financial
intermediaries (financial institutions acting as
middlemen), hence, also called financial intermediation.

4. B. User
1. Public Finance- deals with sources and uses of funds
of the government.
2. Private Finance- involves individuals and entities.
a) Personal Finance- concerned with individuals and
households.
b) Finance of Non-Profit Organizations- concerned with
charitable organizations which are not concerned with
profit-making.
c) Business Finance- concerned with entities and individuals
engaged in business.

5. • Business- is any lawful economic activity that
involves rendering service.
• Efficiency- is accomplishing something at the
least cost.
• Effectiveness- is getting things done and attaining
objectives.
Efficiency + Effectiveness = Productivity

6. A. Nature/Purpose
1. Service- are engaged in rendering service.
2. Trading/Merchandising- engaged in buying and selling
merchandise.
3. Manufacturing- are those which buy raw materials
and process the same to convert them into finished
products which they sell.
4. Banking and Finance- deals with institutions involved
in lending and borrowing.

7. 5. Mining/Extractive Industries- extract natural
resources like the gold mining.
6. Construction Companies- engaged in road
buildings, etc.
7. Genetic Industries- involved in the production of
certain species of plants and animals like
agriculture, fishing, etc.

8. B. Ownership
1. Sole or Single Proprietorship
2. Partnership
3. Corporation
4. Cooperative

9.  Is a business unit owned and controlled by a
single individual.
 The owner of the proprietorship is referred to
as a sole proprietor or a single proprietor.
 Sole proprietorship is the simplest business
entity and the easiest to form or put up.

10. 1. Ease of formation
2. Needs only minimum capitalization
3. Sole decision maker
4. Easy to terminate

11. 1. Unlimited liability
2. Limited access to capital
3. Limited skills, talents, and capabilities
4. Inability to attract or retain good employees
5. Limited term of existence
6. Difficulty in measuring success
7. Personal problems may hinder
operation/success

12.  Is an association of two or more persons who
have agreed to contribute money, property, or
industry to a common fund with the intention of
dividing the profits among themselves.
 The owners of a partnership are called partners.

13. 1. Contract of partnership
2. Two or more persons with legal capacity to enter
into a contract
3. Valuable contribution (money, property, or industry)
to a common fund
4. Intention to divide the profits between or among
the partners.
5. Lawful purpose(s)

14. A. Mutual Agency- every partnership is an agent of the
partnership, so long as it is within the scope of the
partnership, bind the partnership.
B. Voluntary association- being a partner is voluntary.
Each partner is entitled to choose his partners.
C. Based on Contract- there must be an agreement which
can be oral or written that will bind the partnership.

15. D. Limited Life- the partnership is dissolved/terminated
once a partner withdraws, dies, becomes bankrupt,
becomes legally incapacitated, or a new partner(s) is
admitted into a partnership.
E. Unlimited Liability- a general partner and an industrial
partner are liable for partnership debts up to extent of
their personal assets after partnership resources have
been exhausted.

16. F. Division of Profits/Losses- profits and losses are
divided between/among partners in accordance with
their agreement, or in the absence of such an
agreement, in accordance with their capital
balances.
G. Co-ownership of ContributedAssets- partners
become co-owners in assets contributed by any
partner to the partnership.

17. 1. Ease of formation.
2. Allows pooling of financial resources.
3. Allows pooling of skills, expertise, and
experience of partners.
4. Less government control, supervision, and
intervention.

18. 1. Limited Life
2. Unlimited Liability
3. Mutual Agency

19. To organize a partnership, persons desiring
to become partners draw up a contract either
orally or writing, which will govern the
formation, operation, and dissolution of the
partnership.

20. 1. General Partnership- all partners are general
partners.
2. Limited Partnership- there is at least one
limited partner (could be more) and at least
one general partner.

21. A. As to Liability
1. General Partner- liable for partnership debts up to
the extent of their personal assets.
2. Limited Partner- liable for partnership debts only
up to the extent of their interest (investment and
profits) in the partnership.

22. B. As to Investment in the Partnership
1. Capitalist Partner- a partner who contributes
money and/or non-cash assets in the partnership.
2. Industrial Partner- a partner who contributes skill
or industry in the partnership.
3. Capitalist-Industrial Partner- a partner who
contributes cash plus and/or other assets and
industry or skill in the partnership.

23.  an artificial being created by operation of law, having
the right of succession and the powers, attributes, and
properties expressly authorized by law or incident to its
existence.
 Corporation Code of the Philippines defines corporation
as an artificial being created by operation of law,
having the right of succession and the powers,
attributes and properties expressly authorized by law
or incident to its existence.

24. 1. Separate legal existence
2. Created by operation of law
3. Transferable units of ownership
4. Limited liability of stockholders
5. Continuity of existence
6. Centralized management by the Board of
Directors

25. 1. Artificial being
2. Limited liability of shareholders
3. Transferability of shares
4. Continuity of life of the corporation
5. Greater ability to acquire funding
6. Greater ability to acquire talents, skills, and
expertise.

26. 1. Corporators- are those who compose the corporation
whether they are stockholders or members.
2. Incorporators- founders of the corporation; are
signatories to the Articles of Incorporation.
3. Stockholders- owners of shares of stock in a
corporation
4. Members- corporators of a non-stock corporation, the
counterpart of shareholders/stockholders of a stock
corporation.

27. 5) Promoters- persons who undertake to form and
organize a corporation bringing together the
incorporators or persons interested n the corporation.
6) Board of Directors- stockholders voted into the
position as director.
7) Corporate Officers- are those elected by the Board of
Directors to run the corporation.

28. 3 Steps in the Organization of a Corporation
1. Promotion
2. Incorporation
3. Formal Organization and Commencement of
Business Operations
a) Adoption of By-laws
b) Election of the Board of Directors
c) Election of Officers
d) Commencement of business operations

29. 1. Public Corporation- are corporations organized
for the government of a portion of the state.
2. Private Corporation- all corporations other than
government are private.

30. A. As to Purpose
1. For profit (civil)
2. Non-profit
3. Charitable
a) Ecclesiastical/Religious
b) Eleemosynary/Public Charity
4. Foundation

31. Other private corporations are:
a) Quasi-public corporations
b) Government-owned or controlled corporations
c) Wasting assets corporations

32. B. As to How Membership Is Represented
1. Stock Corporation- these are corporations of which
membership is represented by shares of stock.
a) Open corporations
b) Closed corporations
2. Non-stock Corporation- these are corporations other
than stock corporations.

33. C. As to the State of Incorporation
1. Domestic Corporation- considered domestic in the
state/country fro which it obtain its charter.
2. Foreign Corporation
a) Resident Foreign Corporation
b) Non-resident Foreign Corporation
3. Multinational Corporation – extend their operations in
other countries.

34. D. As to Number of Persons Composing the
Corporation
1. Corporation Sole- this is only applicable to the
Church.
2. Corporation Aggregate- this is the common form of
corporation where there are several stockholders.

35. E. As to Legal right to Corporate Existence
1. De jure Corporation- is a corporation existing in fact
and in law.
2. De facto Corporation- is a corporation in fact but not
in law.

36. F. As to Relation to Other Corporations
1) Parent or Holding Corporation- this is the original
corporation from which another corporation,
called subsidiary or sister company emanates.
2) Subsidiary or Sister Corporation- this is the
corporation whose shares of stock are owned in
majority by the parent or holding company.

37.  Ownership in a corporation is represented by its capital
stock. Capital stock is divided into units to facilitate the
transfer of ownership and distribution of profits. Each of
the units of capital stock is referred to as the share of
stock.

38. 1. Value on the stock certificate
a) ParValue Shares- are shares of which the specific
money value is shown on the face of the stock
certificate and fixed in the Articles of Incorporation.
b) No-parValue Shares- are shares without any money
value appearing on the face of the stock certificate.

39. 2. Rights to dividends
a. Common shares- a corporation issues only one class
of stock.
b. Preferred shares- a corporation issue more than one
class of stock, one with preferential rights over
another class.
1. As to assets- upon liquidation mean that such shares shall
be given preference over common shares in the distribution
of the assets of corporation in case of liquidation.
2. As to dividends- refers to shares with preferential rights to
share in the earnings of the corporation.

40. a) Cumulative- are entitled to receive all passed
dividends in arrears.
b) Non-cumulative- are not entitled to passed
dividends.
c) Participating- are entitled not only to stipulated
dividend, but they also share with the common
stock in the dividends that may remain after the
common shares have received dividends at the
same rate as the preferred.
d) Non-Participating- are entitled to a fixed
amount or rate of dividend only.

41.  Organization established by members to provide
themselves with goods and services or to produce and
dispose of the products of their labor.
• Patronage refund- is the profit of the cooperative or
credit union that is given back to the members.