Somewhere on PUP Sinta's 5th floor, hallways burst to life as Ka-Finance sophomores review for their quizzes, juniors prepare for title defense, and seniors swap stories about internships. And somewhere in the chaos, a wide-eyed Ka-Finance freshman takes their first step into a world of numbers and ambition.
It may be daunting, yet excitement paints their eyes—thirsty to discover how the field truly works. The journey ahead is no walk in the park, but every challenge comes with promises of growth, grit, and wit. As a head start from the piles of financial statements to analyze and forecast, here's a guide to the essentials that every freshman Ka-Finance should keep in their arsenal:
1) Financial System
It refers to an organized network of financial institutions, including banks, insurance companies, stock exchanges, and investment firms, that collectively facilitate the flow of capital within the economy. It serves as a channel through which surplus funds are transferred from investors to individuals or entities in need of financing. Thus, the financial system enables the funding of various economic activities, supports investment opportunities, and contributes to economic growth and development (CFI, n.d.).
An example is the Philippine financial system, which consists of institutions such as the Bangko Sentral ng Pilipinas, commercial banks, thrift banks, the Philippine Stock Exchange, insurance companies, and other financial institutions. These entities coordinate to mobilize savings, provide loans, and facilitate investments across various sectors of the economy. As a result, they provide capital to both businesses and individuals.
2) Banking Institutions
Banks are intermediaries between depositors and borrowers. Their primary function is to accept deposits from individuals and institutions with surplus funds, pool these resources, and lend them to those in need of financing (Gobat, n.d.). Its financial intermediation function facilitates the flow of funds that support economic activity, promote capital formation, and maintain the stability and liquidity of the financial system.
Banks also offer various financial services for individual and institutional clients, including processing payment transactions, providing savings and investment products, managing wealth and assets, issuing credit and debit cards, offering foreign exchange services, and facilitating business operations through financing and advisory services.
3) Banking
Banking is an activity that involves accepting deposits, lending, or investing money.
Essentially, banking operates on confidence and trust—the assurance that a bank has sufficient resources to meet its financial obligations. When this confidence is undermined, it can lead to a bank run, as depositors rush to withdraw their funds simultaneously. Such events can destabilize even solvent institutions, underscoring the critical role of trust in maintaining the stability and integrity of the banking system.
4) Non-Bank Financial Institutions (NBFIs)
Non-Bank Financial Institutions (NBFIs) are financial entities that do not possess a full banking license and are therefore unable to accept deposits from the public. Despite this, NBFIs remain relevant in the financial system by offering alternative financial services such as investment management, risk pooling, financial consulting, brokering, money transmission, and check cashing. They also serve as significant sources of consumer credit, complementing the services provided by licensed banks. Examples of NBFIs include insurance companies, venture capital firms, currency exchanges, microloan organizations, and pawn shops (World Bank, n.d.).
5) Partnership
A partnership is defined in Article 1767 of the Civil Code of the Philippines as "a contract whereby two or more persons bind themselves to contribute money, property, or industry into a common fund with the intention of dividing profits among themselves."
A partnership is a business owned by two or more individuals who share its ownership. Each partner contributes resources such as money, property, labor, or skills, and in return, shares in the profits and losses of the business (Tony Burch Foundation, n.d.).
6) Corporation
Republic Act No. 11232, also known as the Revised Corporation Code of the Philippines, refers to a 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."
A corporation is a legally recognized entity that exists independently of its owners, capable of entering into contracts, owning property, incurring debts, and initiating or facing legal actions (BDC, n.d.).
7) Financial Statements
Financial statements are written records that present a company’s business activities and financial performance. They are often audited to ensure accuracy for purposes such as taxation, financing, or investment (Viewpoint, n.d.). The three primary statements evaluate a company’s financial health.
The Balance Sheet provides a snapshot of a company’s assets, liabilities, and shareholders’ equity at a specific point in time, typically listing items by liquidity and separating current from non-current. The Income Statement covers a period of time, showing revenues, expenses, and net income to illustrate profitability from an accounting perspective. The Cash Flow Statement tracks the movement of cash, showing cash from operations, investing, and financing, and reveals how much cash goes to creditors, shareholders, and internal investments.
8) Financial Management
Financial management encompasses the strategic oversight of an organization's financial resources, including monitoring, controlling, protecting, and reporting on its financial activities. This involves managing the inflow and outflow of money, ensuring compliance with applicable laws and regulations, and making informed decisions to maintain solvency and profitability. As organizations grow in size and complexity, the scope of financial management expands to include tasks such as capital budgeting, managing capital structure, and integrating financial data across various departments to support enterprise decision-making (Sampson, 2023).
9) Scarcity
Scarcity is a fundamental concept in economics that refers to the condition in which resources are limited in relation to the unlimited wants and needs of individuals and societies. It represents the basic economic problem of allocating finite resources among competing uses. Scarcity necessitates choice and gives rise to trade-offs, as individuals, firms, and societies must prioritize how resources are efficiently utilized.
Understanding scarcity is the core of microeconomics due to its relevance to the allocation of resources, the determination of prices, and the decisions regarding the production and distribution of goods and services.
10) Opportunity Cost
Opportunity cost is the value of the potential benefits that are forgone when one option is chosen over another (Khan Academy, n.d.; Fernando, 2025). Because resources are limited, choosing one alternative requires giving up other options. The concept of opportunity cost helps individuals and institutions make informed decisions by weighing the benefits of different choices. It is fundamental in economics, involving aspects of trade-offs in production, consumption, and resource allocation.
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