Business Finance Prelim Quiz

Capital

Is the amount required to start a business.

Finance

It is the study of money.
It means TO ARRANGE PAYMENT for.

Personal Finance

Mobilization of funds frown own sources.

Public Finance

This kind of finance deals with mobilization or administration of public funds.
It includes the aspects relating to the securing the funds by the government from public through various methods.

Business Finance

It is pertaining to the mobilization of funds by various business enterprises.

Proprietary Finance

Refers to the procurement of finds by the individuals, organizing themselves as sole traders.

Partnership Finance

Concerned with the mobilization of finances by the partners of a business organization;

Corporation Finance

It deal with the raising of finances by corporate organizations.

Industrial Finance

This deals with raising of finances from all sources.
It is the study of principles relating to securing the finances from the financial institutions.

Economics

It is the mother of finance.
It is used to deal with all aspects of finance as an integral part of it.

Financial Markets

a place where business houses can raise their long and short - term financial requirements.

Capital Market

a place where all buyers and sellers of capital funds.
It provides the long term finance.

Primary Market

only new securities are issued to the public.
It is a place where borrowers exchange financial securities for long-term funds.

Secondary Market

Anyone can either buy or sell the securities in the market.
consist of stock exchange.
The shares subsequent to the allotment are traded in the _____________ .

Money Market

deals with short-term requirements of borrowers.
It is concerned with the supply and demand for a commodity or service.

Common Stock

It is also known as equity shares, who are the real owners of the business will enjoy the profit or loss suffered by the company.

Preferential Stock

by name these holders have two preferential rights.
1) to get fixed rate of dividend at the end of every year irrespective of profits/ losses of the company
2) to get back the investment first when the company goes into liquidation

Fixed Capital

long-run finance to acquire the fixed assets that are useful to the business organization over a period of time.

Working Capital

short-term finance which is required to keep running fixed assets or to make them working.

External

these are the funds drawn from outsiders.

Share Capital

this is the primary source of finance to a corporate form of organization.

Change par bonds

another source of finance to a company is issue of bonds/ debentures.
These holders are eligible to get fixed interest at the end of each year.

Public Deposits

these are unsecured, fixed-term funds that companies borrow directly from the general public to meet working capital and financing needs.

Borrowings

he companies may borrow funds from banks, financial institutions for their requirement at the interest chargeable by the lender institutions

Foreign Capital

ither in the form of direct participation in the capital or collaboration in a project in the equity of the company and also provide loans some time.

Trade credits

It is the common means of short-term external finance

Internal Sources

this is applicable for only those companies which are in existence.

Retained earnings

these are the funds that are retained out of the profits for meeting future contingencies.

Provisions

generally companies, in order to meet the legal and other obligations, create some funds for future use.

Sole Proprietorship

The first type and most common type of business organization that was use for years since the PRE-HISTORIC times.

1. Ease of formation

2. Business decisions are only made by one person

3. All profits accrue to the sole proprietor

4. He has the sole authority to manage the business

5. It is more stable than partnership.

6. Less government control

7. It has flexibility of operation

8. Much easier to transfer ownership

9. Business Secrecy can be easily preserved.

ADVANTAGES OF SOLE PROPRIETORSHIP

1. Sole Proprietorship has unlimited liability.

2. Has a limited ability to raise added capital

3. All net income of the business is subject to tax whether withdrawn or not.

4. Has no one to share the burden of decision making

DISADVANTAGES OF A SOLE PROPRIETORSHIP

Partnership

The exist of two or more people contribute money, property and services to a common fund for the purpose of going into business for a profit.

General Partner

contributes money and/or properties to general or limited partnership and has general liability for partnership obligations

Limited Partner

contributes money and/or properties to the limited partnership but who is not liable for partnership obligations

Capitalist Partner

general or limited partner who contributes money or properties to the partnership business.

Industrial Partner

partner who contributes his services or industry to the business.

Managing Partner

who is in-charge with the management of the business either by agreement or pursuance to the operation of law.

Ontesible Partner

a partner whose names appear in the firm name and who is known to the public as such.

Secret Partner

member of the partnership but is not known publicly as partner.

Dormant Partner

partner in the partnership but is passive and does not participate in the partnership business.

Nominal Partner

a one who is not actually a partner in the partnership but who by his acts or omissions is made liable to third parties for partnership to obligations.

Silent Partner

a partner that cannot participate in the management and decision making of the partnership.

Winding Up or Liquidating Partner

a partner who is in-charge with the responsibility to wind up the affairs of the partnership

DELECTUS PERSONARUM

Refers to the right of a partner to choose the people he wants to be partners with.

JUDICIAL PERSONALITY

Refers to a legal entity inherent to both a partnership and a corporation in that the partnership and the corporation acquire a personality of its own, separate and distinct from the personality of the owners.

It has the right to hold properties under its own firm name, to sue and be sued in court, and to enter into contracts.

GENERAL PARTNERSHIP

is a partnership where all the partners are general partners with one or more industrial partner.

LIMITED PARTNERSHIP

is a partnership where there are one or more general partners with one or more limited partners.

UNLIMITED LIABILITY

refers to a partner who is answerable for partnership debt up to the extent of his personal properties.

LIMITED LIABILITY

refers to a partner who is not liable for partnership debts.
What he can only possibly lose is his agreed contribution.

CONJUGAL PARTNERSHIP

is different from a partnership in that it rises from the celebration of a marriage.

PARTNERSHIP CONTRACT

may either be oral or written.

REGISTRATION OF A PARTNERSHIP

is necessary as a condition for the issuance of license to engage into business.

1. A simple form of organization

2. Efficiency in raising funds

3. More efficient in obtaining credit

4. Flexibility of operation

5. Limited Government Control

ADVANTAGES OF A PARTNERSHIP

1. Stability of the business depends on the life of the owners and in their interpersonal relationships.

2. Less ability to raise capital funds compare to corporation

3. Unlimited Liability of General Partners

4. Harder to achieve large scale operation

DISADVANTAGES OF A PARTNERSHIP

1. Register the name with the Bureau of Trade.

2. Prepare a notarized partnership agreement to be signed by all parties.

3. Apply for tax account number with the BIR.

4. Register the Partnership agreement of articles co-partnership with the Securities and Exchange Commission.

5. Apply for the municipal license of the firm with the local government.

6. Apply for the VAT Account Number of the firm with the BIR.

7. Register the firm’s book of accounts, sales invoice and official receipts with the BIR.

PROCEDURES IN ORGANIZING A PARTNERSHIP

Articles of 1797 of the Law on Business organizations

that profits and losses shall be distributed in conformity with the agreement.

1. In accordance to stipulation in the contract

2. In the absence of stipulation in the contract, profits are shared as follows:

• Capitalist partners share profits in accordance to their capital contribution.

• If it is a partnership with capitalist and industrial partners, the industrial partner gets a just and equitable share for the services he has contributed while the capitalist partners share according to their capital contributions for the remainder of the profits

• When a capitalist industrial partner exists, such partner gets a share in the profits as an industrial partner and gets an additional share for his capital contribution.

RULES IN SHARING PROFITS

1. Losses will be shared according to stipulation in the partnership contract.

2. In the absence of a stipulation in the contract, but the contract provides for sharing in profits, such profit sharing rates shall also be the same sharing for losses.

3. In the absence of a contract for sharing losses, the loss shall be shared in proportion to their capital contribution.

RULES IN THE SHARING OF LOSSES

DISSOLUTION OF A PARTNERSHIP

Dissolution takes place when the partners agree to cease operating the business.

CORPORATION

Is an artificial being created by the operation of law, having the rights of succession, and of the power, attributes and properties

Stockholders

are the investors of a corporation.
The subscribers or purchasers these shares of stocks are calledCORPORATORS

CORPORATORS

are the persons comprising the corporation whether stock or non-stock

INCORPORATORS

first set of stockholders

MEMBERS

these are corporator in non-stock corporations

1. Promotion

2. Incorporation

STEPS IN THE CREATION OF A CORPORATION