Finance review for Nush ❤️ Q#1

refers to the use, allocation, and sourcing of funds of a certain organization

Financial management

estimating revenues and expenses over time

Budgeting

looking for opportunities to grow excess cash

Investing

looking for sources of funds when the organization lacks cash

Financing

Pertains to financial planning of an individual.

Personal finance

Tax collection, budget allocation for social programs (infrastructure, healthcare, etc.) and the distribution of public goods.

Public finance

Management of financial activities of private enterprises and business organizations.

Corporate finance

measure of its financial performance over time.

Profitability

having enough cash to pay off its short-term obligations

Good liquidity

efficient and effective use of its assets and liabilities

Reasonable leverage position

concrete future prospects allowing investors to hope for better revenues

Corporate plans that improve the business

managers that are visionary, decisive, people-oriented, inspiring, innovative, respected, and experienced

Competent management

decisions on cash use in daily operations (collections and payments)

Operating

decisions on where to use the excess cash (short-term vs. long-term)

Investing

decisions on where to outsource additional funds (debt or equity/capital)

Financing

decisions on when to pay out dividends to existing shareholders

Dividend Policy

organized forum that lets suppliers of funds along with users of funds meet and make transactions

Financial Market

serves as an intermediary to the suppliers and users of funds

Financial Institution

documents with monetary value which signify a legal or binding agreement between two parties

Financial Instruments

Savers/suppliers of funds hold financial instruments giving rise to

financial assets

Users/demanders of funds issue financial instruments giving rise to

financial liabilities

If a saver of funds knows that a user needs it, or a user of funds knows that a saver is willing to invest funds →

both entities enter a private placement

If the need to invest or borrow funds is unknown to both saver and user →

go to the financial market to meet and make their own transactions

If both saver and user do not want to try to find their counterparts in the financial markets →

a middleman, in the form of a financial institution, is employed

A financial institution that acts as an intermediary between depositors (savers of funds) and borrowers (users of funds)

Banks

what does banks do?

Accepts deposits from savers of funds & lends money to borrowers.

Offers basic banking services to customers (savings and checking accounts, loans, etc.).

Commercial Bank

Offers the services of a commercial bank, plus assistance on investments (e.g., asset management, investment advisory, financial analysis)

Universal Bank

Offers savings and home mortgages

Thrift Bank

Found within rural communities, encouraging economic growth; helps farmers and fishermen with capital needs.

Rural Bank

National authority that conducts monetary policy and regulates banks nationwide.

Central Bank

An institution that provides compensation coverage from losses, damages, and injuries.

Insurance company

An insurance policy states the coverage (financial protection from losses), duration, and the required periodic payments

premiums

how does an insurance company work?

If an unforeseen event happens, the policyholder files a claim (supported by documents) stating what happened and how much should be covered. The insurance company validates the claim, and the compensation is paid to the nominated beneficiary.

Beneficiaries are ensured payments upon the death of the insured.

Life Insurance

Payments are made for financial losses due to damage of properties, personal accidents, travel inconveniences.

Non-life Insurance

Provisions for rendering future services when the actual need arises (e.g., educational plans, funeral benefits, pension).

Pre-need Insurance

Combination of two or more other types of insurance.

Hybrid Insurance

An institution that facilitates investments, legal and tax assistance, and record keeping for individuals and businesses.

Investment house

function as a middleman between two parties in an investment transaction

Brokers

pool of money from multiple investors used by professionals to invest in securities

Mutual Funds

investment in stocks

Equity Fund

Equity Fund risks

generally higher returns but with higher risk

investment in corporate bonds & provides dividends each year

Fixed Income Fund

Fixed Income Fund risks

lower risk and lower returns

investment in a mix of equity and fixed income securities

Balanced Fund

investment in securities that are generally not available to retail investors

Feeder Fund

investment in multiple mutual funds

Fund of Funds

investment that replicates the structure and performance of a financial market index (e.g. PSE Index, NYSE Index)

Index Fund

investment in short-term securities issued by government and companies (e.g., treasury bills, commercial papers).

Money Market Fund