FINANCE MIDTERMS

Finance

The science and art of management of an individual's/household's financial activities.

Financial Management

Responsible for the financial health of an organization, involving financial planning, asset management, and fundraising decisions to enhance the value of businesses.

Financial Managers

Individuals responsible for maximizing shareholders' wealth and dealing with decisions that affect the market's perception of the company.

Public Finance

Study of how governments collect revenues, manage expenditures, and handle public debt to meet the needs of society and influence the economy.

Private Finance

How individuals, households, or businesses manage their income, expenditure, savings, investment, and debt.

Personal Finance

Involves managing personal income and expenditures.

Corporate Finance

Involves managing financial activities of a corporation.

Capital Budgeting

Determined by the capital structure of the company, which is the proportion of total assets through debt versus equity.

Financing Decisions

Decisions regarding how to fund the company's operations and growth.

Dividend Policies

Decisions regarding the distribution of profits to equity shareholders.

Investment Management

Managing investments in non-current assets through evaluation of capital projects.

Cash Flow Management

Managing the day-to-day cash flow and financial operations of the company.

Risk Management

Managing risks associated with changes in interest rates and exchange rates.

Financial Planning

The process of setting financial goals and outlining a strategy to achieve them.

Asset Management

The management of investments on behalf of clients.

Fundraising Decisions

Decisions related to raising capital for the organization.

Financial Reports

Documents that provide an overview of the financial performance of an organization.

Shareholder Wealth Maximization

The goal of financial management to maximize the value of shares of stock.

Market Perception

The public's view of a company's financial health and future prospects.

Long-term Financial Goals

Strategic objectives that guide an organization's financial planning over an extended period.

Current Assets

Assets that are expected to be converted into cash within a year.

Non-current Assets

Assets that are expected to provide economic benefits for more than one year.

Temporary Placement of Excess Cash

Buying short-term securities to manage surplus funds.

Dividends

A part of profits that are available for distribution to equity shareholders.

Working Capital Management

It refers to the administration of the firm's short-term assets, including inventory, its short-term liabilities.

Shareholders

INVESTORS are people who put money in your firm and expect a return in the future.

Dividend

The amount of money or items of value received by stockholders from their investment in a corporation.

Business Operations

Production of the firms that later on will earn money.

Board of Directors

The highest policy-making body in a corporation.

Market Price

Reflects what investors believe an asset or company is worth today.

Book Value

The value of a company's assets minus its liabilities, based on the accounting records (balance sheet).

President (CEO)

Top executive in charge of implementing the board's strategies.

Vice-President (Administration)

Performing all areas of management: planning, organizing, staffing, directing and controlling.

Capital Structuring

It evaluates ways in which the firm obtains and manages long-term financing to support its long-term investments.

Investing Decisions

Decide where the company puts its money.

Long-term Investments

Supported by a capital budgeting analysis to minimize the probability of failure.

Real Assets

Physical assets of the firm from earnings such as land, equipment, etc.

Top Management Compensation

Determining top management's compensation.

Production Plan

Coming up with a production plan that maximizes the use of production facilities.

Production Cost Minimization

Identifying production processes that minimize production cost and make the company cost competitive.

Raw Material Suppliers

Identifying adequate and cheap raw material suppliers.

Financial Statements Approval

Approving the information and other disclosures reported in the financial statements.

BOD Responsibilities

Setting policies on investments, capital structure, and dividend policies.

Company Strategies Approval

Approving the company's strategies, goals, and budgets.

Appointing Management

Appointing and removing members of the top management, including the PRESIDENT.

Voting Rights

Each share held is equal to one voting right.

Vice-President (Administration) Responsibilities

Oversees company-wide administrative functions.

Vice-President (Administration) Representation

Representing the company in professional, social, and civic activities.

Vice-President (Administration) Coordination

Coordinating the functions of administration, finance, and marketing departments.

Vice-President (Marketing)

Formulates marketing strategies and plans.

Vice-President (Marketing) Sales Coordination

Directing and coordinating company sales.

Vice-President (Marketing) Market Analysis

Performing market and competitor analysis.

Vice-President (Marketing) Payroll Assistance

Providing assistance in payroll preparation, payment of vendors, and collection of receivables.

Vice-President (Marketing) Office Space Determination

Determining the location and the maximum amount of office space needed by the company.

Vice-President (Marketing) Effectiveness Analysis

Analyzing and evaluating the effectiveness and cost of marketing methods applied.

Vice-President (Marketing) Research

Conducting research that allows identification of new marketing opportunities.

Bangko Sentral ng Pilipinas (BSP)

The BSP began formal operations on July 3, 1993.

BSP Responsibilities

BSP is responsible for maintaining price stability conducive to a balanced and sustainable growth of the economy.

BSP Functions

BSP provides directions in the areas of money, credit, and banking.

BSP Supervision

BSP supervises the operations of banks to promote the safety of banking.

BSP Regulation

BSP regulates the operations of finance companies and non-bank financial institutions doing quasi-banking functions.

Private Placements

They are sales of a new security directly to an investor. They are secured and choose who can buy stocks.

Financial Systems

It includes processes and procedures used by an organization's management to exercise financial control and accountability.

Financial Systems Measures

Measures include recording, verification, and timely recording of transactions that affect revenues, expenditures, assets, and liabilities.

Private Banking Institutions

These companies perform the service of safekeeping funds through the acceptance of money deposits, and the provision of credit through the lending of money.

Government Banking Institutions

To supplement the credit facilities of the private institutions.

Private Nonbanking Financial Institutions

These companies engaged in the underwriting (help issue) of securities of other corporations.

Financial Institutions

Organizations that help money flow smoothly in the financial system.

Development Bank of the Philippines (DBP)

Tasked with the development and expansion of the agricultural industry, and promotion of the establishment of private development banks.

Commercial Banks

Individuals deposit their money in commercial banks, which use the funds to provide loans to businesses and individuals.

Land Bank of the Philippines (LBP)

Primarily helps farmers acquire land under the agrarian reform program and funds farming and selling of produce.

Philippine Amanah Bank

Provides credit, commercial, development, and savings banking facilities at reasonable terms, primarily in Muslim provinces of Mindanao including Palawan.

Thrift Banks

Banks that manage checking accounts and accept savings and time deposits.

Investment Houses

Help companies raise money by selling stocks or bonds and are engaged in the underwriting of securities of other corporations.

Rural Banks

Regional banks mainly serve people in rural areas by granting short-term loans to farmers and merchants.

Investment Companies

Raise funds in the capital market by selling their own issues of securities, mainly common stock, to individual investors.

Financing Companies

Provide loans for buying goods like cars or appliances and extend credit facilities to consumers and enterprises.

Trust Corporations

Act as trustees or administrators of any property or trust, and deposit, with necessary skill, care, prudence, and diligence.

Security Dealers/Brokers

Intermediaries in the marketing process, buying and selling stocks, bonds, and other investments.

Insurance Companies

Offer protection against risks (health, life, property) and pool payments to invest the proceeds in various securities.

Fund Managers

Individuals or organizations that manage investment funds and portfolios.

Non-Stock Savings and Loan Associations

Member-owned organizations for savings and borrowing, performing quasi-banking functions.

Building and Loan Associations

These are corporations where stockholders pay their capital in regular, equal installments.

Lending Investors

These institutions collect funds from individuals through deposits or by issuing debt and equity securities, then lend these funds to other people or entities that cannot borrow from banks because of strict requirements.

Venture Capital Corporation

This institution was created to support small and medium-scale industries.

Pawnshops

Engaged in the business of lending money on personal property (jewelry, gadgets, etc.) and lend money in exchange for personal items as collateral.

Government Service Insurance System (GSIS)

Administers life insurance for government employees and provides social insurance and security benefits to members.

Social Security System (SSS)

Gives its members, those from the private sector, benefits such as sickness, disability, death, and old-age pension.

Money Market

For buying and selling short-term securities (mature in 1 year or less).

Capital Market

For buying and selling long-term securities.

Financial Instruments

Monetary contracts between parties that represent legally enforceable agreements regarding a right to payment of money.

Financial Markets

These are physical locations that facilitate the flow of funds among investors and businesses.

Debt Instruments

Generally have fixed returns due to fixed interest rates.

Treasury Bonds/Bills

These are issued by the Philippine government and have usually low-interest rates with very low risk of default.

Corporate Bonds

These are bonds issued by publicly listed companies that usually offer higher interest rates than Treasury bonds.

Commercial Papers

Mature in 270 days.

Primary Market

This is where new securities (stocks or bonds) are issued for the first time.

Secondary Market

This is where existing (previously issued) securities are bought and sold.

Public Offering

Securities are sold to the general public. The first time a stock is offered is called an Initial Public Offering (IPO).

Private Placement

Securities are sold to a specific group of investors (like big institutions) directly.