business finance quiz 1

Finance

Discipline that deals with decisions concerning how money is managed, raised, and used by businesses

Business finance

refers to the management of financial resources available to the organization. It studies the role of financial manager

Financial management

The process of planning, organizing, directing, and controlling the financial activities of the firm.

Planning

Requires managers to establish objectives. Objectives include maximizing short term profits

Directing

Involves organizing and coordinating the org’s activities

Controlling

Keeping the company’s activities on track

Financing decisions

This decision includes determining the capital structure of the business

Investing decisions

Concerns the planning and managing of the firm’s long-term investments

Operating decisions

Refers to determining how to finance working capital accounts

Financial System

Links and allows the transfer of funds between depositors and borrowers

Financial institutions

Responsible for the supply of money to the market through transfer of funds from investors to companies in form of loans, deposits, and investments

Banks

Institutions concerned with the safekeeping of funds through acceptance of deposits and provision of credit through lending of money. Regulated by Banko Sentral as they take deposits and public interest is involved

Commercial banks

A financial institution that has services such as deposit accounts, make loans, safeguard assets, and work with different clients, including general public and businesses

Thrift banks

A financial institution that specializes in offering savings accounts and originating home mortgages for consumers. Also called Savings and Loan Association

Rural banks

Regional banks that serve people in rural areas. Offer loans to farmers, merchants and cooperatives to finance business aimed for local and countryside development

Insurance companies

Offer life life and non-life insurance protection to individuals and properties, respectively

Stock exchange

Provides a system for the trading of equity securities of publicly listed companies

Lending institutions

Non-banks, but offer loans to individuals

Financial instruments

Consists of equity securities and debt securities

Equity securities

Common stock

Preferred stocks

Common stock

Represents shares of ownership in a corporation. Those who have this get dividends and have voting rights

Preferred stocks

Have priority over common stocks in terms of claims over company assets. People who have this get dividends but no voting rights

Deferred securities

Bonds

Bonds

When other entities or companies are in need of money, this term refers to borrowing money from investors and paying them back later with interest

Financial markets

Refers to the framework of bringing together those that have money to invest to those who need funds. Where trading of securities occur such as the stock market, bond market, forex market

Sales forecast

Shows the potential sales for the industry

Sales budget

Known as sales forecast. Most important sales statement account in forecasting

Purchase budget

Schedule that provides information regarding number of units that should be produced

Cash receipts schedule

Refers to cash inflows expected by the firm for a given period

Cash disbursement schedule

Refers to cash outflows or uses of cash

Cash budget

A budget of expected cash receipts and disbursements during the period.

Financial planning

A document containing a business’ current money situation. Show the process of determining the best uses of financial resources of an org at the least cost. A statement of what should be done in the future. Requires prep of budget or a plan in money form

Budget

A formal written statement of management’s plans for a specified future time period. Primary method of communicating agreed-upon objectives in an org. Basis for evaluating performance

Direct Materials

Materials that are part of the product.

Raw materials

The basic materials and parts used in the manufacturing process.

Indirect materials

Raw materials that are used but not physically traceable on the finished product.

Direct labor

Refers to the work of factory employees that can be directly associated with the product

Indirect labor

Refers to the work of employees that have no physical association with finished product. They support production

Manufacturing overhead

Refer to costs that are indirectly associated with the manufacture of the finished product. Includes indirect materials, indirect labor, depreciation of factory buildings and machines, insurance, and maintenance on factory facilities