Introduction to Finance – Key Vocabulary

Vocabulary flashcards covering fundamental terms and concepts from the lecture on Introduction to Finance.

Finance

The science and art of applying economic and accounting concepts to manage, allocate, and utilize financial resources, investments, and expenditures.

Science and Art (in Finance)

Finance is governed by factual standards (science) yet continually adapts to changing business needs (art).

Economic and Accounting Concepts

The theories from economics and the recording practices of accounting that underpin financial decision-making.

System, Structure, and Process (in Finance)

Coordinated financial activities aligned with an organization’s overall framework and guided by clear procedures.

Management, Allocation, Utilization

The core objective of finance—correctly handling limited funds to reach organizational goals.

Financial Resources

Funds provided by owners or creditors of a business.

Financial Investments

Resources expected to generate income and value growth for the business.

Financial Expenditures

Outflows covering operating or capital spending.

Public Finance

Allocation of government income (taxes or borrowings) and related expenditures; also called fiscal administration.

Private Finance

Management of financial resources of private individuals or organizations according to their financial policies and priorities.

Personal Finance

Sub-category of private finance focusing on income from compensation, profession, or sole proprietorship and related investment decisions.

Business Finance

Area of finance that handles the financial resources of a business organization.

Financial Management

Branch of finance centered on capital budgeting, asset acquisition, and choosing financing schemes.

Capital Market

Area of finance that studies financial institutions, their lending functions, and the costs (e.g., interest) of borrowing funds.

Financial Investments (Area)

Field concerning valuation and pricing of stocks and bonds, portfolio and security analysis, and investor behavior.

Reasons for Studying Finance

To plan fund acquisition and use, become better investors, and make informed economic decisions.

Organizational Goal (Finance)

Maximize the wealth of common stockholders via the value of common stock.

Finance Division (Corporate Structure)

Organizational unit headed by a VP for Finance or comptroller responsible for financial functions.

Finance Officer (CFO)

Executive who makes operating, investing, and financing decisions to achieve business objectives.

Operating Decisions

Day-to-day financial choices such as credit, inventory, discount policies, budgeting, and control of operating expenses.

Investing Decisions

Choices about non-current asset acquisition, investment portfolios, and pricing of stocks and bonds.

Financing Decisions

Determinations involving equity vs. debt funding, borrowing terms, and cost of capital.

Qualifications of a Finance Officer

Expertise in accounting/economics, management science, finance, communication, stakeholder relations, and ethical responsibility.

Philippine Financial System

Comprehensive system of banks and non-banks licensed by the BSP under RA 8791.

Universal Bank

Large Philippine bank offering a wide array of services; part of the banking sector.

Commercial Bank

Banking institution that provides deposit and lending services; distinct from universal banks by scope.

Thrift Bank

Savings-oriented bank category including savings and mortgage banks, stock savings and loan associations, and private development banks.

Rural Bank

Small bank serving rural communities within the Philippine financial system.

Cooperative Bank

Bank owned and operated by cooperatives to serve members’ financial needs.

Non-Bank Financial Institution (NBFI)

Financial entity such as investment banks, insurance companies, or pawnshops that offers financial services without full banking status.

Financial Intermediary

Entity that acts as middleman between two parties in a financial transaction (e.g., commercial bank, mutual fund).

Financial Market

Marketplace where securities trading occurs, including stock, bond, forex, and derivatives markets.

Financial Institution

Organization that provides financial services; may be a bank or non-bank entity.

Financial Instrument

Tradeable asset such as stocks, bonds, or other securities used within financial markets.