---- Flashcards
Functions of a commercial Bank
The primary functions of a commercial bank are accepting deposits and also lending funds to individuals and organizations
Function of central banks
Central banks are national banks that provide financial and banking services for its country’s government and commercial banking system
Types of bank accounts
Savings account, checking account, salary account, current account.
Types of non-financial institutions
Examples of nonfinancial institutions include insurance firms, venture capitalists, currency exchanges and some microloan organizations
Definition of collateral
Collateral is an item of value pledged to secure a loan
Importance of collateral
Reducing losses: Collateral plays a function as compensation for a lender’s losses in the event that a borrower defaults on a loan.
Types of collateral
Real Estate Collateral.
Business Equipment Collateral. Inventory Collateral. Invoices Collateral. Cash Collateral. Investments Collateral.
Secured versus unsecured loan
With a secured loan, you give the lender the right to seize the asset you use as collateral should you fail to repay the loan. With an unsecured loan, no assets are required
What is budgeting
budget is a plan you write down to decide how you will spend your money each month
Personal budget
Personal budgets are budgets that everyday people make to manage their income and expenses,
Government budget
A government budget is a document prepared by the government and/or other political entity presenting its anticipated tax revenues and proposed spending/expenditure for the coming financial year.
Short term financing definition
Short-term financing means taking out a loan to make a purchase, usually with a loan term of less than one year
Types of short term financing
The main sources of short-term financing are (1) trade credit, (2) commercial bank loans, (3) commercial paper, a specific type of promissory note, and (4) secured loans.
Long term financing definition
Long-term finance can be defined as any financial instrument with maturity exceeding one year
Types of long term financing
bank loans, bonds, leasing and other forms of debt finance
Capital definition
the sum of financial assets that are required to produce goods or services
Importance of capital
Capital helps a company grow by providing the assets it needs to generate more revenue.
Types of capital
working capital, debt, equity, and trading capital
Working capital
the capital of a business which is used in its day-to-day trading operations,
Debt
When a company borrows money to be paid back at a future date
Equity
Equity is the amount of capital invested or owned by the owner of a company.
Trading capital
the amount of money allotted to an individual or a firm to buy and sell various securities.
Purpose of financial records
to provide information about the results of operations, financial position, and cash flows of an organization
Gross profit
Gross profit, also known as gross income, equals a company’s revenues minus its cost of goods sold
Net profit
Net profit is the result after all expenses have been subtracted from revenues
balance sheet definition
balance sheet is a financial statement that contains details of a company’s assets or liabilities at a specific point in time.
