1st Mastery Test Flashcards
It is the study of how the players in a financial system acquire, spend, manage, and make other sound financial decisions concerning money and other financial resources.
•Describes activities associated with banking, leverage or debt, credit, capital markets, money, and investments.
Finance
It refers to managing an individual’s monetary resources across five key areas—income, savings, investments, expenditure, and assets protection.
The goal is to make intelligent investment decisions and build a safety net that sustains the individual without constraints or bad debts.
Personal Finance
Like individuals, governments need to allocate their resources to different sectors of the economy. It is how federal, state, and local institutions track revenue and manage expenses for all the services they provide to the public.
Public Finance
It covers all the financial activities related to running a business. You can think of this in terms of acquisitions and investments, funding, capital budgeting, risk management, and tax management needed for business growth in financial markets.
Companies need to maintain a balance between cash flow, risks and investment opportunities to increase their value and strengthen their capital structure.
Corporate or Business Finance
Basic Functions of Money
- Medium of Exchange
- Unit of Account
- Store of Value
Reasons to Study Finance
- To be able to manage money or financial resources
- To be able to make sound economic decisions
- To be able to arrive at sound personal and business investment decisions
- To be able to understand the career path available to finance professionals
Careers in Finance
Commerce & Industry
Government
Academe
Academe
- Lecturer
- Researcher
Government
1.Administrative Clerk
2. Examiner
3.Collections Officer
Commerce & Industry
1.Financial Analyst
2.Cash Management
Analyst
3.Credit Analyst
4.Bank Tellers
5. Investment
Researchers 6.Real Estate Agent 7.Financial Advisors
Characteristics or Areas of Financial Environment
Financial Institutions and markets
Financial Markets
Investments
Financial Management
are organizations or intermediaries that help the financial system operates efficiently and transfer funds from depositors and investors to individuals, business, and governments.
example: banks, insurance companies, & lending institutions
Financial Institutions and markets
describes any market place where trading of securities such as shares, bonds and currencies occurs
in the Philippines —Philippine Stock Exchange (PSE)
Financial Markets
focuses on the decisions made by businesses and individuals as they choose securities for their investment portfolios.
example: sales or marketing of securities, analysis of securities
Investments
involves financial planning, asset management, and decisions to increase the value of the stakeholders.
deals with decisions concerning cash flows, including both inflows and outflows
Financial Management
•Are assets that can be traded, or they can also be packages of capital that may be traded
•These assets can be cash, a contractual right to deliver or receive cash or another type of financial instrument, or evidence of one’s ownership of an entity
Financial Instrument
any physical or electronic documents that has intrinsic monetary value or transfer value.
Financial Instruments
primarily issued by corporations to generate cash or to acquire an asset
it could either take the form of a debt security or an equity security
Securities
refers to corporate bonds (or liability securities)
debt security
refers to corporation shares
equity security
represents an ownership interest in a corporation
Share
supervised and regulated by
the BSP
Banks
an establishment for the deposit, custody, and issue of money, for making loans and for making the exchange of funds easier
BSP
Accept the savings of individuals and lend pooled savings to individuals primarily in the form of mortgage loans.
Examples (BPI Family Savings Bank (a subsidiary of BPI), China Bank Savings)
Savings Bank
Represent the more popular type of banks in the rural communities.
(Examples: ASPAC Rural Bank, Inc., BDO Network Bank (a subsidiary of BDO Unibank, Inc.),
Universal and commercial banks
Represents non-commercial banks composed of savings and mortgage banks, private development banks, stock savings and loan associations and microfinance thrift banks.
Example (HSBC Savings Bank (Phils), Inc., Equicom Savings Bank, Inc.)
Thrift Banks
Various Financial Markets
Money market
Capital market
Primary market
Secondary market
markets which previously issued instruments or securities are traded. (buying & selling of existing markets)
Secondary market
which financial instruments and securities are financially offered or sold with the proceeds going to the issuer (setting up for new business or expansion)
Primary market
the markets in which debt instruments with maturities longer than one year and equity securities are traded
Capital market
the markets in which debt securities with maturities of one year or less are traded (short term funds)
Money market
Subtypes of Secondary Market
Securities markets
Mortgage markets
Derivative markets
Currency exchange markets
also called foreign exchange (FOREX) market where banks and institutional traders buy and sell various currencies on behalf of businesses and other clients
Currency exchange markets
where derivative securities are purchased and sold
Derivative markets
where mortgage instruments or loans, backed by real property in the form of buildings and houses, are originated and traded
Mortgage markets
where previously issued debt and equity securities are sold and traded
Securities markets
Forms of
Business
Organizations
• Sole Proprietorship
• Partnership
• Corporation
