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Grade 12 > Business Finance > Flashcards

Business Finance Flashcards

1
Q

It is a branch of economics concerned with resource allocation as well as resource acquisition, management, and investment

A

FINANCE

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2
Q

It is the business discipline concerned with managing money efficiently

A

FINANCE

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3
Q

It is the study of fund management and asset allocation over time

A

FINANCE

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4
Q

deals with the acquisition, management, and investment of financial resources to enable a business company to attain its predetermined objectives toward growth, stability, profitability, and liquidity

A

Finance

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5
Q

identifies the financing requirements of the firm at its estimated time and value. It determines if such financing requirements are needed short-term or long term.

A

Finance

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6
Q

Three Areas of Finance

A

Financial Institutions and markets
Investments
Financial Management

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7
Q

are where the providers and users of funds interact with the help of the financial intermediary. Here, the providers of funds are willing to lend their money for the purpose of generating interest or profits, while the users of funds are willing to use the funds either electronically or manually and the providers and users do not necessarily meet face to face to execute the transactions.

A

Financial Institutions and markets

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8
Q

is more concerned with raising, allocating, and controlling the firm’s funds. In times of financial trouble, the finance manager must find ways for the firms to meet

A

Financial Management

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9
Q

involve the buying and selling of financial securities, the analysis on making an investment, and risk management. The parties here are investors and users of funds, both individuals and institutions.

A

Investments

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10
Q

covers applications of finance other than public finance.

A

Private finance

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10
Q

is concerned with the government revenues and spending and their general effect on the economy.

A

Public finance

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10
Q

Categories of Finance

A

Public finance
Private finance

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10
Q

finance manager should answer are the following:

A
  1. What are the project proposals to accept to maintain or improve the firm’s stock price?
  2. In financing the acceptable project, should the firm borrow money or issue equity?
  3. If not from the borrowing, did the firm generate enough funds to finance its activities? Should they issue additional shares of stocks, preferred or common?
  4. In case there are no investment prospects and the firm has enough cash to declare as dividends, how much dividends should be declared?
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11
Q

Private finance is divided as:

A

a. Personal finance
b. Nonprofit organization
c. Business finance

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12
Q

Just like firms, individuals must consider the types, benefits, and risks of investments that they intend to make such as banking products, insurances, retirement plans, stock market, and mutual funds to name a few.

A

Personal finance

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12
Q

deals primarily with the management of the finances of individuals and households. It involves budgeting, saving, investing, and spending the finances to maintain, sustain, or enhance the unit’s well-being.

A

Personal finance

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13
Q

Fields of NPOs

A
  1. Arts, culture, and humanities
  2. Education
  3. Environment and animals
  4. Health
  5. Human services
  6. International and foreign affairs
  7. Public and societal benefit
  8. Religion related
  9. Mutual/membership benefit
  10. Unknown, unclassified
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14
Q

provides goods and services to the public without necessarily gaining profit for its owners or investors.

A

Non Profit Organization

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15
Q

Its uses whatever profit it gains to support its operations.

A

Non Profit Organization

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16
Q

It is basically funded by donations from individuals, corporations, foundations, and the government.

A

Non Profit Organization

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17
Q

Diff of Accounting and Finance:
Accounting

A

It deals with assets, liabilities, income, and expenses. It involves recording the past transactions, analyzing the past performance, and preparing and interpreting the financial statements of the business of the past year.

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17
Q

is the management of funds and other valuable assets to be used in the conduct of business. It is concerned with the acquisition, allocation, and accumulation of funds. Finance is commonly interchanged with accounting, but they have distinct differences. Both are concerned with managing the money of the business but in different ways.

A

BUSINESS FINANCE

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18
Q

Diff of Accounting and Finance:
Finance

A

Covers accounting, economics, taxation, and business laws. It involves using the accounting data and information in running the business and ensuring the sufficiency of its funds for future operations. The results of finance decisions make up the accounting data. This makes accounting and finance closely interrelated.

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19
Q

Reasons for Studying Finance

A
  1. come up with financial plans as to how their funds can be acquired, managed, and allocated;
  2. become better investors; and
  3. make informed financial and economic decisions.
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20
Q

questions that finance manager must answer in dealing with financing.

A
  1. Should the firm borrow money?
  2. Is it short-term or long-term?
  3. If they will not borrow, how will they generate enough funds?
  4. Should they issue additional shares of stocks, preferred or common?
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21
Q

Role of Finance Manager

A

Financing Decision
Investment Decision
Operating
Dividend Policy Decision

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22
Q

Definition of Finance by Mejorada

A

Acquisition, management, and investment of financial resources to enable a business company to attain its predetermined objectives toward growth, stability, profitability, and liquidity

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23
Q

Definition of Finance by AttractCapital

A

Study of the money and assets coupled with the management and use of those assets to build wealth

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24
Q

Definition of Finance by WebFinance, Inc

A

Branch of economics concerned with the resource allocation as well as resource acquisition, management, and investment

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25
Q

Definition of Finance by Kolakowski

A

Business discipline concerned with managing money efficiently

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26
Q

Definition of Finance by Lumen Learning

A

Study of fund management and asset allocation over time

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27
Q

It consists of the diversified financial activities being performed by the different economic units whose activities are so closely related to each other, considering the use of money, credit and different instruments associated with money.

A

THE FINANCIAL SYSTEM

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28
Q

A mathematical relationship between two numbers

A

Financial Ratio

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29
Q

Commonly expressed in percentages and decimals

A

Financial Ratio

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30
Q

basic functions of the financial system

A

a) Promote savings
b) Payment
c) Protection against risk
d) Means wealth
e) Provide liquidity
f) Credit facility

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31
Q

Categories of Bank Institutions

A
  • Universal Bank
  • Thrift Bank
  • Cooperative Bank
  • Islamic Bank
  • Government Bank
  • Investment Bank
  • Investment Company
  • Securities Dealers/brokers
  • Insurance Company
  • Credit Union
  • Pawnshop
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31
Q

is part of the financial market where lending and borrowing takes place for the medium-term and long term.

A

Capital Market

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32
Q

refers to an institution that acts as a middleman between two parties in order to facilitate a financial transaction.

A

FINANCIAL INTERMEDIARY

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33
Q

It is the part of financial market where lending and borrowing takes place for short-term up to one year

A

Money Market

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34
Q

How are financial ratios commonly expressed?

A

In percentages and decimals

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35
Q

Financial data is in such a way that it can be compared and trends identified and thus questions for analysis can be raised

A

Financial Ratio

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36
Q

TYPES OF CAPITAL MARKET

A

Primary market
Secondary market

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37
Q
  • Issuers
  • Financial instruments
  • Financial intermediaries
  • Investors
A

Primary market

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38
Q

It is also called aftermarket. The securities are sold by the investor to another investor for the purpose of profit or cutting loss in the.

A

Secondary market

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39
Q

Definition of Financial Ratio by Jones and Ernest

A

Financial data is in such a way that it can be compared and trends identified and thus questions for analysis can be raised

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40
Q

What are the three areas of financial ratios?

A
  1. Liquidity Ratios
  2. Solvency Ratios
  3. Profitability Ratios
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41
Q
A
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42
Q

Ability to convert assets into spendable form

A

Liquidity

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43
Q
A
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44
Q
A
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45
Q
A
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46
Q

It dtermines a company’s ability to cover short-term obligations and cash flows.

A

Liquidity Ratios

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47
Q

Types of liquidity ratios

A
  1. Current Ratio
  2. Quick Ratio
  3. Receivable Turnover
  4. Inventory Turnover
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48
Q

The overall liquidity of a company by comparing current assets to current liabilities

A

Current Ratio

49
Q

Another term for current ratio

A

Working Capital Ratio

50
Q

Another term for working capital ratio

A

Current Ratio

51
Q

More conservative in the sense that it does not include all current assets in the computation

A

Quick Ratio

52
Q

Another term for quick ratio

A

Acid Test Ratio

53
Q

Another term for acid test ratio

A

Quick Ratio

54
Q

Measures how efficiently a company collects its outstanding credit sales

A

Accounts Receivable Turnover

55
Q

It indicates how many times a company converts its accounts receivable into cash during a specific period

A

Accounts Receivable Turnover

56
Q

The process of listing the unpaid invoices and other receivables by their due dates

A

Average Receivables

57
Q

The number of times that inventory is sold during the accounting

A

Inventory Turnover

58
Q

Where you can see how long the goods have been stored in the stockroom

A

Age of Inventory

59
Q

The key metric used to measure an enterprise’s ability to meet its debt obligations and its use often by prospective business lenders

A

Solvency Ratios

60
Q

It indicates whether a company’s cash flow is sufficient to meet its short- and long-term liabilities.

A

Solvency Ratios

61
Q

Types of solvency ratios

A
  1. Time-Interest earned
  2. Debt Ratio
  3. Equity Ratio
  4. Debt to Equity Ratio
  5. Equity to Debt Ratio
62
Q

It evaluates the ability of a company to pay the interest on its debt

A

Time-Interest Earned

63
Q

Measures the percentage of assets funded by creditors

A

Debt Ratio

64
Q

Indicates the percentage of assets funded by the owners

A

Equity Ratio

65
Q

Refers to the financial ratio indicating the relative proportion of shareholders’ equity and debt use in the finance of a company’s asset

A

Debt to Equity Ratio

66
Q

Refers to the proportion of owner’s equity to debt

A

Equity to Debt Ratio

67
Q

Show how efficiently a company generates profits and value for shareholders

A

Profitability Ratios

68
Q

Types of Profitability Ratios

A
  1. Gross Profit Margin
  2. Operating Profit Margin
  3. Net Profit Margin
69
Q

Measures the company’s profitability, calculated as the gross profit as a percentage of revenue

A

Gross Profit Margin

70
Q

The amount remaining deducting the cost of goods sold (COGS) or direct cost of earning revenue from revenue

A

Gross

71
Q

Measures the average markup on every peso sale of each product

A

Gross Profit

72
Q

Computed by deducting operating expenses from the gross profit

A

Operating Profit Margin

73
Q

Overall measure of profitability

A

Net Profit Margin

74
Q

The capacity of goods and services to satisfy wants

A

Utility or Expected Satisfaction

75
Q

The final product of the whole accounting process

A

Financial Statement Analysis

76
Q

Users of financial statements

A
  1. External
  2. Internal
77
Q

Process preparing financial statements

A
  1. Analyzing business transactions
  2. Recording in the journals
  3. Posting to ledger accounts
  4. Preparing the unadjusted
  5. Making the adjusting entries
  6. Preparing the adjusted trial balance
  7. Preparing the financial statements
  8. Making the closing entries
  9. Post-closing trial balance
78
Q

Types of financial statements

A
  1. Statement of Financial Position
  2. Statement of Comprehensive Income
  3. Statement of Changes in Owner’s Equity
  4. Statement of Cash Flow
79
Q

A snapshot of a company’s financial position at a specific point in time, showing assets, liabilities, and equity

A

Statement of Financial Position

80
Q

Another term for statement of financial position

A

Balance Sheet

81
Q

Another term for balance sheet

A

Statement of Financial Position

82
Q

It shows a company’s financial position at a specific point in time

A

Statement of Financial Position

83
Q

What is the purpose of statements of financial position?

A

It shows a company’s financial position at a specific point in time

84
Q

What are the components of a statement of financial position?

A

**Assets*, liabilities, and equity

85
Q

What the company owns

A

Assets

86
Q

What the company owes

A

Liabilities

87
Q

The owner’s claim after liabilities are subtracted from assets

A

Equity

88
Q

A report that shows a company’s financial performance over a specific period, detailing revenues, expenses, and net income or loss

A

Statement of Comprehensive Income

89
Q

Another term for statement of comprehensive income

A

Income Statement

90
Q

Another term for income statements

A

Statement of Comprehensive Income

91
Q

It reports a company’s financial performance over a specific period

A

Statement of Comprehensive Income

92
Q

What is the purpose of statements of comprehensive income?

A

It reports a company’s financial
performance over a specific period

93
Q

What are the components of statements of comprehensive income?

A

Revenue, expenses, and net income

94
Q

A financial statement that details the changes in the equity section of the balance sheet over a specific period

A

Statement of Changes in Owner’s Equity

95
Q

Another term for statement of changes in owner’s equity

A

Statement of Changes in Equity

96
Q

Another term for statement of changes in equity

A

Statement of Changes in Owner’s Equity

97
Q

Shows the movement in the owner’s equity during the accounting period

A

Statement of Changes in Owner’s Equity

98
Q

Provides transparency about how equity has changed due to various factors

A

Statement of Changes in Owner’s Equity

99
Q

What are the purposes of Statement of Changes in Owner’s Equity?

A
  1. To show the movement in the owner’s equity during the accounting period
  2. To provide transparency about how equity has changed due to various factors
100
Q

What are the components of Statement of Changes in Owner’s Equity?

A

Opening balance, owner contributions, net income/loss, dividends or withdrawals, other comprehensive income, and closing balance

101
Q

The equity balance at the beginning of the period

A

Opening Balance

102
Q

Additional investments made by the owner

A

Owner Contributions

103
Q

Profit or loss from the income statement

A

Net Income or Loss

104
Q

Amounts paid out to the owner or shareholders

A

Dividends or Withdrawals

105
Q

Gains or losses not included in net income (e.g. revaluation surplus)

A

Other Comprehensive Income

106
Q

Equity balance at the end of the period

A

Closing Balance

107
Q

A statement that tracks the inflows and outflows of cash over a period, categorized into operating, investing, and financing activities

A

Statement of Cash Flow

108
Q

Shows the inflows and outflows of cash over a period

A

Statement of Cash Flow

109
Q

What is the purpose of Statements of Cash Flows?

A

Shows the inflows and outflows of cash over a period

110
Q

What are the components of Statements of Cash Flows?

A

Operating activities, investing activities, and financial activities

111
Q

It is the process of selecting related data from financial statements to evaluate the entity’s past financial position and operating performance and predict the outcome of future operations

A

Financial Statement Analysis

112
Q

What are the methods of analyzing the financial statements?

A
  1. Horizontal or Comparative approach
  2. Vertical or Common-Size approach
113
Q

An analytical tool that evaluates the present performance of an entity compared to last year’s

A

Horizontal or Comparative Analysis Approach

114
Q

The analysis reflects the differences in absolute amount and in percentage between two periods only, namely the present year and previous year

A

Horizontal or Comparative Analysis Approach

115
Q

The ability of the company to pay for the obligation in relation to the assets it has

A

Horizontal or Comparative Approach

116
Q

Allocation of resources and management priorities

A

Vertical or Common-Size Approach

117
Q

An analytical tool that determines the size or proportion of an item in the financial statements in relation to the total

A

Vertical or Common-Size Approach

118
Q

Setting the goals of an organization and identifying ways to meet its goals

A

Planning

119
Q

Planning may be broken down into _____ and ____?

A

Long-term plans and short-term plans

120
Q

Involves strategies that focus on the results within a short period of time, say a year

A

Short-term plan

121
Q

Mission

A

Short-term plan

122
Q

Vision

A

Long-term plan

123
Q

Plans are reflected in a company’s business strategy

A

Long-term plan

124
Q

Includes monitoring and comparing actual performance with plans

A

Controlling

125
Q

What are the steps in planning?

A
  1. Set goals or objectives
  2. Identify the resources
  3. Identify the goal related tasks
  4. Establish responsibility centers for accountability and timeline
  5. Establish an evaluation system for monitoring and controlling
  6. Determine the plans
126
Q

An important financial statement account in forecasting because almost all other accounts in the financial statement are affected by this

A

Sales Budget

127
Q

It analyzes the statement of profit or loss, such as cost of sales, gross profit, and variable operating expenses based on the sales figure

A

Sales Budget

128
Q

Provides information regarding the number of units to be produced over a given accounting period based on expected sales and target level of ending inventories

A

Production Budget

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