BUSINESS FINANCE WEEK 2

Question 1

A financial institution licensed to receive deposits and make loans. It also provides financial services such as wealth management, currency exchange, and safe deposit boxes.

Answer 1

BANKS

Question 2

A company or government agency that provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.

Answer 2

INSURANCE COMPANIES

Question 3

A security that represents the ownership of a fraction of a corporation.

Answer 3

STOCKS

Question 4

Assets that can be traded, or they can also be seen as packages of capital that may be traded.

Answer 4

FINANCIAL INSTRUMENTS

Question 5

Financial institutions that help one buy and sell securities. They act as the middleman between the buyer and the seller.

Answer 5

STOCK BROKERAGE FIRMS

Question 6

An entity that acts as the middleman between two parties in a financial transaction, such as a commercial bank, investment bank, mutual fund, or pension fund.

Answer 6

FINANCIAL INTERMEDIARY

Question 7

A payment made by a corporation to its shareholders.

Answer 7

DIVIDENDS

Question 8

Broadly refers to any marketplace where the trading of securities occurs.

Answer 8

FINANCIAL MARKET

Question 9

A form of debt that the issuing entity promises to repay at some point in the future.

Answer 9

BONDS

Question 10

is a private non-profit and nonstock organization created to provide and maintain a fair, efficient, transparent and orderly market for the purchase and sale of securities such as stocks, warrants, bonds, and others.

Answer 10

PHILIPPINES STOCK EXCHANGE

Question 11

are venues where the different stakeholders of security do their act, either lending money or borrowing money or invest.

Answer 11

FINANCIAL MARKETS

Question 12

Give the 6 financial markets exist

Answer 12

1. Stocks market
2. Bond market
3. Currency market
4. Options market
5. Derivatives market
6. Commodities market

Question 13

What are the 2 common types of markets?

Answer 13

1. PRIMARY MARKET
2. SECONDARY MARKET

Question 14

This is a venue that deals with the new issuance and sale of securities by the government and the corporation. The government and the corporations are the vendors in this market, this transaction is called Initial Public Offering (IPO).

Answer 14

PRIMARY MARKET

Question 15

This is a venue where the different individuals and corporation will sell their securities to the public which was bought during the IPO

Answer 15

SECONDARY MARKET

Question 16

exists to provide a wide variety of deposit, lending, and investment products to individuals, businesses, or both.
While some focus on providing services and accounts for the general public, others are more likely to serve only certain consumers with more specialized offerings.

Answer 16

FINANCIAL INSTITUTIONS

Question 17

Give the 6 examples of Financial institutions

Answer 17

1. COMMERCIAL BANKS
2. INSURANCE COMPANIES
3. MUTUAL FUNDS
4. BROKERAGE FIRMS
5. PENSION FUNDS
6. OTHER FINANCIAL INSTITUTION

Question 18

Represent the largest group of financial institutions. Individuals deposit funds at _______________________, which use the deposited funds to provide commercial loans to firms and personal loans to individuals, and purchase debt securities issued by firms or government agencies.

Answer 18

COMMERCIAL BANKS

Question 19

A practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.

Answer 19

INSURANCE COMPANIES

Question 20

These are owned by investment companies which enable small investors to enjoy the benefits of investing in a diversified portfolio of securities purchased on their behalf by professional investment manager.

Answer 20

MUTUAL FUNDS

Question 21

assist individuals and institutions in buying and selling securities among available investors.

Answer 21

BROKERAGE FIRMS

Question 22

are financial institutions that receive payments from employees and invest the proceeds on their behalf.

Answer 22

PENSION FUNDS

Question 23

include pension funds like Government Service Insurance System (GSIS) and Social Security System (SSS), Unit Investment trust fund (UITF) and credit unions and others.
FINANCIAL I

Answer 23

OTHER FINANCIAL INSTITUTIONS

Question 24

is a real or virtual document representing a legal agreement involving any kind of monetary value.

Answer 24

FINANCIAL INSTRUMENTS

Question 25

What are the 2 examples of Financial Instruments

Answer 25

1. BONDS 2. STOCKS

Question 26

What are the 2 major categories of financial instrument?

Answer 26

1. EQUITY SECURITIES 2. DEBT SECURITIES

Question 27

2 common examples of equity securities

Answer 27

1. COMMON STOCKS 2. PREFERRED STOCKS

Question 28

2 types of Debt Securities

Answer 28

1. TREASURY BONDS AND TREASURY BILLS 2. CORPORATE BONDS

Question 29

You own one percent in everything that the company has or may have in the future.

Answer 29

EQUITY SECURITIES

Question 30

Generally have fixed returns due to fixed interest rates. These financial instruments are sold if a company is in need of funding and the proceeds of this will be used to finance the company’s plans.

Answer 30

DEBT SECURITIES

Question 31

Is a security that represents ownership in a corporation. Holders of this elect the board of directors and vote on corporate policies. This form of equity ownership typically yields higher rates of return on long term. However, in the event of liquidation, common shareholders have rights to a company's assets only after bondholders, preferred shareholders, and other debtholders are paid in full.

Answer 31

COMMON STOCKS

Question 32

Has priority over a common stock in terms of claims over the assets of a company. If a company is to be liquidated and its assets have to be distributed, no asset will be distributed to common stockholders unless all the claims of the preferred stockholders have been given.

Answer 32

PREFERRED STOCKS

Question 33

Are issued by the Philippine government. These bonds and bills have usually low interest rates and have very low risk of default since the government assures that these will be paid.

Answer 33

TREASURY BONDS AND TREASURY BILLS

Question 34

Are issued by publicly listed companies. These bonds usually have higher interest rates than Treasury bonds. If the company which issued the bonds goes bankrupt, the holder of the bonds will no longer receive any return from their investment and even their principal investment can be wiped out.

Answer 34

CORPORATE BONDS

Question 35

What are the 4 factors influence the stock market price?

Answer 35

1. ECONOMICS 2. POLITICS 3. NATURAL AND MAN-MADE DISASTER 4. MARKET PSYCHOLOGY

Question 36

factors such as interest rates, inflation unemployment and economic growth often move stock markets.

Answer 36

ECONOMICS

Question 37

A belief by investors that control of the government by one party or the other will hurt or benefit them can move the market as whole.

Answer 37

POLITICS

Question 38

It it natural factor that influence the stock market price made by people.

Answer 38

NATURAL AND MAN-MADE DISASTER

Question 39

At the end of the day, swings in the stock market are caused by human beings. There are boom periods in a rising market when everyone wants to buy. Alternatively, there are also periods of panic when almost every investor is scrambling to sell

Answer 39

MARKET PSYCHOLOGY

Question 40

made by the business through operations, investment, and financing transactions over a period of time. This statement is preferred mostly by investors to look at when analyzing a company’s performance.

Answer 40

CASH FLOW STATEMENT

Question 41

this is where we can measure the amount of cash that the company has made through its regular business operations. EXAMPLES: Salaries of employees Sales from Products or Services Marketing Cost Delivery of goods Taxes

Answer 41

CASH FROM OPERATING ACTIVITIES

Question 42

this statement provides the information regarding the buying and selling of long-term assets such as property, plant and equipment. EXAMPLES: 1. buying/selling of business assets such as lands, buildings, equipment etc. 2.Dividend earnings from stocks investments.

Answer 42

CASH FLOW FROM INVESTMENT ACTIVITIES

Question 43

In this section one can see the amount of cash the company has raised to fund the company through all forms of debt like stocks bonds etc. EXAMPLES: Insuance of Company Stocks and Bonds. Loan and credit obligations Cash receivables through Loans and credits. Paying Dividends to investors

Answer 43

CASH FLOW FROM FINANCING ACTIVITIES

Question 44

FOUR MAJOR TYPES OF DECISIONS FOR A FINANCIAL MANAGER

Answer 44

1. FINANCING DECISIONS 2. INVESTING DECISIONS 3. OPERATING DECISIONS 4. RETURN OF CAPITAL OR DIVIDEND DISTRIBUTION DECISION

Question 45

These decisions are made in order for the company to have the appropriate capital structure. This involves how much borrowing or how much capital is to be allocated in financing for acquiring an asset, long term investments or working capital for the day to day operations of the company.

Answer 45

FINANCING DECISIONS

Question 46

concerned about the selection of assets in which funds will be invested by a company. Basically, this is the how and where to invest the funds.

Answer 46

INVESTING DECISIONS

Question 47

involves in dealing with the daily operations of a company that ensures that the company has sufficient cash to carry on with the day to day operations and keep away from unnecessary expenses.

Answer 47

OPERATING DECISION

Question 48

These decisions involve the payouts to the shareholders and its proportion of earning per share, how often would these payments be made or convince the shareholders to retain the earnings within the company.

Answer 48

RETURN OF CAPITAL OR DIVIDEND DISTRIBUTION DECISIONS