Buss fi cm 1 to 2 Flashcards
“Princes come and princes go.” This quote from the musical
musical Kismet
exceptionally apropos of finance
Kismet
the study of money and money management
Finance
studies the allocation of resources in a world of uncertainty
Finance
also referred to as a stockholder
A shareholder
is a person, company, or institution that owns at least one share of a company’s stock
shareholder
shareholder is a person, company, or institution that owns at least one share of a company’s stock or which is known as
Equity
encouraged to develop a longer perspective for the company that they manage.
Management
The very first currency where the
name
“Filipinas”
“Filipinas” appeared in the
coins produced from
1861 to 1868
In 1897, “Filipinas” was
changed to
“Islas Filipinas”
can come from households, individuals, companies,
government agencies or any other entity whose cash
inflows are greater than their cash outflows
Savings
provide mechanism where savers can put their
excess funds through deposits.
Banks
provide mechanism where savers can put their
excess funds through deposits.
Banks
links the savers and the users of funds
Financial System
Insurance
products can be broadly categorized into
Life Insurance and Non- life Insurance
can be broadly categorized into life insurance
products and non-life insurance products.
Insurance products
products protect the insured from the loss
of life
Life Insurance
insurance products protect the
insured from the loss of or damage to properties.
Non-life Insurance
system for the trading of equity securities of publicly listed
companies.
Philippine Stock Exchange (PSE)
Investing in the stock market must be coursed through
Stock Brokerage Firms
one can trade in the stock market
through the Internet
Online Broker
two of the online brokers in the Philippines
COL Financial and BPI Trade
one must have an account and deposit with an online
broker
trade online
one needs a telephone to call brokers and place orders
Live brokers
are forms of evidence regarding the executed buy or sell transaction
that a client paced with his broke
Confirmation receipts
provide opportunities for big and small
investors to invest in financial instruments which they
would not have considered on their own, or they may have
considered but do not have the time and expertise to do it
Mutual Funds
Financial Instruments are generally classified into two
major categories
: Equity securities and debt securities.
include common stocks and preferred
stocks.
Equity securities
have both common stock and preferred stock in their
stockholder’s equity.
PLDT and GLOBE
has a priority over a common stock in
terms of claims over the assets of a company
Preferred stock
also have priority over common
stockholders in cash dividend declaration.
Preferred stockholders
is a share in a corporation traded on a stock exchange and owned by the
public.
Common Stock
This means that if a company is to be liquidated and its assets must be distributed, no asset will be distributed to common
stockholders unless all the claims of the preferred
stockholders have been given.
Preferred stock
s have voting rights, a privilege generally not
available to preferred stockholders
Common stockholders
This means that if one has
enough common shares in a company, he can nominate a director
in the board of directors.
Common stockholders
require the borrower
to repay the principal borrowed.
debt securities
financial assets that entitle their owners to
a stream of interest payments.
debt securities
issued by the National
Treasury are forms of indebtedness of the National
Government.
Treasury bonds and Treasury bills
which are in tenors of 91 days,
182 days, and 360 days are auctioned at the National Treasury
every Monday to accredited dealers.
The Treasury Bills
a type of financial asset that is created when
one party lends money to another.
debt security
Investors lend money to the government in return for interest payments
coupon payments
also known as fixed-income securities
because they generate a fixed stream of income from their
interest payments.
Debt securities
Serve as a financial advisor to the CEO and
executive team for strategic planning purposes
role of a VP of finance
Be responsible for gathering financial data for
analysis and forecasting with respect to profits,
trends, costs, and compliance.
role of a VP of finance
Lead and manage the budgeting process.
role of a VP of finance
Oversee all sides of accounting operations,
including payables, receivables, payroll, and tax
preparation.role of a VP of finance
role of a VP of finance
is an upper-level executive who
oversees all financial matters for an organization, from making
sure payroll is finished on time to analyzing market trends.
vice president of finance
may include supervising a finance or accounting department
VP finance job description
the required skills for VP of Finance
Analytical Skills
* Detail-oriented (being organized is essential)
* Computation skills
* Leadership Abilities
* Written and Oral Communication Skills
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about setting the goals of an
organization and identifying ways to achieve them.
Manage planning
the goals of a company can be
divided into
short-term, medium term, and long-term
goals
can be for a year;
short term
can be between one to three years;
medium term
goals
can be five or 10 years or even longer.
Long term goals
are generally established during
strategic planning where the vision and mission of a
company are formulated or revisited
Long-term
and medium-term plans
describes what top managers want their company
to become
vision
how the company
will achieve its vision and makes the purpose and
objectives of the company clear
Mission
The most important financial statement account in
forecasting
Sales
The following external factors should be investigated
in setting sales forecast assumptions:
Gross domestic product
(GDP) growth rate, interest rate, foreign exchange rate, income
tax rates, inflation, competition, economic crisis, regulatory
environment, and political crisis.
Required production in units =
Expected Sales + Target Ending Inventories – Beginning Inventories
For internal factors, the following factors are considered:
pricing, promotion activities, distribution, area/outlet coverage,
production capacity, human resources, management style of
managers, reputation, and network of the controlling
stockholders, and financial resources of the company.
There are three types of working capital financing policies
management can choose from
- Maturity-matching working capital financing policy
- Aggressive working capital financing policy
- Conservative working capital financing polic
The word “Philippines” derives
from the name of
King Felipe II of Spain (deformation of “Felipinas”)
should be financed by
long term sources
permanent working capital requirements
should be financed by short-term sources of financing
temporary working capital requirements
long-term debt and equity such as
common stocks and preferred stocks.
Long-term sources of financing
include short-term loans from a bank.
Short- term sources of financing
which perfectly describe the
reasons why these loans are incurred.
working capital loans
can bring crystal clarity to the concept
Diagram
In the diagram,
we can see three levels
fixed assets, permanent working
capital, and temporary working capital
represents the type of financing.
The red vertical dashed
line
which stretches till permanent working capital is long-term
financing, and a smaller line is the temporary working capitaL
The bigger dashed line
a risk-free strategy of working capital
financing.
Conservative Approach
indicates the
point till which the long-term funds will be utilized.
The dotted lines horizontal line
A basic internal control system should not allow the assignment
of custodial function and recording function to one person unless
you are the owner.
Separating cashiering function from the recording or
accounting function.
It is important to know the collections from business every day as
these collections reflect the health of the company. The daily
collection report is going to be useful for the next control
measure for cash
Issuing official receipts for collections and summarizing collections
in a daily collection report.
A good internal control over cash is by
depositing the collections intact. The daily collection reports are
now compared with deposit slips to find out if all collections are
indeed deposited.
Depositing collections
all collections need to be deposited, then payments must be made through a check voucher system.
Adopting the check voucher system for payments
shows the expected cash
receipts and disbursements for an accounting period. It can be prepared
on a monthly or a quarterly basis for a year.
Cash budget
The cash budget has the following parts
Cash receipts
Cash disbursement
Net cash flow for the period
Target cash balance
Cumulative excess cash or funding requirements
This includes collections from receivables,
proceeds from loans, or issuance of new shares of stocks and
advances from stockholders.
Cash Receipts
This section includes payments to
suppliers and other service providers, payments for loans and
cash dividend
Cash disbursement
This is computed by deducting
cash disbursements from the collections for the period. This
provides information regarding the amount of excess cash or
cash deficit for the period.
Net cash flow for the period
s the amount of cash that
management wants to always maintain given its present level
of operations, stability of cash flows, and the macroeconomic
and political conditions
Target cash balance
This is the
most important part of the cash budget where the possible
funding requirements are shown on a cumulative basis. This
part of the cash budget is very important in planning because
if the management can estimate the amount of cash they will
need in the future and when it will possibly arise, this early,
management can identify the possible sources of cash.
Cumulative excess cash or funding requirements
5 Financial System Components
Financial Institution
Financial Market
Financial Instruments
Financial Services
Currency( Money)
ROLES OF THE VP OF FINANCE
- Serve as the financial advisor to the CEO and executive teams for strategic planning purposes.
- Be responsible for gathering financial data for analysis and forecasting with respect to profits, trends, cost and compliance.
- Be responsible for development, oversight and management of the organization’s investment plan.
- Lead and manage budgeting process.
- Oversee all slides of accounting operation, including payables, receivables, pay roll an tax operations.
