Chapter 1 Flashcards
Define finance.
It is the science and art of managing money.
Define finance in a personal context.
It is the individual’s decision on how to spend, save and invest their earnings and savings.
Define finance in a business context.
A firm’s decision on how to make good financing and investment decisions to earn a profit and make dividend decisions.
What is Managerial Finance and give an example.
It involves all the decisions within the firm. An example would be the management of funds from the firm’s perspective.
What is Managerial finance also called?
Corporate Finance.
What is investment finance and give an example.
It is investors’ concern to maximize return on investment and minimize risks.
List the types of companies that can be registered under the New Companies Act 71, 2008 in SA.
Private company (Pty) Ltd
Public company (Ltd)
State-owned company (SOC)
External company
Personal Liability Company (Inc)
Non-profit company (NPC)
Why is the Close Corporation not part of the list?
CC’s existing as of 1 April 2011 may continue to exist but no further CC’s can be formed as of 1 April 2011.
What is the marginal cost-benefit analysis?
It is an economic principle that financial decisions should be made only when added benefits exceed added costs.
List the differences between finance and accounting.
Accountants use the accrual method in accounting while in finance, they focus on cash flows.
Decision-making. Accountants pay attention to the collection and presentation of financial data while financial managers make decisions based on the returns and risks.
What is corporate governance?
The rules, processes and laws in which companies operate, control and regulate.
