CHAPTER 1 Flashcards
What is Finance?
Finance is the application of economic principles to decision-making involving the allocation of money under conditions of uncertainty.
Where does the term Finance come from?
Finance comes from a French word meaning settlement of debt.
What is the function of the Financial System?
The financial system facilitates the transfer of funds from entities with excess funds to those in need of funds.
What is a Financial Market?
A financial market is a venue where demanders and suppliers of funds meet.
What are the elements of the Financial System?
The elements of the financial system are:
- Demanders of Funds
- Suppliers of Funds
- Financial Intermediaries
- Regulators
- Financial Instruments.
Who are the Demanders of Funds?
Demanders of funds are individuals or groups in need of additional financing to sustain business operations or livelihood.
Who are the Suppliers of Funds?
Suppliers of funds are entities that have excess funds and are willing to invest them for returns.
What are Financial Intermediaries?
Financial intermediaries are entities that facilitate the transfer of funds between demanders and suppliers, such as financial institutions and financial markets.
What are Financial Institutions?
Financial institutions collect funds from suppliers and extend them to demanders in the form of loans or interest-bearing instruments.
What are the types of Financial Institutions?
Financial institutions can be classified into commercial banks, investment banks, and universal banks.
What are Financial Markets?
Financial markets are platforms that arrange transactions between suppliers and demanders of funds.
What are the classifications of Financial Markets based on Instruments Traded?
Financial markets can be classified into Money Markets (trading short-term financial instruments) and Capital Markets (trading long-term equity or debt instruments).
What are the classifications of Financial Markets based on Market Type?
Financial markets can be Primary Markets (where instruments are originally issued) or Secondary Markets (where instruments are resold).
What are the classifications of Financial Markets based on Origination?
Financial markets can be Domestic Markets (transactions within the same country) or International/Foreign Markets (transactions involving different countries).
What is Private Placement?
Private placement is the issuance of stocks or securities to pre-selected investors instead of the public market.
What is the role of Regulators in the Financial System?
Regulators set the framework and rules to protect the interests of financial system players.
Who is the major financial regulator in the Philippines?
The Bangko Sentral ng Pilipinas (BSP) is the main financial regulator in the Philippines.
What are Financial Instruments?
Financial instruments are documents representing a specified value used in financial transactions.
What are examples of Money Market Instruments?
Examples include Treasury Bills, Commercial Papers, Certificates of Deposits, Repurchase Agreements, and Bankers’ Acceptances.
What are examples of Capital Market Instruments?
Examples include stocks and bonds that mature over a long-term period.
