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Mathematics in Business Finance > FINALS FLASHCARDS > Flashcards

FINALS FLASHCARDS

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1
Q

A financial entity that is authorized to
accept deposits and give credit.

A

Bank

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2
Q

It refers to a network of institutions
that provide financial services to
customers.

A

Banking system

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3
Q

The banking system’s goal

A

to give economic security and confidence.

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4
Q

Earliest banking systems

A
  • Grain, food, and livestock
  • Banking was done before there were coins
    by exchanging grain and other commodities.
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5
Q

Banking in the Roman Empire

A

Rome’s first banks were established in the
temples dedicated to the old Gods.

In ancient Rome, banking played a
significant role in the growth of trade and
commerce and the emergence of wealth.

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6
Q

European Monarchs Discover Easy
Money

A

Due to multiple pointless wars, Philip II of
Spain managed to drown his kingdom in
debt in 1557, leading to the first national
bankruptcy and the second, third, and fourth.

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7
Q

Big ___________ _______ gained significant
economic and political power, taking over
most national banking responsibilities and
providing loans and corporate finance. (Evolution of Banking System)

A

merchant banks

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8
Q

In ______, the Bank Panic occurred due to the collapse of a copper trust, leading to a run on banks and stock sell-offs. (Evolution of Banking System)

A

1907

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9
Q

The formation of the __________ ___________ ______ in 1913 marked the end of private bankers.

A

Federal Reserve Bank

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10
Q

These were created in the 1960s to enable depositors to access their money after business hours.

A

Automated Teller Machine (ATM)

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11
Q

It was a charitable foundation by laymen for charity works and religious activities. It was a banking institution run by the friars.

A

Obras Pias

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12
Q

During the _______________ Spanish colonial era, the first organized credit institutions known as “Obra Pias” were established in the Philippines.

A

16th-century

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13
Q

In ________, the opening of the Suez Canal facilitated trade between the Philippines and Europe.

A

1869

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14
Q

1900 - ___________ was passed by the First Philippine Commission placing all banks under the Bureau of Treasury.

A

Act No. 52

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15
Q

Banking History in the Philippines: February 1929

A

The Bureau of Banking under the Department of Finance took over the task of banking supervision.

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16
Q

Banking History in the Philippines: 1933

A

A particular group of Filipinos were trying to conceptualize a central bank for the Philippines.

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17
Q

The first US law passed setting a process and a date for the Philippines to gain independence from the United States.

A

Hare–Hawes Cutting Act

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18
Q

Banking History in the Philippines: 1939

A

A bill establishing a central bank was drafted by Secretary of Finance Manuel Roxas and approved by the Philippine Legislature.

However, the bill was returned by the US government, without action, to the Commonwealth Government.

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19
Q

Banking History in the Philippines: February 1948

A

President Manuel Roxas submitted to Congress a bill “Establishing the Central Bank of the Philippines, defining its powers in the administration of the monetary and banking system, amending pertinent provisions of the Administrative Code concerning the currency and the Bureau of Banking, and for other purposes.

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20
Q

Banking History in the Philippines: 15 June 1948

A

The bill was signed into law as Republic Act No. 265 (The Central Bank Act) by President Elpidio Quirino.

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21
Q

Banking History in the Philippines: 3 January 1949

A

The Central Bank of the Philippines (CBP) was inaugurated and formally opened with Hon. Miguel Cuaderno, Sr. as the first governor.

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22
Q

Banking History in the Philippines: 3 July 1993

A

The Bangko Sentral ng Pilipinas (BSP) was established to replace the CBP as the country’s central monetary authority.

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23
Q

It is the central bank of the Philippines, oversees the entire banking sector.

A

Bangko Sentral ng Pilipinas (BSP)

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24
Q

The BSP was created by the Republic Act No. 7653, otherwise known as the ______ ___________ _______ _____ ___ ______.

A

New Central Bank Act of 1993

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25
Q

These banks continue to account for the bulk of the total resources of the banking industry.

A

Commercial Banking

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26
Q

Primarily engaged in mobilizing the small savings of the people. They provide funds for agriculture and industry at reasonable interest rates.

A

Thrift Banks

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27
Q

To receive time deposits of different types and to invest its funds in long-term investment.

A

The Savings and Mortgages Banks

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28
Q

It may either be a stock or non-stock
corporation.

A

The Savings and Loan Association

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29
Q

It is a government entity, formerly the Rehabilitation Finance Corporation.

A

The Private Development Banks

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30
Q

It allows small farmers to finance their needs through the granting of loans for capital or other uses.

A

The Rural Banks

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31
Q

Its principal commercial banking activities include deposit-taking, lending, bill discounting, trade finance, foreign exchange.

A

The Philippine National Bank

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32
Q

The Philippine National Bank operates under the provision of

A

Executive Order No. 80

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33
Q

Its primary objective is to provide banking services to cater to the medium and long-term needs of agricultural and industrial enterprises with an emphasis on small and medium-scale industries

A

The Development Bank of the Philippines

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34
Q

The Development Bank of the Philippines’ first mission

A

to coordinate and manage trust funds

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35
Q

The Agrarian Reforms Code created the
________ _______ ____ ____ ___________ to finance the acquisition and distribution of agricultural estates for the division and reselling of these small landholders.

A

Land Bank of the Philippines (LBP)

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36
Q

It was created under Republic Act No. 6848 to promote and accelerate the socio-economic growth of Mindanao.

A

The Al-Amanah Islamic Investment Bank of the Philippines

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37
Q

They provide services related to claims, financial information, and advice, manage portfolios of financial assets.

A

Non-Bank Financial Institution

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38
Q

The term “___________ ________” is defined
to mean “any enterprise” which engages
in the underwriting of securities of other
corporations.

A

investment house

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39
Q

It is the act or process of guaranteeing the distribution and sale of securities of any kind issued by another corporation.

A

Underwriting

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40
Q

These are written evidence of ownership & interest.

A

Securities

41
Q

Under the provision of the Revised
Securities Act, no broker, dealer, or salesman must engage in business in the Philippines as such broker, dealer, or salesman or sell any securities, including securities exempted under the said law.

A

Securities Brokers/dealers

42
Q

A type of savings institution that receives savings from members and lends funds to them.

A

Building and Loan Associations

43
Q

It also has for its purpose the inculcation of the habit of thrift, frugality, and the idea of helping one another

A

Credit Unions

44
Q

They contribute to the country’s socio-economic development as well as to the insured.

A

Private insurance companies

45
Q

Primary Functions of Banks

A
  • Accepting Deposits (saving and
    recurring deposits…)
  • Granting Advances (loans…)
46
Q

Secondary Functions of Banks

A
  • Agency Functions (transfer of funds,
    collection of cheques)
  • Utility Functions (drafts, project reports)
47
Q

Classification of Banks based on Ownership: Public Sector Banks

A

Governments use public funds as leverage to produce credit, which benefits the public in many ways (infrastructure development, small company loans, etc.) Ex: Landbank

48
Q

Classification of Banks based on Ownership: Private Sector Banks

A

A financial institution that is owned and operated by private individuals or companies, as opposed to the government; Ex: Security Bank

49
Q

Classification of Banks based on Ownership: Foreign Bank

A

Financial institutions that serve customers outside of their own country; Ex: Citibank

50
Q

It is also known as Single-Office Banks; they are small, independent financial institutions that operate a single-branch

A

Unit Banks (Ex: Cantilan Bank)

51
Q

it refers to a system in which a bank provides banking services through a wide network of branch offices

A

Branch Banks (Ex: BPI)

52
Q

A form of bank governance in which individuals or an entity takes control of, at least, three banks that are independently chartered.

A

Chain Banks (Ex: Union Bank)

53
Q

A third-party financial organization
serves as a bridge between local and
foreign institutions.

A

Correspondent Banks

54
Q

Classification of Banks based on Function: Commercial Banks

A

They contribute to the maintenance of economic stability and economic progress (ex. BPI)

55
Q

Classification of Banks based on Function: Industrial Banks

A

Specialized financial institutions that are primarily focused on providing financial services to industrial companies.

56
Q

A system that includes individuals and institutions, instruments, and procedures.

A

Financial Markets

57
Q

The primary role of financial markets

A

to facilitate markets in the flow from individual governments that need funds over their incomes.

58
Q

The sum of all cash inflows/outflows from and into different financial assets.

A

Flow of Funds

59
Q

Three financial phases

A
  • Young adults borrow
  • Older working adults save
  • Retired adults use saving
60
Q

________ transfer of the money to saver or borrower, __________ transfer through investment banking house, and financial intermediates

A

Direct ; Indirect

61
Q

It assists both people and businesses in raising capital through underwriting. Act as intermediaries between security issuers and investors and help new firms go public.

A

Investment banking house

62
Q

An entity that facilitates a financial transaction between 2 parties.

A

Financial intermediaries

63
Q

Market Efficiency: Economic Efficiency

A

Funds are allocated to their optimal use at the lowest costs.

64
Q

Market Efficiency: Informal Efficiency

A

Investment prices are adjusted quickly to reflect current information.

65
Q

Market Efficiency: Weak-form

A

All information contained in past price movements is reflected in current market prices.

66
Q

Market Efficiency: Semi-strong-form

A

Current prices all publicly available information.

67
Q

Market Efficiency: Strong-form

A

Current prices reflect all pertinent information, both public and private.

68
Q

Money versus capital markets

A

a) Money market- used for short-term lending assets held 1 year or less.
b) Capital- Long-term securities have a direct/indirect impact on the capital.

69
Q

Debt versus equity markets

A

a) Debt market- Market where debt instruments were traded.
b) Equity market- Market from trading equity instruments.

70
Q

Primary versus secondary markets

A

a) Primary- Where securities are created.
b) Secondary- Where to those securities traded by investors.

71
Q

Financial markets for derivatives, financial instruments like futures contracts or options, are derived from other forms of assets. (Example: Currency future)

A

Derivatives markets

72
Q

It is a place where shares of publicly listed companies are traded.

A

Stock Market

73
Q

A decentralized market in which market participants trade stocks, commodities, currencies, or other instruments directly between two parties and without a central exchange or broker.

A

Over-the-counter Market

74
Q

It is often called the debt market, fixed income market, or credit market—is the collective name given to all trades and issues of debt securities.

A

Bond Market

75
Q

It refers to trading in very short-term debt investments.

A

Money Market

76
Q

A type of financial contract whose value is dependent on an underlying asset, group of assets, or benchmark

A

Derivative Market

77
Q

It allows participants, such as banks and individuals, to buy, sell, or exchange currencies for both hedging and speculative purposes. It is the largest financial market in the world.

A

Forex Market

78
Q

It is a marketplace for buying, selling, and trading raw materials or primary products.

A

Commodities Market

79
Q

It is a digital or virtual currency secured by cryptography, which makes it nearly impossible to counterfeit or double-spend.

A

Cryptocurrency Market

80
Q

Functions of the Markets: Puts savings into more productive use

A

Financial markets like banks open it up to individuals and companies that need a home loan, student loan, or business loan.

81
Q

Functions of the Markets: Determines the price of securities

A

Investors aim to make profits from their securities. However, unlike goods and services whose price is determined by the law of supply and demand, prices – of securities are determined by financial markets.

82
Q

Functions of the Markets: Makes financial assets liquid

A

Buyers and sellers can decide to trade their securities anytime. They can use financial markets to sell their securities or make investments as they desire.

83
Q

Functions of the Markets: Lowers the cost of transactions

A

In financial markets, various types of information regarding securities can be acquired without the need to spend.

84
Q

3 GENERAL STOCK MARKET ACTIVITIES

A
  • The secondary market - trading in the outstanding, previously issued share of established, publicly owned companies
  • The primary market - additional shares sold by established, publicly owned companies
  • IPO market - new public offerings by privately held firms
85
Q

This is the regulation of national securities
exchanges exchange. They have the power to prohibit manipulation of securities’ prices and control over stock trades by corporate insiders.

A

Securities and Exchange Commission (SEC)

86
Q

Special segment of Banking operation that helps individuals/ organizations raise capital + provides financial consultancy services to them.

A

Investment Banking

87
Q
  • Helps corporations design securities
    attractive to investors
  • Buys these securities from the
    corporation
  • Resells the securities to investors
A

Investment Banker

88
Q

A syndicate of investment firms formed to spread the risk associated with the purchase and distribution of a new issuance of securities.

A

Underwriting Syndicate

89
Q

The member of an underwriting syndicate who manages the distribution and sale of a new security offering.

A

Lead or Managing Underwriter

90
Q

A network of brokerage firms formed to distribute a new issuance of securities.

A

Selling Group

91
Q

Shelf Registrations on SEC

A
  • Securities registered with the SEC for sale at a later date
  • Held “on the shelf” until the sale
92
Q

Maintenance of the Secondary Market

A
  • When a company is going public for the first time, the investment banker is obligated to maintain a market for the shares after the issue has been completed.
  • The lead underwriter agrees to “make a
    market” in the stock and keep it reasonably liquid.
93
Q

THE ROLE OF FINANCIAL INTERMEDIARIES

A
  1. Facilitate the transfer of funds from
    those who have funds (savers) to those
    who need funds (borrowers).
  2. Manufacturing a variety of financial
    products that take the form of either
    loans or savings instruments.
94
Q

The probability of an asset declining in value which then results in unanticipated fluctuations in interest rates.

Occurs when interest rates affect the values of bonds and stocks in the market.

A

INTEREST RATE RISK

95
Q

Risk that a financial institution will be unable to reinvest at a rate that corresponds to the current rate of return.

A

REINVESTMENT RISK

96
Q

Refers to the potential loss due to exchange rate fluctuations wherein the rate of a certain currency is not in line with the favor of the financial institution.

A

FOREIGN EXCHANGE RISK

97
Q

It is associated with any investment decision. It is brought about by the price volatility which often arises due to fluctuations that commonly affect the financial instruments.

A

MARKET RISK/ PRICE RISK

98
Q

The probability of loss due to the borrower’s failure to pay its loan or debt.

A

CREDIT RISK

99
Q

This risk talks about the possibility of a firm not meeting its obligation or running out of cash to pay bills and keep the firm operating.

A

LIQUIDITY RISK

Mathematics in Business Finance (1 decks)

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