Fundamental Concepts and Tools of Business Finance Flashcards
May be defined as the study of the acquisition and investment of cash for enhancing value and wealth.
Finance
deals with the revenue and expenditure patterns of the government
Public Finance
deals with the revenue and expenditure patterns of the government, individual and businesses
Private Finance
Is concerned with the fundamentals of managing one’s own personal money affairs.
Personal Finance
Includes private undertakings such as charity, religion, and some private educational institutions.
Finance of non-profit organization
It refers to the provision of money for commercial use.
Business Finance
The Goals of Business Finance
- Maximizing profit
- maximizing profitability
- maximizing profit subject to cash constraint
- maximizing net present worth
- seeking an optimum position along a risk- return frontier.
Concerned with Business Finance
Small Business Finance
Corporation Finance
Multinational Finance
2 type of Finance
Public Finance
Private Finance
Means realizing the highest possible peso or dollar income.
Maximizing Profit
This concept indicates that money increases in value with the passing of time .
Time value of money
Can set a goal of achieving the best possible combination of risk and return.
Firm
Are those that present financial information to various interested parties.
Financial Statement
Is the statement produced periodically , normally at the end of a financial year, showing an organization’s assets, liabilities, and the interest of the owners.
The balance sheet
The assets section of the balance sheet shows everything that the firm owns and which has the monetary value.
Assets
Type of Assets
Current Assets
Trade Investment
Fixed Assets
Intangible Assets
These are composed of cash, bank deposits, and other items readily convertible into cash like accounts receivable, stocks and work-in-process, and marketable securities;
Current Assets
These are composed of investments in subsidiary or associated companies;
Trade Investment
These items show the firms ownership of property like land, buildings, plan and machinery, equipment, vehicles, furniture and fixtures, all valued at cost less depreciation written off;
Fixed Assets
These items present goodwill, patents, copyright which are attributed to the firm.
Intangible Assets
It shows the profile of the debts of the company. They are classified into several items:
Liabilities
These are usually composed of debts payable within a few days, weeks , or months, like those incurred in the purchase of raw materials and stocks.
Account Payable
These are debts evidenced by promissory notes and oftentimes backed up by collateral.
Loans and Notes Payable
Sometimes, customers are required to make down payments before orders are processed.
Advances from Customers
These represent obligations, which have been incurred but not yet paid.
Accrued Expenses
This comprises borrowings and other sources of funds. This item also represents long-term debts and is usually secured by land, buildings , or equipment.
Mortgage Payable
When a large amount of long –term debt is sought by the firm from a large number of creditors, bonds are usually issued.
Bonds Payable
Awareness of the environment where the business operates provides a better perspective to the one making decisions relating to the finance function.
Financial Markets
It refers to lending by ultimate borrowers with no intermediary.
Direct Finance
refers to the selling of securities by private negotiation directly to insurance companies, commercial banks, pension funds, large –scale corporate investors, and wealthy individual investors.
Private Placement
is one who acts an intermediary between buyers and sellers but does not take tile to the securities traded.
Broker
is one who is in the security business acting as a principal rather than an agent. The dealer buys for his account a
Dealer
refers to lending by an ultimate lender to a financial intermediary that then relends to ultimate borrowers.
Indirect Finance
Classification of Financial Markets
- Primary market
- secondary market
- money market
- capital market
- bond market
- stock market
Four P’s
Product
Price
Promotion
Place
Four C’s
Customer Solution
Consumer Cost
Communication
Convenience
The Celling Concept
FACTORY - EXISTING PRODUCTS - SELLING AND PROMOTION - PROFITS THROUGH SALES VOLUME
The Marketing Concept
MARKET - CUSTOMER NEEDS - INTEGRATED MARKETING - PROFITS THROUGH CUSTOMER SATISFACTION
The analysis, planning, implementation, and control of programs designed to create, build, and maintain beneficial exchanges with target buyers for the purpose of achieving organization objectives.
Marketing Management
describe basic human requirements.
Needs
are shaped by one’s society.
Wants
are wants for specific products backed by ability to pay.
examples
Demands
is a trade between two parties that involves at least two things of value, agreed-upon conditions a time of agreement, and a place of agreement.
Transaction
is the act of obtaining a desired object from someone by offering something in return.
Exchange
The process of creating, maintaining, and enhancing strong, value-laden relationships with customers and other stakeholders.
Relationship Marketing
Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfying a want or need. It includes physical objectives, services, persons, places, organizations and ideas.
Product
any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything.
Service
Marketing Philosophies
The production concept
The product concept
The selling concept
The marketing concept
The societal marketing concept
Consumers prefer products that are
widely available and inexpensive
Production Concept
Consumers favor products that
offer the most quality, performance,
or innovative features
Product Concept
Consumers will buy products only if
the company aggressively
promotes/sells these products
Selling Concept
Focuses on needs/ wants of target
markets & delivering value better than competitors
Marketing Concept
