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Business Finance > Lesson 1 > Flashcards

Lesson 1 Flashcards

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1
Q

Stakeholders in a company:

A

Managers
Employees
Suppliers
Customers
Creditors
Regulatory agencies
Community

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2
Q

Factors that can affect stock prices

A

Nature of business
Maturing obligations
Investing decision

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3
Q

Is a shared responsibility of the board of directors and all the top managers in a company including the president and all the vice pres

A

Shareholder’s wealth maximization

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4
Q

Links the savers and the users of funds

A

Financial system

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5
Q

Can come from households, individuals, companies, government agencies, or any other entity whose cash inflows are more significant than their cash outflows.

A

Savings

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6
Q

Ex of financial intermediaries:

A

Banks
Insurance Companies
Stock exchange
Stock brokerage firms
Mutual funds
Other financial institutions

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7
Q

Offers facilities for the trading of shares of publicly listed companies

A

The Philippines Stock Exchange (PSE)

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8
Q

Corporate bonds and government debt securities can be traded through the “ “

A

Philippine dealing and exchange corp (PDEx)

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9
Q

The original issuance of a financial instrument, equity or debt security, is called a “ “

A

Primary issue

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10
Q

A financial market that deals with shirt term borrowing

A

Money market

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11
Q

Deals with long term sources of financing

A

Capital market

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12
Q

Investing in the stock market has to be coursed through “ “

A

Stock brokerage firms

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13
Q

Types of brokers:

A

Online brokers
Live brokers

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14
Q

With “ “, one can trade in stock market through the internet

A

Online broker

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15
Q

With “ “, one needs a telephone to call brokers and place orders

A

Live brokers

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16
Q

Provides 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 or expertise to do it

A

Mutual funds

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17
Q

Funds are invested by professional managers for a fee

A

Mutual funds

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18
Q

There are mutual funds that are limited only to stocks

A

Equity funds

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19
Q

Restricted to fixed income instruments like bonds and treasury notes

A

Bonds funds

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20
Q

Provide a combination of both stocks and fixed income instruments

A

Balance funds

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21
Q

To invest in a mutual fund, he/she has to buy shares of a mutual fund, and the buying prices depends on what?

A

Net asset value (NAV)

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22
Q

Note that the net asset value (NAV) of a mutual fund changes “ “ as the value of the financial instruments where the fund is invested also changes

A

Every day

23
Q

Other financial institutions includes:

A

Government Service Insurance System (GSIS)

Social Security System (SSS)

Unit Investment Trust Fund (UITF)

24
Q

Financial instruments are generally classified into two major categories:

A

Equity securities and debt securities

25
Q

Include ordinary shares or common stocks and preference shares or preferred stocks

A

Equity securities

26
Q

Include treasury bills, treasury notes, retail treasury bonds, and corporate bonds

A

Debt securities

27
Q

Ordinary shares
Preference shares

A

Equity securities

28
Q

Treasury bills
Treasury notes
Retail treasury bonds
Corporate bonds

A

Debt securities

29
Q

Has priority over an ordinary share in terms pf claims over a company’s assets

A

Preference shares

30
Q

Are the real owners of the company

A

Common shareholder

31
Q

What is PSEi

A

The Philippine Stock Exchange Index

32
Q

It must be noted that investment in “ “ is riskier because returns are not guaranteed

A

Equity securities

33
Q

The dividend per share of “ “ is not fixed

A

Ordinary share

34
Q

A company is not obligated to pay dividends if it is not in a position to do it. Korique or nah?

A

Korique

35
Q

For cumulative preferred shareholders, unpaid dividends cannot accumulate. T or F?

A

False.

For cumulative preferred shareholders, unpaid dividends CAN accumulate

36
Q

No cash dividends will be paid to common shareholders unless all the dividends in arrears due to preferred shareholders are paid first. T or F?

A

True

37
Q

Being the residual owner of a company, prefferes shareholders have voting rights, a privilege that is generally not available to common shareholders. T or F?

A

False

Being the residual owner of a company, COMMON shareholders have voting rights, a privilege that is generally not available to PREFFERED shareholders

38
Q

COMMON shareholders=?

A

Real owners of the company/residual owner

39
Q

Growth potential of their investment is unlimited=?

A

Common shareholders

40
Q

Have priority over ordinary shareholders in cash dividend declaration

A

Preferred shareholders

41
Q

Are debt financial instruments that are traded in the secondary markers through PDEx

A

Debt securities

42
Q

Debt securities issued by the government

A

Treasury bonds

43
Q

For treasury bonds, coupon interest is paid “ “

A

Semi anually

44
Q

It offers slightly higher interest rates than government securities

A

Corporate bonds

45
Q

In terms of claims over a company’s assets, “ “ have priority over preference and common shares

A

Bond holders

46
Q

Explain why the same company came be a saver and a user of funds

A

Ex.
A company has to open a bank account, especially a current account or a checking account, to start a business. In doing business, a company has to deposit cash to a bank, which is financial intermediary. When the business has grown, this company may need to borrow funds to support an increasing volume. When a company borrows, it becomes a user of funds. In this case, this company is both a depositor and a borrower

47
Q

What is the roles of financial intermediaries in the financial system?

A

Financial intermediaries serve as middlemen for transactions, generally between banks or funds. These intermediaries help create efficient markets and lower the cost of doing business.

It creates a market for saving and lending by indirectly matching savers and borrowers

48
Q

What is the role or function of yhe PSE

A

Provide and ensures a fair, efficient, transparent and orderly market for the buying and selling securities

49
Q

What is debt securities

A

Financial assets that define the terms of a loan between an issuer (the borrower) and an investor (the lender)

50
Q

The highest policy making body in a corporation

A

Board of directors

51
Q

Who elected the directors?

A

Shareholder

52
Q

Who helps the board of directors and the top management set policies regarding a company’s capital structure?

A

VP for finance

53
Q

What are the two conditions before a company can declare cash dividends?

A

Must have retained earnings to support cash declaration

Must have cash

54
Q

Factors considered in declaring cash dividends:

A

Availability of investment opportunities

Capital structure

Access to long term sources of funds

Business Finance (2 decks)

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