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FUNDAMENTALS OF BUSINESS MANAGEMENT 2 > LESSON 1 > Flashcards

LESSON 1 Flashcards

1
Q
A
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2
Q

What is finance?

A

It refers to the process of attracting money and the management of these funds.

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3
Q

What does finance encompass?

A

It is a body of facts, principles, and theories relating to raising and using money by individuals, businesses, and governments.

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4
Q

What are the two main activities related to finance?

A
  1. The actual process of attracting money
  2. The management of these funds
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5
Q

What are the three interrelated areas of finance?

A
  1. Money and Capital Markets
  2. Investments
  3. Financial Management
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6
Q

What does Money and Capital Markets deal with?

A

It deals with securities market and financial institutions.

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7
Q

What is the focus of investments?

A

It focuses on decisions made by individual and institutional investors as they choose securities for their investment portfolios.

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8
Q

What does financial management involve?

A

It involves decisions within firms.

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9
Q

What are the functions of finance?

A

Analysis and decision making.

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10
Q

What is money?

A

It is any medium that can be used for the exchange of goods and services.

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11
Q

What is the system of money in an economy?

A

A system of value of exchange of goods in an economy.

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12
Q

What are the functions of money?

A
  1. Medium of exchange
  2. Standard of deferred payment
  3. Store of wealth
  4. Measure of value
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13
Q

What is M1 in the traditional measures of the money supply (United States)?

A

It consists of currency in circulation, travelers’ checks of nonbank issuers, demand deposits, and other checkable deposits.

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14
Q

What is M2 in the traditional measures of the money supply (United States)?

A

It includes all the items in M1, plus savings deposits and money market deposit accounts, time deposit accounts below $100,000, and balances in retail money market mutual funds.

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15
Q

What is M1 in the traditional measures of the money supply (Europe)?

A

It consists of currency in circulation plus all overnight deposits.

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16
Q

What is M2 in the traditional measures of the money supply (Europe)?

A

It includes all the items in M1, plus deposits redeemable at notice of up to three months and deposits with an agreed maturity of up to two years.

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17
Q

What is M3 in the traditional measures of the money supply (Europe)?

A

It includes all the items in M2, plus repurchase agreements, money market fund shares, money market paper, and debt securities issued with a maturity of fewer than two years.

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18
Q

What is the money supply?

A

It is the sum total of all of the currency and other liquid assets in a country’s economy on the date measured.

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19
Q

What does the money supply include?

A

It includes all cash in circulation and all bank deposits that the account holder can easily convert to cash.

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20
Q

What is financial accounting?

A

It concentrates on record keeping and submitting of financial statements.

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21
Q

What is a characteristic of financial accounting?

A

It tends to be more concerned with the past.

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22
Q

What is another characteristic of financial accounting?

A

It tends to have an income focus.

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23
Q

What does finance focus on?

A

It focuses on making decisions and carrying out analysis based on information presented by accounting.

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24
Q

What is a characteristic of finance?

A

It tends to be more interested in present and the future.

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25
What is another characteristic of finance?
It tends to have a cash flow focus.
26
What are the types of business decisions?
1. Investment decisions 2. Financing decisions 3. Asset management decisions
27
What is the goal of the business?
The target of business is to maximize shareholder's wealth.
28
How is shareholder's wealth measured?
It is measured as the price of stocks.
29
What does the wealth minimization concept adjust for?
It adjusts for deficiencies or previous concept.
30
What is an interest rate?
It is a value that helps in calculating the value of money over time.
31
What is the term structure of interest rate?
It is the relationship between yields and the time to maturity for debt with a given level of risks.
32
What is a yield curve?
It is a graph relating interest rates and the term to maturity.
33
What does the yield curve plot?
A line that plots yields (interest rates) of bonds having equal credit quality but having differing maturity dates.
34
What is facilitating savings?
Financial markets provide a means for people to transfer their money power from the present to the future.
35
What are the basic methods for transferring funds from savers to users?
1. Direct investment 2. Creation of market in the existing securities.
36
What is direct investment?
It occurs when the owners start the business and invest the saving in the operation.
37
What is the creation of market in existing securities?
Secondary market does not transfer funds to the user of funds. They transfer ownership for cash.
38
What do primary markets facilitate?
They facilitate the issuance of new securities.
39
What do secondary markets facilitate?
They facilitate the trading of existing securities, allowing for a change in the ownership of the securities.
40
What is liquidity?
The degree to which securities can easily be liquidated (sold) without a loss of value.
41
What is a commercial bank?
A financial institution that provides services like loans, certificates of deposits, savings bank accounts, and bank overdrafts.
42
How do commercial banks make money?
By lending loans to individuals and earning interest on loans.
43
What is the role of commercial banks?
They are the most important depository institution.
44
What is the primary source of funds for consumers?
Commercial banks.
45
What are primary liabilities of commercial banks?
Deposits checking account (demand deposits) and various types of savings and time deposits.
46
What is a certificate of deposit (CD)?
A time deposit issued by a bank with a specified interest rate and maturity.
47
What is a negotiable certificate of deposit?
It is a money-market instrument that evidences a large-denomination interest-paying bank deposit that is negotiable.
48
What is a thrift bank?
A type of financial institution that specializes in offering savings accounts and originating home mortgages for consumers.
49
What are thrift banks also referred to as?
Savings and Loan Associations (S&Ls).
50
What is the purpose of thrift banks?
They are places for savers, especially individuals with modest savings to deposit funds.
51
What do thrift banks aim to promote?
A culture of savings and homeownership among Filipinos.
52
What are the types of thrift banks?
1. Savings and Loans Associations 2. Mutual Savings Bank
53
What are savings and loans associations?
They are owned and operated by their customers or shareholders.
54
What is a characteristic of savings and loans associations?
They are not required to insure their deposits with the state or the FDIC.
55
What is a mutual savings bank?
It is owned by its depositors, but the bank itself is managed by a board of trustees.
56
What is a characteristic of mutual savings banks?
They provide reliable, low-risk services to people with lower incomes.
57
What is the FDIC?
Federal Deposit Insurance Corporation, which insures deposits.
58
What are examples of thrift banks in the Philippines?
1. AII Bank Inc 2. BPI Direct Banko 3. Philippine Savings Bank (PSBank) 4. Robinsons Bank 5. EastWest Bank 6. Philippine Business Bank (PBB)
59
What is AII Bank Inc. known for?
Providing specialized financing products and services to working-class Filipinos and business owners.
60
What does BPI Direct Banko focus on?
Providing microfinance services, savings accounts, and loans for MSMEs.
61
What services does Philippine Savings Bank (PSBank) offer?
Savings accounts, time deposits, loans, and remittances.
62
What is Robinsons Bank known for?
Focusing on consumer banking with various savings accounts and loans.
63
What does EastWest Bank offer?
A range of banking services including savings accounts, loans, and investment products.
64
What is Philippine Business Bank (PBB) specialized in?
Providing banking services to small and medium-sized enterprises (SMEs).
65
What is Bangko Sentral ng Pilipinas?
The central bank of the Philippines.
66
What is the responsibility of Bangko Sentral ng Pilipinas?
Ensuring the stability, soundness, and integrity of the banking system.
67
What does Bangko Sentral ng Pilipinas help maintain?
The stability of thrift banks and ensures they operate within the framework of laws and regulations.
68
What is the Philippine Deposit Insurance Corporation (PDIC)?
It provides deposit insurance coverage to eligible thrift bank depositors.
69
What is the coverage provided by PDIC?
Deposit insurance coverage of up to 500,000 Philippine pesos per depositor per bank.
70
What does PDIC protect depositors from?
In the event of bank closure, insolvency, or liquidation.
71
What role do thrift banks play in the Philippines?
They serve as catalysts for financial empowerment, fostering economic growth, supporting small businesses, and encouraging savings and homeownership.

FUNDAMENTALS OF BUSINESS MANAGEMENT 2 (1 decks)

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