Midterm Flashcards
Stages of Exchange Development
1st stage - Direct Appropriation stage
2nd stage- Direct/Barter
3rd stage - the use of Commodity as Money
4th stage - credit money
What early man’s need was provided by its natural resources
1st stage - Direct Appropriation stage
Exchange of Goods and services directly exchange for other goods and services
2nd stage- Barter/direct
Some goods, because of its usefulness, beauty, scarcity, and rarity commands a wide acceptance as medium of exchange
3rd stage- the use of commodity as money
Money whose monetary value is more than its material or commodity value
4th stage - credit money
Money comes from what word?
Greek
Greek word of Money
moneta
anything which is used as a medium of exchange and is widely accepted as payment
money
a mandatory law that.make money acveptec as payment
Legal Tender power
it give money its Purchasing Power
Legal Tender Power
Functions of Money
as a medium of exchange
As a standard unit of value
As a standard of deferred payment
As a store of value
money serves as a common medium or tool of exchange
As a medium of exchange
money serves as a mesuring device in which value of goods and services can be expressed
as a standard unit of value
money can be use to pay for debts and obligations
as a standard of deferred payments
Money has the quality to be kept or stored for future use
As a store of value
characteristics of money
general acceptance
Stability
Durability
Portability
Malleability
Divisibility
Uniformity
Homogeneity
Cognizability
Accepted by anyone kn exchange for goods and services
general acceptance
Value must not change every now and then
stability
money is made ligjt, to be easily carried
Portability
Design should not only aesthetically beautiful but also difficult to counterfeit
cognizability
money must withstand longer period of time agains wear and tear
Durability
Divisible into small parts and likewise posaible to recombine these small parts into bigger denominations
Divisibility
money can be melted and beaten inti desired shape to conform to the specification of the government
Malleability
Money must conform to certain standard to avoid confusion (siz, shape, and color)
uniformity
material used must be uniform in composition throughout
homogeneity
Forms of money
Commodity Money
Currency (bills and coins)
Check
money that is made up of precious metal or another value such as non metallic money and metallic money or gold/silver
Commodity money
domestic currency can only be used in its country of origin
currency
generally used in business and persons in conducting business, as well.as personal transaction
Check
relate to decisions concerning stocks and bonds and inclue a number of activities such as security analysis, portfolio theory, market analysis
investments
Is a system that includes the circulation of money, the granting of credit, the making of investments and the provision of banking facilities
Finance
Also called as corporate finance. Focuses on decision relatinh to how much and what types of assets to buu
financial.management
relate to the markets where interest rates, along with stock anr bond prices are determined
capital markets
A business owned by one individual
sole proprietorship
A business owned by two or more.person
partnership
A legal entity created by a stage, separate and distinc from its owner and managers
Corportation
Advantage of sole proprietorship and parnership (familiarized)
Ease of formation
Subject to few regulation
No corporate income taxes
Disadvantage of sole proprietorship and parnership (familiarized)
difficult to raise capital
Unlimited liability
Limited life
Advantage of Corporation (familiarized)
unlimited life
Easy to tranfer ownership
Limited liability
Ease to raise capital
Disadvantage of Corporation (familiarized)
Double taxation
Cost to setup and report filing
Means planning, organizing, directing, and controlling the financial activities
Financial Management
Applying general management principles to financial resources of th enterprise
financial management
It may be defined as the area or function in an organization which is concerned with profitability, etc
Financial management
Generally cincered with short term working capital management
Financial management
objective of Financal management
generally concerned with procurement, allocation, and control of financial resources
function of financal management
estimation of capital requirements
Determination of capital composition
Choice of sources of funds
Investment of funds
Disposal of surplus
Management of cash
Financial control
a finance manager has to make estimation with regards to capital requirements of the company. This will depend upon expected cost and profits
estimation of capital requirements
the capital structure have to be decider. This involves short term and long term dept equilty analysis
Determination of capital composition
a company has manu choices like issue of shares and debentures, loans to be taken from banks and financial institution, public deposits to be drawn like in form of bonds
choice of sources of funds
The finance manager has to decide to allocate funds into profitable ventures
investement of funds
the net profits decision have to be made by financial management
Disposal of surplus
type of disposal that includes indentifying thr rate of dividends and other benefits like bonus
dividend declaration
Tyoe of disposal that the volume has to be decided which will depend upon expansional, innovational, diversification plans of the company
retailed profits
Finance manager has to make decision in regard to cash management
management of cash
It is required for many purposes like payment of waged and salaries, etcs
cash
The finance manager has not only to plan, procure, and utilize the funds but he also has to exercuse control over finance
financial control
Perform data analysis and advise senior managers on profit maximizing ideas
Financial managers
The produce financial reports, direct investments activities and develop strategies and plans
financial manager
task of financial manager
raising funds
Allocation of funds
Profit planning
Understanding capital market
In order to meet the obligation of the business it is important to have enough cash and liquidity.
It is the responsibility of finance manager to decide the ratio between depts and equity
Raising of funds
the funds should allocate in such manner that they are optically use
Allocation of funds
is one of the prime function of any business organization
Profit planning
It is important of survival and sustenance of any organization
profit earning
it arises due tomany factors such as pricing, etc
Profit
It is incurred by the use of fixed factors of production such as land and machinery
fixed cost
It must be calculated in order to replaced those factors of production which us gone thrown wear abd tear
Opportunity cost
A clear understanding of capital market is impirtant function of a financial manager
Understanding capital market
