Part 1: Business Finance

Financial Manager

- he is in charge of the overall finance functions of a business. He develops strategies and plans to achieve the financial goals of the organization.

Controller

- he is the one responsible for managing the accounting staff that provides managerial accounting information used for internal decision making, financial accounting information for external reporting purposes, and tax accounting information to meet tax filing requirements. The controller is usually the head accountant of the company.

Financial Manager

- the one in charge of all the organization's finance and accounting functions and typically reports to the chief executive officer.

Wealth

- the true value or net worth of business

money market

2 Classification of Financial Market where debt securities with an original maturity of one year or less are traded as well as long-term securities having at least six months left to maturity

capital market

2 Classification of Financial Market where securities with maturity of more than one year are traded. The capital market is subdivided into bond market,stock market and mortgage market

Philippine Accounting Standards 32

According to the ______________, a financial instrument is any contract that gives rise to both a financial asset of one entity and a financial liability or equity instrument of another entity.

Bonds Receivable

Bonds that are a financial asset of the investor - reflected as _______

Bonds Payable

Bonds that are a financial liability of the issuing company reflected as ____________

Indirect Finance

Flow of Funds: In this, a financial institution stands between lender and borrower. For example, a bank receives money from its savers or depositors. The bank has now the money on hand. Then, a spender decides to borrow funds from the bank to buy a car. The bank lends out the money of the saver to a borrower.

Direct Finance

Flow of Funds: In this, the borrowers sell securities directly to lenders in the financial markets. There are no intermediaries involved. For example a corporation offers its stocks to the stock exchange and the investor acquires it by paying the required amount. In exchange of the corporation issues a stock certificate to the investor which is now considered as the stockholder.

Stocks

Generally, this can be classified as common and preferred.

Financial Manager

In large companies, this position is usually termed as Chief Financial Officer. The financial manager is to whom the controller and the treasurer reports.

Wealth Maximization

It is widely accepted as the ultimate goal of a business.

Notes Payable

Notes A note is the financial liability of the debtor - reflected as ___________

Notes Receivable

Notes and a financial asset of the creditor - reflected as ________

BSP

The _______ maintains a floating exchange rate system. Exchange rates are determined on the basis of supply and demand in the foreign exchange market.

Wealth Maximization

The concept requires the management team to continually search for the highest possible returns on funds invested in the business, while mitigating any associated risk of loss.

Financial System

The functions of this is to channel the funds from lenders to the borrowers, provide a medium of exchange, provide a mechanism for risk sharing and provide a channel through which the central bank can influence the economy

BSP

The role of the ____________ in the foreign exchange market is principally to ensure orderly conditions in the market. The market-determination of the exchange rate is consistent with the Government's commitment to market-oriented reforms and outward-looking strategies of achieving competitiveness through price stability and efficiency.

Savings and Loan Associations

These are also known as thrift banks, these are financial institutions that specialize in savings type deposits, mortgages and other loans. They provide dividends to their depositors.

Insurance Companies

These are corporate entities that insure people against loss. The client pays a fee, known as a premium, in exchange for the promise of the company to protect the client financially in the event of certain potential misfortunes. The common types of insurance include health, life and property insurances.

Credit Unions

These are non-profit financial cooperatives owned by and operated for the benefit of its members.

Wealth Maximization

This calls for a detailed analysis of the cash flows associated with each prospective investment, as well as constant attention to the strategic direction of the organization.

Financial management decision function

This includes areas such as investment, financing, and asset management decisions.

Notes

This is a debt security obligating repayment of a loan with a corresponding interest within a defined period of time. Notes are being issued by the borrower to signify its indebtedness.

Stocks

This is a financial asset of the stockholder and an equity instrument of the issuing company.

Commercial Bank

This is a financial institution that provides various financial services, such as accepting deposits, offering savings and checking account services, and issuing loans for both private individuals and businesses.

Stocks

This is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

Investment Banks

Unlike commercial banks, these banks do not take deposits. Their focus is assisting individuals, corporations, and governments in raising capital by underwriting or acting as the client's agent in the issuance of securities. These may also assist companies involved in mergers and acquisitions

Profit

When we say ___________, we usually refer to the financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity.

Financial system

a framework for describing set of markets, organizations, and individuals that engage in the transaction of financial instruments, as well as regulatory institutions.

Financial Institutions

an establishment that provides financial services such as investments, loans and deposits. Typically, these are the key entities that control the flow of money in the economy. Financial institutions may either be a banking institution or nonbanking institution. Examples (3) Banking Institutions Commercial Bank Investment Banks

Stocks

are issued by companies in order to raise funds for the business.

Bonds

are usually issued by companies, municipalities, states and sovereign governments to raise money and finance their economic activities.

Examples of Financial Instruments

currency bills and coins, stocks bonds and notes

Financial markets

facilitate the flow of funds and thereby allow financing and investing by households, firms, and government agencies.

Treasurer

his primary duties include asset safekeeping and cash management. He is also responsible for obtaining investment capital as well as obtaining loans and credit from outside sources.

Fixed Income Exchange Market

is a comprehensive financial market infrastructure that aims to provide an electronic platform for trading, clearing and settlement, and depository and custodianship fixed-income securities and its derivatives.

Bonds

is a debt security in which an investor lends his money to an entity which borrows the funds for a defined period of time at defined interest rate.

Banking Institutions

is a financial institution that accepts deposits from the public and creates credit which is being supervised by a regulatory agency.

Non-Banking Financial Institutions

is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency.

Financial System

is a framework which collectively describes the financial markets, financial institutions, borrowers and lenders within the economy.

Wealth Maximization

is a modern concept which deals with the increase of the value of a business in order to increase the share of stockholders or the owners.

Philippine Stock Exchange

is a private organization created to provide and maintain a fair, efficient, transparent and orderly market for the purchase and sale of stocks and other securities.

Profit Maximization

is a traditional and narrow approach where business entities determine the best output and price levels in order to maximize its return. The company will usually adjust influential factors such as production costs, sale prices, and output levels as a way of reaching its profit goal. The main aim of any kind of economic activity is to earn this.

Financial Intermediaries

is an entity that acts as the middleman between two parties in a financial transaction. Financial intermediaries are businesses which move money from the individual into the markets.

Finance

is the art and science that describes the management, creation and study of money, banking, credit, investments, assets and liabilities. Also is needed in business because financing decisions often involve large financial amounts that are very significant to the business and once made, such decision is not easily reversed.

Fixed Income Exchange Market

is the country's first centralized electronic infrastructure for trading of fixed-income securities.

Financial Instruments

is the written legal obligation of one party to transfer a thing of value, usually money, to another party at some future date, under certain conditions.

Foreign Exchange

is where participants can be able to buy, sell, exchange and speculate on currencies

financial market

is where stocks, bonds and other financial securities can be purchased or sold.

Profit

the difference between income and expenses

Treasurer

the one responsible for obtaining sources of financing for the organization, projecting cash flow needs, and managing cash and short-term investments.

fixed-income securities

these are investments that provide return in the form of fixed periodic payments and the eventual return of principal at maturity. This may include treasury bonds and certificate of deposits.