Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
92 Cards in this Set
- Front
- Back
- 3rd side (hint)
|
Business Finance |
Study how you manage your money |
|
|
|
Business |
Putting up |
|
|
|
Finance |
Capital |
|
|
|
Shared Capital Loan Capital |
Sources of Capital for corporation |
|
|
|
Business |
Venturing |
|
|
|
Finance |
Money and its management Allocation of resources |
|
|
|
Financial institutions Investments Business Finance |
Three areas of finance |
|
|
|
Financial institutions |
Creation |
Area of finance |
|
|
Investment |
Analysis and planning |
Area of finance |
|
|
Business Finance |
Management |
|
|
|
1. Allocation of funds 2. Procurement of funds 3. Utilization of funds |
Functions of Business Finance |
|
|
|
Allocation of funds |
Profitable Minimal cost |
Function of BF |
|
|
Procurement of funds |
Evaluation of funds Short term/ long term |
Function of BF |
|
|
Efficient - periodic assessment Effective - short/long term goals |
Utilization of funds |
|
|
|
Efficient |
Periodic assessment |
|
|
|
Effective |
Short/long term goals |
|
|
|
1. To acquire necessary funds to ensure that they are used effectively. 2. Capital budgeting 3. Capital structuring 4. Working capital management |
Roles of financial manager |
|
|
|
Sole proprietorship Partnership Corporation |
Business Organization |
|
|
|
Sole proprietorship |
One owner; DTI; BIR |
|
|
|
Department of Trade and Industry |
DTI |
|
|
|
Bureau of Internal Revenue |
BIR |
|
|
|
Partnership |
Owned by two or more; SEC |
|
|
|
Securities and Exchange Commission |
SEC |
|
|
|
Corporation |
Stock; SEC Dividends |
|
|
|
General Limited |
Types of partnership |
|
|
|
General |
All liabilities |
|
|
|
Limited |
No liability No active role |
|
|
|
Universal Particular General Limited Capital Industrial Capitalist industrial |
Classification of partnership |
|
|
|
Universal |
All (object of contribution) |
|
|
|
Particular |
Determined (object of contribution) |
|
|
|
Capital |
Money |
Classification of partnership |
|
|
Industrial |
Work/services |
Classification of partnership |
|
|
Capitalist Industrial |
Both money and work |
Classification of partnership |
|
|
Stock - profit Non-stock - non profit |
Classification of corporation according to sources of capital |
|
|
|
Classification of Corporation |
|
|
|
1. Voting Right 2. Ownership 3. Transfer of ownership 4. Entitlement of dividend 5. Right to sue 6. Pre-emptive right |
Rights of stockholder |
|
|
|
Classes of shares of stocks |
|
|
|
Class a |
Filipino stocks |
|
|
|
Class b |
Foreign stocks |
|
|
|
Dividends |
Value received by the stockholders |
|
|
|
Classifications of dividends |
|
|
|
Liquidation |
Transforming assets into cash |
|
|
|
1. Declaration 2. Ex-dividend date 3. Date of Record 4. Payment date |
Dividend payment (step) |
|
|
|
1. Equity Capital Stock 2. Borrowed Capital 3. Debt Financing/ Borrowings |
Sources of Capital |
|
|
|
Equity |
*Source of capital for sole proprietorship *venture capitalist |
|
|
|
Venture Capitalist |
Firm na nagpapautang in exchange of equity |
|
|
|
Capital Stock |
*Source of capital fo corporation *Stock market |
|
|
|
Borrowed Capital |
Loans, there is interest |
|
|
|
1. Not required to cash dividends 2. It has a maturity date |
Advantage of Equity= stocks |
|
|
|
Control and ownership are being affected |
Disadvantage of equity= stocks |
|
|
|
Authorized Capital Issued Stock Reacquired Stock Outstanding Stock |
Forms of Capital Stock |
|
|
|
Authorized Capital |
Maximum number of shares |
Form of capital stock |
|
|
Issued stock |
Subscribed authorized stock |
Form of capital stock |
|
|
Reacquired Stock |
By gift Buying back - forfeiture of stock |
Form of capital stock |
|
|
Outstanding stock |
Portion of issued stock |
Form of capital stock |
|
|
Common stock Preferred stock |
Classes of Stock |
|
|
|
Common stock |
Basic shares |
|
|
|
Preferred stock |
Stocks with preference |
|
|
|
Debt financing |
Borrowings |
|
|
|
Keme of Debt Financing |
|
|
|
1. Trade credit market - raw materials; manufacturer/ distributor 2. Customer loan market - banks; creditors; finance company |
Major Sources of funds |
|
|
|
Equity vs Debt Capital |
|
|
|
Loans |
Lending of money |
|
|
|
Amortization |
Allocation of cost |
|
|
|
1. Pure-discount loan - simplest form 2. Interest-only loan - interest paid 3. Amortized loan - repaid in parts |
Kinds of loans |
|
|
|
Working capital |
To finance its day to day transactions |
|
|
|
Working capital |
Portion of the firms capital continuously converted into cash |
|
|
|
Working capital |
Portion of the firms capital continuously converted into cash |
|
|
|
Firm's cash Checks for the encashment Bank account balances Accounts receivable Inventories Prepaid expense |
Woking capital includes |
|
|
|
1. Inventory replenishment 2. Provision for Operating Expenses 3. Back-up credit sales 4. Safety margin |
Why we need working capital? |
|
|
|
Inventory replenishment |
Sufficient stock of inventory |
|
|
|
Provision for operating expenses |
Back-up expenses |
|
|
|
Back-up credit sales |
Until receivables are converted inti cash |
|
|
|
Safety margin |
Unexpected expense Delays in cash inflows Decline in revenue |
|
|
|
-purchase and cash sales -time period from collection -time period from purchase or payment -accounts receivable collection -inventory investment |
The amount of cash needed may depend on: |
|
|
|
Cash-management |
Sufficient amount of profit must be attained |
|
|
|
Liquidity management |
Sufficient cash to cover cash requirements |
|
|
|
Inventory management |
Inventory turn over Earn profit/sales |
|
|
|
Accounts receivable |
Credit sales Money owed to the business |
|
|
|
Trade credit |
Credit sale made to other business Open account- no formal debt contract |
|
|
|
Consumer credit |
Credit sale made to other individual |
|
|
|
1. Credit period 2. Discount period 3. Discount rate |
Credit forms |
|
|
|
Credit period |
The date the buyer is invoiced/ date of payment |
|
|
|
Discount period |
Discount for prompt payment |
|
|
|
Discount rate |
Price reduction |
|
|
|
Short-term operations Long-term operations |
Financing decision |
|
|
|
Capital budgeting |
To plan and control |
|
|
|
Expenditures Valuation Investments |
Under capital budgeting |
|
|
|
Break-even point |
Variable and fixed expenses |
|
|
|
BEP= Sales income - expenses |
Formula for break-even point |
|
|
|
Variable expense |
Directly proportional Changing Labor cost |
|
|
|
Fixed expense |
Remain constant Not changing |
|
