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