FINANCE PRELIM REVIEWER

by Jasmine Hermoso
FINANCE 1. Is concerned with decisions about money or cash flow
The art and science of managing funds
The study of how individuals, institutions, governments and business
acquire, spend and manage money and other financial assets

MONEY 2. Anything which is use as a medium of exchange, widely acceptable

for the payments of goods and services without reference to the general
standing of the person who offers it.

CASH FLOWS 3. Movement of money in and out of the business

COINAGE 4. Process of making uniform coins from metals and stomping them with
specific design as a guaranty of its weight and fineness and integrity
of the country it represents

GENERAL AREAS OF FINANCE

FINANCIAL MARKET 1. Banks, Insurance Company, Saving and loans, Credit unions
AND INSTITUTIONS

INVESTMENTS 2. No description

FINANCIAL SERVICES 3. Refers to the functions provided by organizations that deals

with the management of money

MANAGERIAL FINANCE 4. Deals with decisions that all firms make concerning cash flows, including
inflows and outflows

NON FINANCE AREAS

1. Management 4. Information System
2. Marketing 5. Economics
3. Accounting

FUNCTIONS OF MONEY 4 P's of MARKETING

1. As a medium of exchange 1. Product
2. As a unit of account 2. Place
3. As store value 3. Price
4. As means of different payment 4. Promotions

CHARACTERISTICS OF A GOOD MONEY

1. General Acceptability 5.Cognizability
2. Durability 6. Elasticity of supply of money
3. Homogenity/uniformity 7. Stability of value of money
4. Malleability 8. Portability
 FINANCE PRELIM REVIEWER
by Jasmine Hermoso
TYPES OF MARKETS

PHYSICAL ASSET 1. "Tangible" or "real" asset market

MARKETS

FINANCIAL ASSET 2. Deal with stocks, bonds, notes and mortgages.

MARKETS

SPOT MARKETS 3. The markets in which assets are bought or sold for "on-the-spot" delivery.

FUTURES MARKETS 4. The markets in which participants agree today to buy and sell an asset at
some future date.

MONEY MARKETS 5. The financial markets in which funds are borrowed or loaned for
short periods (less than one year)

CAPITAL MARKETS 6. The financial markets for stocks and for intermediate or long-term debt
(one year or longer)

PRIMARY MARKETS 7. Markets in which corporations raise capital by issuing new securities

SECONDARY MARKETS 8. Markets in which securities and other financial assets are traded among
investors after they have been issued by corporations

PRIVATE MARKETS 9. Markets in which transactions are worked out directly between two parties

PUBLIC MARKETS 10. Markets in which standardized contracts are traded on organized changes.

FUNDS

EXCHANGE TRADED
FUNDS

HEDGE FUNDS

PRIVATE EQUITY
COMPANIES
 FINANCE PRELIM REVIEWER
by Jasmine Hermoso

CORPORATION TERMS

BOARD OF DIRECTORS 1. All corporate powers are exercised by the _____.

STOCKHOLDERS 2. The board of directors are elected by the _____.

3. _____ are partly owners or co-owners of the corporation.

PROXY 4. Every stockholders has the right to vote in person or by _____ during the
election for the members of the board of Directors.

STOCKS 5. _____ represents ownership on the part of the issuing corporation

DIVIDEND 6. _____ is the profit or part of the profit of the corporation distributed
to the stockholders on record.

PREFFERED STOCK 7. _____ generally fixed dividend rate of 5-7% either low or high dividend
Also superior to common stock

COMMON STOCK 8. _____ has a voting power to vote for the members of the board
Prioritized when corporation holds big events

CUMULATIVE VOTING 9. Is used during the election for the members of the board of directors .

CAPITAL STOCK 10. Permanently ivested capital of the corporation contributed by stockholders
by buying shares of stocks.

STOCK CERTIFICATE 11. Evidence of stock ownership

FORMS OF BUSINESS ORG

1. Sole Proprietorship 2. Partnership 3. Corporation

PROPRIETORSHIP & PARTNERSHIP A D V A N T A G E S :

1. Ease of formation 3. No corporate Income Taxes
2. Subject to few regulation

DISADVANTAGES:
1. Difficult to raise capital 3. Limited Life often set up
2. Unlimited liability through LLC/LLPs

CORPORATION A D V A N T A G E S :
1. Unlimited life 3. Limited liability
2. Easy transfer of ownership 4. Ease of raising capital
 FINANCE PRELIM REVIEWER
by Jasmine Hermoso

DERIVATIVE 1. Any financial asset whose vale is derived from the value of some other
"underlying" asset.

FINANCIAL INSTITUTIONS

INVESTMENT BANKS 1. Traditionally help companies raise capital.

COMMERCIAL BANKS 2. Such as Bank of America, Citibank, Wells Fargo and JPMorgan Chase, are the
"department stores of finance" because they serve a variety of savers &
borrowers.

FINANCIAL SERVICES 3. Are large conglomerates that combine many different financial institutions
CORPORATIONS within a single corporation.

CREDIT UNIONS 4. Are cooperative associations whose members are supposed to have a
common bond, such as being employees of the same firm.

PENSION FUNDS 5. Are retirement plans funded by corporations or government agencies

for their workers and administered primarily by the trust depts of
commercial banks or by life insurrance companies.

LIFE INSURANCE 6. take savings in a form of annual premiums; invest funds in stocks, bonds,
COMPANIES real estate and mortgages; and make payments to the beneficiaries of
insured parties.

MUTUAL FUNDS 7. Organizations that pool investor funds to purchase financial instruments
and thus reduce risks through diversification.

MONEY MARKET Mutual funds that invest in short-term, low-risk securities and allow
FUNDS investors to write checks against their accounts

EXCHANGE TRADED 8. Are similar to regular mutual funds and are often operated by mutual
FUNDS fund companies.

HEDGE FUNDS 9. Are similar to mutual funds because they accept money from savers
and use the funds to buy various securities, but there are some
important differences.

PRIVATE EQUITY 10. Are organizations that operate muh like hedge funds; but rather than
COMPANIES purchasing some of the stock of a firm, privately equity players
buy and then manage entire firms.
 FINANCE PRELIM REVIEWER
by Jasmine Hermoso

S CORPORATION 1. A special designation that allows small businesses that meet

qualifications to be taxed as if they were a proprietorship rather
than a corporation.

Limited Liability 2. A relatively new type of organization that is a hybrid between a

Company (LLC) partnership and a corporation.

Limited Liability 3. Similar to an LLC but used for professional firms in the fields of acctg, law
Partnership (LLP) and architecture. It has limited liabitlity like corporations but
is taxed like patnership.

Shareholder Wealth 4. The primary goal for managers of publicly owned companies implies that
Maximization decisions should be made to maximize the long-run value of the
firm's common stock.

INTRINSIC VALUE 5. An estimate of a stock's "true" value based on accurate risk and return data.
Can be estimated but not measured precisely.

MARKET PRICE 6. The stock value based on perceived but possibly incorrect info as
seen by the marginal investor.

Marginal Investor 7. An investor whose views determine the actual stock price.

EQUILIBRIUM 8. The situation in which the actual market price equals the intrinsic value,
so investors are indifferent between buying or selling a stock.

CORPORATE RAIDER 9. An individual who targets a corporation for takeover because

it is undervalued.

HOSTILE TAKEOVER 10. The acquisition of a company over the opposition of its management.
 FINANCE PRELIM REVIEWER
by Jasmine Hermoso

PHYSICAL LOCATION 1. Formal organizations having tangible physical locations that

EXCHANGES conduct auction markets in designated ("listed") securities.

OVER THE COUNTER 2. A large collection of brokers and dealers, connected electronically
MARKET by telephones and computers, that provides for trading in
unlisted securities.

DEALER MARKET 3. Includes all facilities that are needed to conduct security
transactions not conducted on the physical location exchanges.

CLOSELY HELD 4. A corporation that is owned by few individuals who are typically
CORPORATION associated with the firm's management.

PUBLICLY OWNED 5. A corporation that is owned by relatively large number of

CORPORATION individuals who are not actively involved in the firm's management.

TYPES OF STOCK MARKET TRANSACTIONS

GOING PUBLIC 1. (Primary Market) The act of selling stock to the public at large
by a closely held corporation or its principal stockholders

INITIAL PUBLIC 2. The market for stocks of companies that are in the process of
OFFERING MARKET going public.

SECONDARY MARKET 3. Outstanding shares of established publicly owned companies

that are traded.