Business Administration Roles and Functions

Questions and Answers

What is the primary function of commercial banks?

To manage pension funds

To issue government securities

To insure personal properties

To provide loans using deposited funds (correct)

How do insurance companies generate funds to pay claims?

By pooling insurance premiums and investing them (correct)

By funding through government grants

By issuing stocks to the public

By providing loans to policyholders

What is a mutual fund primarily designed to do?

Allow small investors to invest in diversified portfolios (correct)

Offer insurance protection

Manage retirement accounts

Provide loans to large corporations

What type of financial institution is a pension fund?

A fund that receives and invests employee contributions Signup and view all the answers

Which of the following represents a financial asset?

Cash held in a bank Signup and view all the answers

What results from the issuance of a financial instrument?

A financial asset and a financial liability or equity instrument Signup and view all the answers

Which of the following statements about debt securities is true?

They represent a loan made by an investor to a borrower Signup and view all the answers

Which of the following does NOT belong to the category of financial institutions?

Real estate properties Signup and view all the answers

What are the two primary sources of returns from equity instruments?

Dividends and stock price appreciation Signup and view all the answers

What is a preferred stock?

A stock that has priority over common stock in asset claims Signup and view all the answers

What distinguishes common stockholders in a company?

They are considered the real owners of the company Signup and view all the answers

In which market are new securities issued directly to buyers?

Primary market Signup and view all the answers

What is one characteristic of a secondary market?

Existing securities are resold by current holders Signup and view all the answers

What is a characteristic of the Philippine Stock Exchange (PSE)?

It functions as both a primary and secondary market Signup and view all the answers

What does the term 'residual interest' refer to in equity instruments?

The net assets of a company after liabilities are deducted Signup and view all the answers

How are financial instruments, financial institutions, and financial markets differentiated?

By their structure and operation Signup and view all the answers

What is a financial asset?

A contractual right to exchange instruments under favorable conditions. Signup and view all the answers

Which of the following describes a financial liability?

A contractual obligation to deliver cash or other financial instruments. Signup and view all the answers

Which of the following is an example of a debt instrument?

Corporate Bonds Signup and view all the answers

What defines the Philippine Stock Exchange?

A private non-profit organization that manages equity markets. Signup and view all the answers

What differentiates equity instruments from debt instruments?

Equity instruments reflect ownership in a company. Signup and view all the answers

How does one benefit from investing in stocks?

By selling shares after their price appreciates over time. Signup and view all the answers

Why are Treasury Bonds considered low risk?

They are backed by the government. Signup and view all the answers

Which of the following correctly describes money markets?

They facilitate transactions involving short-term securities. Signup and view all the answers

Which of the following statements about corporate bonds is true?

They can lead to a complete loss of investment if the issuing company goes bankrupt. Signup and view all the answers

What is a key distinguishing feature of capital markets?

They involve the trade of long-term securities like stocks and bonds. Signup and view all the answers

What type of returns do equity instruments typically have?

Variable returns based on company performance. Signup and view all the answers

What is the return on investment (ROI) if a person buys 100 shares at PHP 10 per share and sells them for PHP 20 per share?

100% return or PHP 2,000 gain. Signup and view all the answers

Which of the following best defines a financial instrument?

Any asset or liability that can be traded. Signup and view all the answers

What is the primary responsibility of the VP for Finance/Financial Manager in determining capital structure?

To determine how much of total assets is financed by debt and equity Signup and view all the answers

Which decision is NOT a function of Financial Managers?

Setting corporate sales targets Signup and view all the answers

What aspect do operating decisions in finance primarily deal with?

Daily operations and working capital financing Signup and view all the answers

Financial instruments are best described as which of the following?

Tools used for various financial transactions Signup and view all the answers

Which of the following is NOT a type of financial institution?

Capital budgeting analysis Signup and view all the answers

What does the term 'dividend' refer to in finance?

A portion of profits available for distribution to shareholders Signup and view all the answers

Which of the following is a major focus of investing decisions in finance?

Minimizing potential failure through capital budgeting analysis Signup and view all the answers

To minimize operating costs, which role is specifically involved in identifying processes or systems?

Financial Manager Signup and view all the answers

Study Notes

Administration and Finance Functions

Coordination of administrative, finance, and marketing departments is essential for efficient company operations.
The Vice President (VP) for Administration assists in employee hiring across departments.
Key responsibilities include payroll preparation, vendor payments, and accounts receivable management.
The VP for Finance determines the company's capital structure, balancing debt and equity financing.

Financial Manager Functions

Financing Decisions: Focuses on long-term investments and working capital management.
Investing Decisions: Involves capital budgeting analysis to support long-term investment decisions.
Operating Decisions: Addresses daily operations, particularly in funding accounts receivable and inventory.
Dividend Policies: Financial managers decide on the distribution of profits to shareholders or retention for reinvestment.

Financial System Overview

Financial Institutions: Companies providing a wide range of services such as banking, insurance, and investment management.
- Commercial Banks: Accept deposits, offer commercial and personal loans, and purchase government and corporate debt securities.
- Insurance Companies: Offer protection via premiums collected and invest these funds until claims are paid.
- Mutual Funds: Allow small investors to partake in a diversified portfolio managed by professionals.
- Pension Funds: Receive employee contributions and invest them for future payouts.

Financial Instruments

Represent legal agreements with monetary value, includes debt and equity securities.
Financial assets can include cash, equity instruments, or contractual rights for future cash flows.
Financial liabilities involve obligations to pay cash or deliver financial instruments.
Equity Instruments: Represent residual interest in a company's assets.
- Examples include ordinary and preference shares.
Debt Instruments: Generally fixed returns, includes treasury bonds, bills, and corporate bonds.

Financial Markets

Marketplace for trading financial assets such as stocks, bonds, and derivatives.
Primary Markets: Where new securities are issued through public offerings or private placements.
Secondary Markets: Allow trading of existing securities, exemplified by the Philippine Stock Exchange (PSE), which operates as both primary and secondary markets.

Market Classifications

Money Markets: Trade in short-term securities (one year or less).
Capital Markets: Involve longer-term securities such as bonds and stocks.
Money markets facilitate temporary borrowing/lending, whereas capital markets facilitate long-term investments and ownership exchanges.

Shareholding and Investments

Investing in stocks allows individuals to own part of a corporation, providing potential growth and return on investment.
Shareholders profit from dividends or stock price increases, illustrating the relationship between company performance and investor returns.

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Description

This quiz explores the various roles and responsibilities within the administration, finance, and marketing departments of a company. It highlights the coordination needed between these functions and the importance of assisting in hiring and payroll processing. Test your knowledge on the key positions and their contributions to organizational success.