BFIN Midterm Reviewer PDF

BFINANCE MIDTERM REVIEWER Commercial banking institutions Contractionary – intends to decrease the level of liquidity - Expanded commercial banking/universal banking...

BFINANCE MIDTERM REVIEWER Commercial banking institutions Contractionary – intends to decrease the level of liquidity - Expanded commercial banking/universal banking /money supply in the economy and which could result in a Usurers – borrow money from banks, pawnshops, credit - Ordinary commercial banks relatively lower inflation path for the economy. unions or even from unlicensed moneylenders. Thrift banks Open Market Operations – the sale or purchase of Philippine Financial System – a civilized society and - Savings and mortgage banks government securities by the BSP to withdraw liquidity or market economy have been directly involved in the - Private development banks inject liquidity into the system. operations of the financial system. - Stock savings and loan associations Rediscounting – refers to the transactions whereby the - A lot more complex in structure and operation Rural Banks BSP extends credit to a bank collateralized by its loan because we lack a good framework for viewing the 2. Government banking institutions papers with customers. financial system as a whole. - Development bank of the Philippines Reserved requirement – the minimum number of reserves - International Financial System have great - Land bank of the Philippines that bank must hold against deposits. influence in the formulation and implementation of Non-Banking Financial Institutions Direct Controls – consist of quantitative and qualitative our banking laws and monetary policies. 1. Private Non-Bank Financial Institutions limits on the ability of banks to undertake certain activities. - Banko Sentral ng Pilipinas (BSP) is part of our - Investment houses Moral Suasion – persuade the banks to make their lending financial system. - Investment companies policies responsive to the needs of the economy. - PFS have a vast network of various institutions and - Financing companies Multinational Banks in the Philippines – also known as modern facilities and its operations cover all - Securities dealers/brokers transitional banks operate in our country their branches, commercial and industrial centers of the world. 2. Government non-bank financial institutions offshore banking units, representative offices and equity Financial System – a network of various institutions which - Government Service Insurance System (GSIS) investments in both financial and non-financial institutions generates, circulates and control money and credit. - Social Security System (SSS) which operate in many countries throughout the world. Financial Claims – money and the rights to receive money FINANCIAL REFORMS WHAT IS A GOOD FINANCIAL SYSTEM? under specific circumstances. 1980 – series of laws were introduced amending the - Financial system plays a very vital role in the Financial Institutions – private or government organization General Banking Act, Savings and Loan Association Act, economy and society. whose assets consist primarily of claims or incomes Charter of the Development Bank of the Philippines, - Holds the funds for investment, business and primarily derived from dealing in or performing services in Investment Houses Act, and the BSP Act. development. connection with claims. 1972 – part of the recommendation by an IMF-BSP Group - BSP is the leader of the financial system has been Financial Markets – institutions which expedite and by the IMF-WB Mission in 1979 entrusted with the very great responsibility of transactions in financial claims. 1977 – offshore baking system was established as promoting monetary stability and economic growth Government Agencies – monetary policies are formulated proposed bu the said groups for the whole country. by the monetary board of the BSP. Banko Sentral ng Pilipinas Laws and Policies – national government regulates and - Mother of all banks BANKING KEY CONCEPTS supervises the whole economy in order to attain its - Mandated to oversee the financial system of the Ancient Times development objectives. country - Early 2000 BC there were records of loans in the General Function – to facilitate the transfer of funds from - The agency that is tasked to ensure that the country temples of Babylon the savers to the users. has healthy financial system and a healthy economy - Companies of traders conducted banking activities Specific Functions - It is the central monetary authority related to buying and selling of goods - Investigation and credit analysis Monetary Policy – refers to the measures or actions taken - Greek system of banking was adopted in Egypt and - Matching the supply and demand for funds by the central bank to influence price level and the level of then in Rome. - Provisions for liquidity liquidity in the economy Medieval Times - Provides payments system Expansionary – intends to increase the level of - Genoa and other Italian cities during 12th century Banking Institutions liquidity/money supply in the economy and which could - Commerce expanded in Europe in the 14th century 1. Private banking institutions result in a relatively higher inflation path for the economy.  - International trade fairs were set up by the bankers Loan-Money – other consumable thing, upon the condition 6. Deposit means the unpaid balance of money or its in Champagne, France that the same amount of the same kind and quality shall be equivalent received by a bank in the usual course of paid, in which case the contract is simply called a loan or business and for which it has given or is obliged to give Bankers in the Mediterranean cities were the direct mutuum. credit to a commercial, checking, savings, time or thrift ancestors of modern commercial banking Public – shall mean twenty or more lenders. account. - Banco della Piazza di Rialto, founded in Venice was Quasi Banking Functions – shall mean borrowing funds 7. Insured Deposit means the net amount due to any the first real public bank for the borrower’s own account, through the issuance, depositor for deposits in an insured bank less any part - Bank of Deposit in Barcelona (1401) endorsement or acceptance of debt instruments of any kind thereof in excess of - Casa di Giorgio in Genoa (1407) other than deposits from 21 or more lenders. P500,000. OBRAS PIAS – rich and religious citizens donated money Financial Intermediaries – shall mean persons or entities 8. Transfer deposit means a deposit in an insured bank for charitable and pious projects during the Spanish time whose principal functions include the lending, investing or made available to a depositor by the Corporation as - Which means pious works and managed by placement. payment of insured deposit. confraternities Regulations – mean the issuances of the rules of conduct 9. Trust funds means funds held by an insured bank in a 1778 – arrival of Governor Jose Basco Y Vargas paved the or the establishment of modes of standards of operation for fiduciary capacity and includes funds for trustee, etc. way for the economic development of the Philippines. uniform application to all institutions. Miscellaneous Deposit - bank introduced several deposit 1830 – First Filipino bank was founded by Francisco Supervision – include not only the issuance of rules, but schemes to attract deposits form the different types of Rodrigues named RODRIGUEZ BANK followed by Garrido also the overseeing to ascertain that regulations are people. Bank and then Tuazon Bank compiled with, investigating or examining to determine Recurring Deposit – a fixed amount of money for a specific 1851 – first government bank was established by governor whether an institution is conducting its business on a sound period of time. Antonio de Urbiztondo called Banco Espanol- Filipino financial basis. Fixed Deposit – repayable after expiry of specific period, de Urbiztondo now the Bank of the Philippine Islands (BPI). Commercial Bank – any corporation which accepts or which is to be determined at the time of opening of the Foreign Banks – no foreign bank or banking corporation creates demand deposits subject to withdrawal by check. account. formed, organized or existing under any laws other than Bank Reserves – currency deposits that are not lent out to Savings Deposit – individuals who wish to deposit small those of the RP be permitted to transact business in the a bank’s clients. amounts out of their current income. Philippines or maintain by itself or assignee. PHILIPPINE DEPOSIT INSURANCE CORPORATION Current Deposit – also called as demand deposit, can be WHAT IS A BANK? PDIC withdrawn by the depositor at any time by checks. - A place where people deposit their money. - Federal Deposit Insurance Corporation (FDIC) in the Deposit – is constituted from the moment the person USA for the purpose of safeguarding the interests of Stock Market – place where stock is bought and sold receives a thing belonging to another, with the obligation of depositors with respect to their deposits in banking Stocks – units of ownership in a company safely keeping it and of return the same. institutions. Bull Market – the economy is great and stock prices are Deposit Money – all those liabilities of the BSP and of other 1. Board of Directors means board of directors of the rising banks which are denominated in Philippine currency and corporation Bear Market – the economy is bad and a recession is are subject to payment in legal tender. 2. Bank and banking institution shall be synonymous and looming Deposit Substitutes – alternative form of obtaining funds interchangeable and shall include banks and all other Financial Markets – operate provides a better perspective from the public, other than deposits, through the issuance, companies and partnerships performing banking functions to the one making decisions relating to the finance function endorsement, or acceptance of debt instruments. in the Philippines. Primary Market – which newly issued primary and Loan – one of the parties delivers to another, either 3. Receiver includes a receiver, liquidating agent, secondary securities are traded for the first time something not consumable so that the latter may use to commissioner or other agency Secondary Market – which existing financial securities are another. 4. Insured bank means any bank the deposits of which are traded Commodatum – the latter may use the same for a certain insured in accordance with the provisions of Act. Capital Market – part of financial market where trading is time and return it, in which case the contract. 5. Non-insured bank means any bank the deposits of undertaken for securities with maturity of more than one which are not insured. year. Bond Market – market for debt instruments of any kind - It Prepaid cash/gift card/certificate – can be given as a gift Money Order – instrument issued by the post-office of a operates through a system of dealers using a so that the recipients can choose what they want to country ordering sum of money to be paid to the payee telecommunications network, rather than in a single purchase. indicated on the instrument physical location for trading Medium of Exchange – Money is used to facilitate the Warehouse receipt – document of title of goods; a proof Stock Market – where the common and preferred stocks transfer of goods and the possession control of the goods issued by corporations are traded services and settle obligations. Scarcity – makes something valuable over abundance Stock Analysis – a term that refers to the evaluation of a Standard of Value – Goods, services, assets, liabilities and makes it worthless particular trading instrument an investment sector or the net worth (equity Divisibility – must have the quality of being broken down market as a whole. or capital) are all measured in terms of money. into smaller units. Fundamental Analysis – concentrates on data from Store of Value – Savings, usually in the form of money, is Portability – medium must be easy to handle or carry sources including financial records, economic reports, stored either in Durability – must be long lasting. company assets and market share the bank or at home for future use that is the idea of store Technical Analysis – focuses on the study of past market of value. Finance action to predict failure price movement Deferred Payment – legal tender, money is acceptable in - Comes from the latin word finer meaning to end or Simulation – imitation of the operation of a real-world payments of debts or liabilities. to pay process or system over time Conveyance – conveys or transfer title or possession - Management of money Commodity money – things used as money - To provide capital for a person or enterprise Money Checks – printed form on which the account holder writes Allocation of available funds – means determining where - Comes from the Latin word Moneta meaning mint or an amount of money and who it is to be paid to to use the funds currently available to the firm place for coining money Bank Drafts – issued by banks against their own account Acquisition of needed funds – obtaining funds from the - A liquid asset used to facilitate transactions of value. Flat Money – flat “let it be done” money given value by the right sources at the right time Barter – defined as the exchange of things for other things government through a decree Utilization of funds to achieve set goals – means using Coinage – defined as the conversion of metal into coins Representative money – money backed by the the funds Mint – place where metals are made into coins government or banks promises to exchange it for a certain Direct finance – direct borrowing, direct negotiation Coin – ingot of metal, the weight and fineness of which are amount of silver or gold. between borrower and lender certified by the integrity of the design on tis surface and the Personal Checks – issued by persons to be drawn against Indirect Finance – use of financial intermediaries also power of the issuing authority. their own current account called financial intermediation Free Coinage – metals brought to the government mint and Business Checks – issued by business organizations Public Finance – involves government deals with sources converted into standard money without any charge for Cashier’s Check – treated as bank drafts, issued by the and use of funds of the government minting except for delay involved in the process bank against its own account. Private Finance – individuals and entities Brassage – free charged by the government is just Certified Checks – a cashier check but is issued by the Personal Finance – concerned with individuals and sufficient to cover the cost of minting. bank certifying that the account of the person is issuing It households Seigniorage – fee charge by the government is more than has available funds Business Finance – with entities and individuals engaged the cost of minting so the government earns a profit Travelers Checks – prepaid fixed amount that operates like in business Limited Coinage – governments convert metals into coins cash that a purchased can used to buy goods or services Non-profit Organizations – with charitable organizations only at its option. when traveling. which are not concerned with profit making Cash Money – physical coins and paper/polymer money Demand draft – payable or demand Efficiency – measure of speed and cost Bank Deposits – are the digital entries on banks and other Time Draft – payable sometimes in the future, like a post- Effectiveness – measure of quality financial institutions accounting books dated check Sole or single proprietorship – solo business Plastic money – allows owner to buy products on credit, Local Draft – issued by the bank in a single country; for Partnership – 2 or more in business subject to a credit limit. Debit cards charge to the local transaction only Cooperative - a legal business structure that is owned and cardholder’s bank account on purchase. governed by, and functions for, the benefit of those who use its services. They are owned by those that work for it, are Effective working capital management – managing both Growth in Sales – additional investment in assent, which in served by it, or both. current assets and current liabilities and maintaining the turn requires the need for additional capital or funding. General Partner – debts up to the extent of their personal right combination allow the company to enjoy a good Finance – deals with sources and uses of funds. assets working capital positions Accounting – deals with recording financial transactions to Limited Partner – liable for partnership debts only up to the Effective inventory management – overstocking and determine the results of operations and financial conditions. extent of their interest understocking are undesirable Profit Maximization – ultimate objective of any business Capitalist Partner – who contributes money and non-cash Effective investment decisions – investing excess funds firm because it is the best way to increase owners’ wealth assets to create additional income and the value of the company Industrial Partner – partners who contributes skill or Proper Asset Selection – selecting the richt machinery and Accounting for profits – measures manager and owners industry equipment needed for the company operation use to performance of firms. Corporations – being organize in accordance with the Proper risk management – weight risks associated with Managerial Accounting – branch of accounting which provision of law in which ownership is divided into shares of certain business decisions deals with providing internal users, primarily the managers, stocks Financial Policy Making – function are the task of selecting with the financial information they need to be able to perform financial goals, developing financial policies and designing their duties. Managerial Finance – called as financial management, the finance organization to carry out the finance function with the management of funds. Financial Planning and Budgeting – set of financial goals Management – utilizing the scarce resources of the are the guidelines in the preparation of the financial plan. organization to maximize attainment of the organizations goal and objective Financial Accounting – specialized branch of accounting Effectiveness – prompt achievement of goals and that keeps track of a company's financial transaction objectives Accounting – art of recording, classifying and summarizing Efficiency – attaining desired objectives with the least transaction and events. amount of resources Income statement – called the statement of Productivity – output input ratio within a time period taking comprehensive income, shows the result of operation of a into consideration quality firm. Input – labor, materials, capital Balance sheet – the statement of financial coordination, Men – human resources shows the firm’s financial condition or position. Money – capital Financial statement – not only in internal terms users but Material – items needed to make a product also external users Methods – ways things are done Internal users – owners, managers, and employees Machine – produced by technology External users – government and other regulatory Market – to whom/where businesses sell their products agencies Moment – or time the forefront of effective and efficient Non-human capital – include tangible and intangible management resources needed by a company to attain its goal Media – enables businesses to reach their markets Human capital – includes human resources the Acquisition of funds – always be at the least cos and such employees, others are utilized by the company to attain its funds need to be channeled to fund projects or investments goal and objectives that will maximize benefits Tangible assets – include financial assets such as cash Financial Manager – decides where to get financial and marketable securities that help in maintaining healthy resources working capital position. Effective cash management – detailed cash flow budgets Intangible assets – includes goodwill, copyrights, trade names and brands