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Basic Finance

The document defines finance and outlines its major areas and concepts. Finance involves the management of money for individuals, institutions, governments and businesses. It includes public finance, personal finance, non-profit organization finance, and business finance. Major areas of finance are financial institutions and markets, investment, and managerial finance. Financial institutions help transfer funds between savers/investors and those seeking funds. Financial markets facilitate the flow of funds. Forms of business organization discussed are sole proprietorships, partnerships, corporations, and cooperatives. The principles of financial management involve procuring, allocating and managing financial resources to maximize profit and business value.

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614 views3 pages

Basic Finance

The document defines finance and outlines its major areas and concepts. Finance involves the management of money for individuals, institutions, governments and businesses. It includes public finance, personal finance, non-profit organization finance, and business finance. Major areas of finance are financial institutions and markets, investment, and managerial finance. Financial institutions help transfer funds between savers/investors and those seeking funds. Financial markets facilitate the flow of funds. Forms of business organization discussed are sole proprietorships, partnerships, corporations, and cooperatives. The principles of financial management involve procuring, allocating and managing financial resources to maximize profit and business value.

Uploaded by

zandro_ico5041
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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BASIC FINANCE Definition: a study of how individuals, instructions, governments and business acquire, spend and manage financial

l resources, The direct transfer of funds from saves to investor without going through a financial intermediately. the art and science of managing money. the provision of money when and where required the science of managing money on ether a public of private scale administrative area in an organization which has to do with the management of the flow of cash Categories of Finance a. Public Finance deals with the revenue and expenditure pattern of the government and their various effects on the economy b. Private Finance b.1 Personal Finance concerned with the fundamentals of managing ones own personal money affairs b.2 Finance of Non-profit Organizations includes private undertakings b.3 Business Finance the provision of money for commercial use Major Areas a. Institutions and markets Financial Institutions- organizations that help the financial system operate efficiently and transfer funds from savers and inventors to individuals, business and governments that seek to spend or invest the funds in physical assets such as inventories, buildings or equipments. Financial intermediaries institutions that provide the market function of matching borrowers and lenders Financial Market these are physical locations or electronics forums that facilitate the flow of funds amongst investors, business and government. Types of Financial Markets: a. Securities market physical locations where debt and equity securities are traded and sold. Primary securities market initial offering of debt and equity securities to the public occurs. Secondary securities market the transfer of existing/issued debt and equity securities between investors occurs. Kinds: 1. Money market debt instruments of one year or less are traded 2. Capital market market for debt securities with maturities longer than one year b. Mortgage market where mortgage loans backed by real property in the form of non-current assets c. Derivative market facilitate the purchase and sale of derivative securities d. Currency exchange market electronic market in which banks and institutional traders buy and sell various currencies on behalf of business and other clients

b. Investment involves sales or marketing of securities, the analysis of securities, and the
management of investment risk through portfolio diversification.

c. Managerial finance- involves financial planning, assets management and funds raising
decisions to enhance the value of the firm / business. Forms of Business Organization 1. Sole Proprietorship owned by a single person, assumes all the risks and derives all profits. The entrepreneur makes the financial decisions.

2.
business

Partnership a voluntary association of two or more persons to carry on a

Features: a. b. c. common fund d.

voluntary agreement association of profit contribution to a lawful purpose

e. parties f. g. personality

mutual agency of the non-secrecy of articles separate juridical

Classification of Partnership a. Liability - General Partnership - Limited Partnership b. Period of Existence - Partnership at a fixed term - Partnership at will c. Object - Universal Partnership of Present Property - Particular Partnership Classification of Partners: a. Liability - General partners - Limited partners - General-limited partners b. Contribution - Capitalist partner - Industrial partner c. Role played in management - Managing partner - Liquidating partner d. Public knowledge - Ostensible partner - Secret partner - Dormant partner

Silent partner Nominal partner

3.

Corporation an artificial being created by operations of law having the rights of succession and the powers, attributes and properties expressly authorized by law or incident to its existence. Classification of corporation a. Nature of capital - Stock corporation - Non-stock corporation b. Purpose - Public corporation - Private corporation Components of the Corporation a. Corporators b. Incorporators c. State/Country - Domestic corporation - Foreign corporation d. Types of Stocks - Close corporation Open corporation c. Stockholders d. Members

4.

Cooperative a voluntary organization composed of small producers and consumers joining together to form a business enterprise. Principles of Financial Management Definition a branch of study concerned with the procurement, allocation and efficient management of financial resources so that the firm can maximize profit, increase its value and fulfil its corporate social responsibility. Responsibilities of the Financial Manager 1. Forecasting and planning 2. Major investment and financing decision 3. Coordination and control 4. Dealing with financial markets Financial Management Decisions a. Financing decisions b. Investing decisions c. Dividend decisions *Financial flexibility the companys ability to alter or manage its cash flows in response to unexpected needs and business opportunities

Objectives of Financial Management 1. Maximization of stockholders wealth determine how well your investments are doing in the financial markets through: a. Spread b. Turnovers c. Market value 2. Increase the value of the business Evolution of Financial Management 1900-1940s mergers 1941-1950s emphasizes liquidity 1951-1960s focused on investment 1961-1970s innovations and risk 1980s valuation 1990s globalization

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