FORMS OF BUSINESS ORGANIZATION

1. SOLE PROPRIETORSHIP - an unincorporated business with a single owner who pays

personal income tax on profits earned from the business.
2. PARTNERSHIP
 General – an owner of a partnership who has unlimited liability; usually a
managing partner and active in the day-to-day operations of the business
 Limited - only one of the partners will be the general partner and have unlimited
liability
3. CORPORATION - a company or group of people authorized to act as a single entity
(legally a person) and recognized as such in law.
BENEFITS OF FINANCIAL STATEMENT
1. FINANCIAL ANALYSIS – ratio (past)
2. FINANCIAL CONTROL – cost control (present)
3. FINANCIAL FORECASTING – how we allocate budget; way of sustainability (future)
BUSINESS GOALS OF FINANCIAL MANAGEMENT
1. Maximize shareholder’s profit
2. Corporate governance
FINANCIAL MANAGEMENT DECISIONS
1. CAPITAL BUDGETING – budget & planning
2. CAPITAL STRUCTURE – borrowing (either invest to expand or pay debts)
3. WORKING CAPITAL – current assets - liabilities
FINANCE vs ACCOUNTING vs ECONOMICS
FINANCE – anticipates future goals & risks
ACCOUNTING – records & clarifies past transactions
ECONOMICS – looks at the way resources, products and money itself flows within a society or
country – or sometimes even between countries.
TWO (2) FUNCTIONS OF FINANCE
1. ANALYZE
2. DECISION-MAKING
TWO (2) PILLARS OF FINANCE
1. RISK – an unfavourable scenario (loss possibility)
2. RETURN – finance terminology for “profit” from investment
TYPES OF FINANCE
1. CORPORATE FINANCE (BUSINESS FINANCE) – associated to assets & liabilities
2. FINANCIAL ECONOMICS – deals with the finances of the government
3. INVESTMENT - a monetary asset purchased with the idea that the asset will provide
income in the future or will later be sold at a higher price for a profit.
4. BEHAVIORAL FINANCE – how they react towards something; nagmamagaling
5. PERSONAL FINANCE - how you handle your own money; all about managing your
income and your expenses, and saving and investing.
6. PUBLIC FINANCE - the management of a country’s revenue, expenditures, and debt load
through various government and quasi-government institutions.
PRINCIPLES OF FINANCE
1. TIME VALUE OF MONEY
2. RETURN RISK TRADE-OFF
3. CASH FLOW
4. MARKET PRICES
5. INCENTIVES
6. PROFITABILITY & LIQUIDITY
TYPES OF FINANCIAL SYSTEM/ENVIRONMENT (under INVESTMENT)
1. FINANCIAL MARKETS
a. Money Market – assets involved in short-term borrowing, lending, buying and
selling with original maturities of one year or less.
b. Capital Market – in long-term securities; buyers & sellers engage in trade of financial
securities like bonds, stocks, etc. The buying/selling is undertaken by participants
such as individuals and institutions.

2. FINANCIAL INSTITUTIONS
a. Bank - an institution that provides a great variety of financial services. (credit card,
loans, deposits)
 Commercial Bank – has P300-400B capital
 Savings – has P1B capital
b. Lending - the temporary giving of money or property to another person with the
expectation that it will be repaid.
c. Insurance - an individual or entity receives financial protection or reimbursement
against losses from an insurance company.
d. Hedge Fund – can basically invest in anything; will often use borrowed money to
amplify their returns; blue-chip companies only
e. Mutual Fund – pool of investment, not offered in bank and is handled by a
separated entity.
  Unit Investment Trust Fund (UITF) – diversified pool of investment, handled
by bank
f. Exchange-Traded Fund (ETF) – is under NYSE; a marketable security that tracks a
stock index, a commodity, bonds, or a basket of assets; shares trade like common
stock on an exchange; caters to middle & upper class (as well as Leveraged Buyout
Fund)
g. Standard & Poor’s 500 (S&P/S&P500/Spider) - an American stock market index
based on the market capitalizations of 500 large companies having common stock
listed on the NYSE, NASDAQ, or the Cboe BZX Exchange.

3. FINANCIAL INSTRUMENTS
a. Security - has monetary value and can be traded; one (1) investment only.
b. Portfolio Theory – collection of investments
c. Market Analysis - research on any market which aims to anticipate or predict the
direction of prices or growth.
d. Treasury Bills – government-issued with a maturity of less than one (1) year; short-
term investment
e. Banker’s Acceptance – has due date & maturity rate; a promised future payment, or
time draft, which is accepted and guaranteed by a bank and drawn on a deposit at
the bank.
f. Commercial Paper – doesn’t exceed 270 days and turns to bonds if it does;
unsecured, short-term debt instrument issued for the financing of accounts payable
and inventories, and meeting short-term liabilities. (pasweldo ganern)
TYPES OF DEPOSIT (under FINANCIAL INSTRUMENTS)
1. DEMAND DEPOSIT - account with a financial institution that allows the depositor to
withdraw his/her funds from the account without warning or with less than seven days'
notice
2. TIME-DEPOSIT –has a specified date of maturity, such as a certificate of deposit. The
funds in this account must be held for a fixed term and include the understanding that
the depositor can make a withdrawal only by giving notice.
TYPES OF STOCKS (under FINANCIAL INSTRUMENTS)
1. COMMON – holders have voting privileges
2. PREFERRED – holders have a greater claim to a company’s assets and earnings
TYPES OF CAPITAL MARKET
1. PRIMARY – first time to open your product (IPO) to the public; investors buy securities
directly from the company issuing them
 2. SECONDARY - securities are traded after the company has sold all the stocks and bonds
offered on the primary market. Hindi na fresh, kumbaga.
TYPES OF INVESTORS (RISK APPETITE)
1. RISK AVERSE – conservative
2. RISK NEUTRAL – moderate
3. RISK SEEKING – aggressive
TYPES OF DEBT
1. UNSECURED – short-term investments not backed up by collateral
2. SECURED – backed up by collateral (asset)
TERMINOLOGIES
ADMINISTRATION - the process or activity of running a business, organization, etc.; operations
ARBITRAGE – basically buying a security in one market and simultaneously selling it in another
market at a higher price, profiting from the temporary difference in prices.
AT THIS COST – at present time
BLUE CHIP – established companies
BONDS – debt; has fixed return and not protected by insurance
BREAKEVEN - revenue equals cost, and neither a profit nor loss is made
COUPON/COUPON RATE - interest rate of bonds
COLLATERAL – a property or asset that a borrower offers as a way for a lender to secure the
loan. If the borrower stops making the promised loan payments, the lender can seize the
collateral to recoup its losses; non-bank
DEFAULT – bankrupt; the failure to pay interest or principal on a loan or security when due
DIVIDENDS – profit of an incorporation (in finance terms.)
DOG AND PONY SHOW – seminar to market new products or services to potential buyers
EFFECTIVITY – achieving the best; doing the right thing
EFFICIENCY – maximizing resources; doing the thing right
FINANCIAL MANAGEMENT – knowing how to manage money; refers to the strategic planning,
organising, directing, and controlling of financial undertakings in an organisation or an institute.
FINANCIAL CONTIGENCY - focuses on allocating finances and resources in times of financial
crisis. For small and large businesses alike, a financial contingency plan acts as a lifeline when
the health of your company is at risk.
FUND MANAGER – handles both UITF & MF
FUNDAMENTALS - the basic qualitative and quantitative information that contributes to the
financial or economic well-being and the subsequent financial valuation of a company, security
or currency; future plans
INITIAL PUBLIC OFFERING (IPO) - the very first sale of stock issued by a company to the public.
INCORPORATION – small corporation; the legal process used to form a corporate entity or
company.

LEVERAGE – the ability to borrow

LIQUID - ability to transfer hard assets to cash or the state of being in a position where one has
sufficient cash on hand to accommodate any and all necessary financial obligations
MANAGEMENT – process of dealing with or controlling things/people; decisions
MARK-TO-MARKET - futuristic in high-risk investment; measure of the fair value of accounts
that can change over time, such as assets and liabilities; aims to provide a realistic appraisal of
an institution's or company's current financial situation
MARKET PRICE - the current price at which an asset or service can be bought or sold.
MARKET VALUE - the price an asset would fetch in the marketplace
MAXIMUM – highest amount possible attained
MICROMARKET – futuristic; provide users with a convenience store feel with vending options
and prices. They bring a whole new level of selection, service, and satisfaction to your break
room and work campus.
MINIMUM – lowest amount possible attained
MORTGAGE - borrower is obliged to pay back with a predetermined set of payments
NEW YORK STOCK EXCHANGE (NYSE) – was bought by American Stock Exchange (AMEX)
OPTIMAL – best or most favourable
PAPER LOSS - occurs when the value of something drops below the price that was paid for it;
refers to the amount that would be lost on a security if it were sold.
PAR VALUE - apparent worth or the nominal value shown on the principal
PARTNER – preferred shareholder
PRINCIPAL – the amount of a loan or mortgage that is yet to be paid back, excluding any
interest; the original loan amount, before any repayment has taken place.
PROSPECTUS - a formal legal document that is required by and filed with the Securities and
Exchange Commission (SEC) that provides details about an investment offering for sale to the
public; background of risk and return
REVENUE - the income that a business has from its normal business activities, usually from the
sale of goods and services to customers
ROAD SHOW - presentation given by an issuer of securities to potential buyers (VIP clients)
ROLLOVER - reinvesting funds from a mature security into a new issue of the same or a similar
security; move your assets from one investment to another
SALE - a transaction between two parties where the buyer receives goods (tangible or
intangible)
SHARE - unit of ownership that represents an equal proportion of a company's capital
SPREAD – “profit” of the bank from deposits and loans; credit card return
TRADE – finance term for “sell”
UNIT – element of the company
VARIABLE UNIVERSAL LINK (VUL) – combination of insurance & investment
ZONAL VALUE - the basis of the Bureau of Internal Revenue, City Assessor’s Office and Register
of Deeds in computing the respective taxes due on the property. (survey; majority of what
people agreed on)
Ps – per share
P/sh – prices per share