Lesson 1

Question 1

Stakeholders in a company:

Answer 1

Managers
Employees
Suppliers
Customers
Creditors
Regulatory agencies
Community

Question 2

Factors that can affect stock prices

Answer 2

Nature of business
Maturing obligations
Investing decision

Question 3

Is a shared responsibility of the board of directors and all the top managers in a company including the president and all the vice pres

Answer 3

Shareholder’s wealth maximization

Question 4

Links the savers and the users of funds

Answer 4

Financial system

Question 5

Can come from households, individuals, companies, government agencies, or any other entity whose cash inflows are more significant than their cash outflows.

Answer 5

Savings

Question 6

Ex of financial intermediaries:

Answer 6

Banks
Insurance Companies
Stock exchange
Stock brokerage firms
Mutual funds
Other financial institutions

Question 7

Offers facilities for the trading of shares of publicly listed companies

Answer 7

The Philippines Stock Exchange (PSE)

Question 8

Corporate bonds and government debt securities can be traded through the “ “

Answer 8

Philippine dealing and exchange corp (PDEx)

Question 9

The original issuance of a financial instrument, equity or debt security, is called a “ “

Answer 9

Primary issue

Question 10

A financial market that deals with shirt term borrowing

Answer 10

Money market

Question 11

Deals with long term sources of financing

Answer 11

Capital market

Question 12

Investing in the stock market has to be coursed through “ “

Answer 12

Stock brokerage firms

Question 13

Types of brokers:

Answer 13

Online brokers
Live brokers

Question 14

With “ “, one can trade in stock market through the internet

Answer 14

Online broker

Question 15

With “ “, one needs a telephone to call brokers and place orders

Answer 15

Live brokers

Question 16

Provides opportunities for big and small investors to invest in financial instruments which they would not have considered on their own, or they may have considered but do not have the time or expertise to do it

Answer 16

Mutual funds

Question 17

Funds are invested by professional managers for a fee

Answer 17

Mutual funds

Question 18

There are mutual funds that are limited only to stocks

Answer 18

Equity funds

Question 19

Restricted to fixed income instruments like bonds and treasury notes

Answer 19

Bonds funds

Question 20

Provide a combination of both stocks and fixed income instruments

Answer 20

Balance funds

Question 21

To invest in a mutual fund, he/she has to buy shares of a mutual fund, and the buying prices depends on what?

Answer 21

Net asset value (NAV)

Question 22

Note that the net asset value (NAV) of a mutual fund changes “ “ as the value of the financial instruments where the fund is invested also changes

Answer 22

Every day

Question 23

Other financial institutions includes:

Answer 23

Government Service Insurance System (GSIS)

Social Security System (SSS)

Unit Investment Trust Fund (UITF)

Question 24

Financial instruments are generally classified into two major categories:

Answer 24

Equity securities and debt securities

Question 25

Include ordinary shares or common stocks and preference shares or preferred stocks

Answer 25

Equity securities

Question 26

Include treasury bills, treasury notes, retail treasury bonds, and corporate bonds

Answer 26

Debt securities

Question 27

Ordinary shares Preference shares

Answer 27

Equity securities

Question 28

Treasury bills Treasury notes Retail treasury bonds Corporate bonds

Answer 28

Debt securities

Question 29

Has priority over an ordinary share in terms pf claims over a company’s assets

Answer 29

Preference shares

Question 30

Are the real owners of the company

Answer 30

Common shareholder

Question 31

What is PSEi

Answer 31

The Philippine Stock Exchange Index

Question 32

It must be noted that investment in “ “ is riskier because returns are not guaranteed

Answer 32

Equity securities

Question 33

The dividend per share of “ “ is not fixed

Answer 33

Ordinary share

Question 34

A company is not obligated to pay dividends if it is not in a position to do it. Korique or nah?

Answer 34

Korique

Question 35

For cumulative preferred shareholders, unpaid dividends cannot accumulate. T or F?

Answer 35

False. For cumulative preferred shareholders, unpaid dividends CAN accumulate

Question 36

No cash dividends will be paid to common shareholders unless all the dividends in arrears due to preferred shareholders are paid first. T or F?

Answer 36

True

Question 37

Being the residual owner of a company, prefferes shareholders have voting rights, a privilege that is generally not available to common shareholders. T or F?

Answer 37

False Being the residual owner of a company, COMMON shareholders have voting rights, a privilege that is generally not available to PREFFERED shareholders

Question 38

COMMON shareholders=?

Answer 38

Real owners of the company/residual owner

Question 39

Growth potential of their investment is unlimited=?

Answer 39

Common shareholders

Question 40

Have priority over ordinary shareholders in cash dividend declaration

Answer 40

Preferred shareholders

Question 41

Are debt financial instruments that are traded in the secondary markers through PDEx

Answer 41

Debt securities

Question 42

Debt securities issued by the government

Answer 42

Treasury bonds

Question 43

For treasury bonds, coupon interest is paid “ “

Answer 43

Semi anually

Question 44

It offers slightly higher interest rates than government securities

Answer 44

Corporate bonds

Question 45

In terms of claims over a company’s assets, “ “ have priority over preference and common shares

Answer 45

Bond holders

Question 46

Explain why the same company came be a saver and a user of funds

Answer 46

Ex. A company has to open a bank account, especially a current account or a checking account, to start a business. In doing business, a company has to deposit cash to a bank, which is financial intermediary. When the business has grown, this company may need to borrow funds to support an increasing volume. When a company borrows, it becomes a user of funds. In this case, this company is both a depositor and a borrower

Question 47

What is the roles of financial intermediaries in the financial system?

Answer 47

Financial intermediaries serve as middlemen for transactions, generally between banks or funds. These intermediaries help create efficient markets and lower the cost of doing business. It creates a market for saving and lending by indirectly matching savers and borrowers

Question 48

What is the role or function of yhe PSE

Answer 48

Provide and ensures a fair, efficient, transparent and orderly market for the buying and selling securities

Question 49

What is debt securities

Answer 49

Financial assets that define the terms of a loan between an issuer (the borrower) and an investor (the lender)

Question 50

The highest policy making body in a corporation

Answer 50

Board of directors

Question 51

Who elected the directors?

Answer 51

Shareholder

Question 52

Who helps the board of directors and the top management set policies regarding a company’s capital structure?

Answer 52

VP for finance

Question 53

What are the two conditions before a company can declare cash dividends?

Answer 53

Must have retained earnings to support cash declaration Must have cash

Question 54

Factors considered in declaring cash dividends:

Answer 54

Availability of investment opportunities Capital structure Access to long term sources of funds