MId term test Flashcards
(58 cards)
Finance
Finance refers to the management of money, including activities like investing, borrowing, lending, budgeting, saving, and forecasting. It involves the processes and institutions that facilitate the movement of capital and resources in a society.
Financial services
Financial services encompass a broad range of services provided by financial institutions, such as banks, investment companies, insurance firms, and credit unions. These services include lending, investment management, wealth planning, insurance, and payment processing.
Managerial finance
Managerial finance is the branch of finance that focuses on the financial management of organizations. It involves tasks like budgeting, forecasting, and analyzing financial data to make informed business decisions. The goal is to maximize an organization’s value and ensure its long-term financial stability.
Financial manager
A financial manager is a professional responsible for the financial health of an organization. They oversee financial planning, create financial reports, direct investment activities, and develop strategies to meet the company’s financial goals. They ensure efficient management of funds and compliance with regulatory standards.
Commercial bank
A commercial bank is a financial institution that provides banking services to individuals and businesses. These services include accepting deposits, making loans, offering checking and savings accounts, and providing other financial products like certificates of deposit (CDs) and lines of credit.
Investment bank
An investment bank is a financial institution that assists corporations, governments, and other entities in raising capital by underwriting or acting as the client’s agent in the issuance of securities. Investment banks also provide advisory services for mergers, acquisitions, and other corporate financial transactions.
Primary market
The primary market is where new securities are issued and sold to investors for the first time, such as in an initial public offering (IPO) or bond issuance. Companies and governments use the primary market to raise new capital.
Credit union
A credit union is a member-owned financial cooperative that provides financial services similar to those of banks, including savings accounts, loans, and credit cards. Credit unions typically offer better rates and lower fees because they are non-profit organizations focused on serving their members rather than generating profits for shareholders.
Secondary market
The secondary market is where previously issued securities, such as stocks and bonds, are bought and sold between investors. Stock exchanges like the New York Stock Exchange (NYSE) are examples of secondary markets. In these markets, the issuing entity (like a corporation) does not receive money from the sales.
Bond
A bond is a debt security issued by a corporation, government, or other entity to raise capital. The bond issuer borrows funds from investors with the promise to repay the principal amount along with periodic interest payments (coupons) over a fixed period.
Money market
The money market is a segment of the financial market where short-term, high-liquidity debt securities are traded. These instruments include Treasury bills, commercial paper, and certificates of deposit. Money market securities typically have maturities of one year or less and are considered very low-risk.
Capital market
The capital market is a financial market where long-term debt (bonds) and equity (stocks) are bought and sold. It is a marketplace for businesses and governments to raise long-term funding. The capital market is divided into two segments: the primary market and the secondary market.
Commercial paper
Commercial paper is a short-term, unsecured promissory note issued by corporations to finance their short-term liabilities, like payroll or inventory. It typically has a maturity of less than 270 days and is used by companies to raise quick funds at lower interest rates.
Preferred stock
Preferred stock is a type of equity security that gives shareholders priority over common stockholders when it comes to dividend payments and asset liquidation in the event of a bankruptcy. However, preferred stockholders generally do not have voting rights.
Common stock
Common stock is a type of equity security that represents ownership in a corporation. Common stockholders are entitled to vote on corporate matters and may receive dividends, but they are the last to be paid in the event of liquidation, after debt holders and preferred stockholders.
Current assets
Current assets are assets that a company expects to convert to cash, sell, or consume within one year or within its operating cycle, whichever is longer. Examples include cash, accounts receivable, inventories, and pre-paid expenses.
Current liability
Current liabilities are obligations that a company is expected to settle within one year or within its operating cycle, whichever is longer. These liabilities include accounts payable, short-term debt, and accrued expenses.
Accounts receivable
Accounts receivable represent money owed to a company by its customers for goods or services that have been delivered but not yet paid for. It is considered a current asset because the company expects to collect the payment within a short time, usually within a year.
Inventories
Inventories are the goods and materials a company holds for the purpose of resale. They include raw materials, work-in-progress, and finished goods. Inventory is classified as a current asset because it is expected to be sold within the company’s operating cycle.
Accounts payable
Accounts payable represent a company’s obligation to pay off short-term debts to suppliers or creditors for goods or services that have been received but not yet paid for. This is recorded as a current liability on the balance sheet.
Pre - paid expenses
Pre-paid expenses are payments made by a company for goods or services to be received in the future, such as insurance premiums or rent. They are recorded as current assets until the goods or services are consumed, at which point they are expensed.
Notes payable
Notes payable are written agreements in which a company promises to repay a certain amount of money, typically with interest, by a specified date. They can be short-term or long-term liabilities, depending on the maturity date.
Accumulated depreciation
Accumulated depreciation is the total amount of depreciation expense that has been recorded against an asset over its useful life. It is a contra-asset account that reduces the book value of tangible fixed assets like buildings and equipment.
Paid - in capital excess of par
Paid-in capital in excess of par refers to the amount of money shareholders have paid to purchase stock above its par value. It is also known as additional paid-in capital. If a share has a par value of $1, but investors paid $5 for it, the $4 difference is the paid-in capital in excess of par.
