POINTERS FOR PRELIM
Important functions of CFO
- A high ranking official whose main function is to manage the financial actions of the
company. (Managing & raising funds) (Analyze, Plan & Control) PPT 1
Financial assets - It is an intangible asset whose value is dependent upon
contractual claim. (Shares of stock, bonds, bank deposits)
Leverage – It will occur when an entity borrows money in return for a promise to pay the
principal plus interest. (Financial Leverage)
Risk - It means the possible loss in investment
Power and functions of Securities and Exchange Commission
(SEC) - Formulate policies and recommendations on issues concerning the securities market,
advise Congress and other government agencies on all aspects of the securities market and
propose legislation and amendments thereto;”
Treasury bills - Short-term fixed income securities (not more than 1 year) PPT 2
Treasury bonds - Medium- to long-term government securities that pay interest regularly
(interest coupon payments)
Commercial paper - Unsecured short-term promissory note issued by private
corporation
Reason why private companies may opt to issue bonds instead
of shares of stock. - It will not affect ownership of the company. The earnings per share
will not be affected.
Banker’s acceptance - Short term promissory notes. Guaranteed by a bank. Arises
through international trade.
Initial Public Offering (IPO) - when the newly issued shares of stock are offered
for the first time to the general public, there is:
Underwriting - The act of buying securities from the issuing firm, with the intention of
selling the same to the general public.
Investment banker
Originating house - A firm (investment banker) that manages the underwriting.
Syndicate - A group of brokerage houses that sells securities
Market order - An order given to a stockbroker to buy shares of stock at the best price
available
Day order - an order to execute a stock transaction only in one particular day .
Spread - amount considered as gross profit
Clearing house - An entity that will ensure the following: 1. The seller will be paid
properly 2. The buyer will receive the shares completely.
Settlement date - actually the deadline to pay the amount of purchased security. the
agreed date to pay the purchased securities, which is the same day which the said securities
will be delivered
Factors that may affect security price
The following are some of the various factors that affect the price of securities:
1. Supply and demand
2. Financial performance (earnings) of the company
3. Stock’s apparent risk
4. Interest rate
5. Trend
6. Market sentiment
7. Government stability
Bullish - It means the prices of shares in stock market are rising.
Bearish - decreasing prices of share
Return of Investment (ROI) - Gains generated by an investment
Standard deviation
Hedging - Hedging is a risk management strategy employed to offset losses in investments
by taking an opposite position in a related asset.
Futures - Futures are financial contracts obligating the buyer to purchase an asset or the
seller to sell an asset and have a predetermined future date and price.
Functions of money - Medium of Exchange. Measure of value. Store of value
Legal tender – Legal tender is the currency which if offered as payment, in
proper amount, by the debtor, the creditor cannot refuse to accept. In Philippines,
“The maximum amount of coins to be considered as legal tender is adjusted as
follows
The payment of debts in money shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency which is legal tender in the
Philippines.
The delivery of promissory notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of payment only when they have been
cashed, or when through the fault of the creditor they have been impaired. PPT 6