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Finance Notes

this is finance yay

TermDefinition
What is Finance? The science and art of managing money.
Personal Finance Includes: Money spent, money saved, money invested.
Business Finance Includes: How firms raise money, invest to earn profit, reinvest or distribute profits.
Financial Services: The design and delivery of advice and financial products to individuals, businesses, and governments.
Careers in Financial Services: Banking, personal financial planning, investments, real estate, insurance.
Managerial Finance: Financial managers administer the financial affairs of businesses, developing financial plans and evaluating large expenditures
Chartered Financial Analyst (CFA) A graduate-level certification focused on the investment side of finance
Certified Financial Planner (CFP): Certification that requires passing a 10-hour exam covering personal financial planning.
Sole Proprietorship: A business owned by one person and operated for profit.
Corporation: An entity created by law with the ability to sue, be sued, and own property.
Goal of a Firm: Maximize shareholder wealth.
Stakeholders Employees, customers, suppliers, creditors, owners, and others with an economic link to the firm.
Role of Business Ethics: Standards of conduct or moral judgment applied in commerce.
Managerial Finance Function: Practices focused on managing a business’s financial resources to generate profits.
Marginal Cost-Benefit Analysis: Decisions should be made when added benefits exceed added costs.
Primary Market: The market where securities are initially issued.
Money Market: A market for short-term funds and debt instruments like Treasury bills and commercial paper.
Bonds Long-term debt instruments issued by businesses and governments.
Capital Market A market that facilitates transactions of long-term funds
Broker Market vs. Dealer Market: Broker market brings buyer and seller together; dealer market has intermediaries execute orders
Q: What are the three ways firms can obtain funds from external sources? A: Firms can obtain funds through financial institutions, financial markets, or private placements.
Q: What are financial institutions? A: Financial institutions are intermediaries that channel savings from individuals, businesses, and governments into loans or investments. (Banks, Investment Firms, Credit Unions, and Insurance Companies)
Q: What is the role of commercial banks? A: Commercial banks provide a secure place for savers to invest and offer loans to individuals and businesses. Example: Wells Fargo provides checking accounts, savings accounts, and mortgages to its customers.
Q: How do investment banks differ from commercial banks? A: Investment banks help companies raise capital, advise on major transactions, and engage in trading activities, while commercial banks focus on deposits and loans. Ex. Bank helps startup raise money thru IPO
Q: What is a Eurocurrency market? A: The Eurocurrency market is a market for short-term deposits in U.S. dollars or other currencies outside their home country. (U.S. company depositing DOLLARS into a London Bank)
Q: What is an ETF? A: An ETF (Exchange-Traded Fund) is a basket of securities that trades like a stock on an exchange. It can include stocks, bonds, commodities, or currencies. (S&P 500 and Dow Jones)
Q: What are Non-Equity ETFs? A: Non-equity ETFs include bond ETFs, currency ETFs, and commodity ETFs, offering exposure to different asset classes without owning the physical assets. (ETF1 invests in bonds, and ETF2 invests in gold)
Q: What is the shadow banking system? A: The shadow banking system consists of financial institutions that perform banking functions, like lending, but don't take deposits and are less regulated. (accept money from investors and invest in short-term, low-risk like government bonds.)
Created by: mohanchilly
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