8/8/2019 irene zara cantos module

1/22

Financial ManagementAnd Banking

What this module all about?

Hello Good day! I hope youre fine! And find this module interesting toyou. This module really helps you to develop your knowledge about financial

management and banking. This module provides a different accounting termso when you grow old and plan to go on banking work, you have a merelyknowledge about this.

What you are expected to learn?

Students who successfully complete this course will be able to:

1. Understand the common techniques used to improve cash flows inworking capital accounts.

2. Know the different accounting terminologies that will able you to used

the term if necessary in a correct way.3. Learned what are the electronic cash management techniques?

Starting Out: Begin Funding for Your Financial Security

How to learn from this module?

Id like you to imagine that you are the manager of the famousbank in the world.

Do you have a great desire to make your business continuouslyprovide services in the society?

Dont afraid to go in accounting world because most of thebillionaire in the world belongs to this field.

Be interested to this module and open your mind to learned andstudy this module very well. I believe that you can do it ..

8/8/2019 irene zara cantos module

2/22

Good luck!

8/8/2019 irene zara cantos module

3/22

Pre-Test:Encircle the correct answers.

This is the effective acquisition and use of money.a. Operation Management

b. Accounting Managementc. Advertising Managementd. Financial Management

This includes stocks, bonds, and money-market funds.a. Securitiesb. Cashc. Savings Accountd. None of the above

Which is not a responsibility of a financial manager?

a. Improve cash flowsb. Developing financial planc. Budget pland. None of the above

In order to manage finances properly, a company must have a(n):a. Capital Investmentb. Operating budgetc. Financial pland. Financial manager

Which is a working capital account?a. Cashb. Executive benefitsc. Capital budgetingd. None of the above

Which is not an electronically based system that eases bankingchores?

a. ATMb. Online bankingc. EFTd. ENC

These small plastic cards allow users to buy products immediatelythrough a short-term loan.

a. Smart Cardb. Debit Cardc. Bank Cardd. Credit Card

8/8/2019 irene zara cantos module

4/22

This bank account pays interest and requires advance notice beforecustomers can withdraw money.

a. Checking accountb. Passbook accountc. Time depositd. Demand Deposit

A company creates this to provide retirement benefits foremployees.

a. Line of Creditb. Credit Unionc. Pension fundd. Insurance

This includes bills and coins that makes up a countrys cash.a. Moneyb. Checks

c. Currencyd. Line of Credit

This is a government-appointed group that oversees the U.S.central banking system.

a. SECb. FDICc. MISd. Federal Reserve system

This money is available immediately upon request.a. Demand deposit

b. Time depositc. Currencyd. CD

This includes bills and coins that make up a countrys cash money.a. Cashb. Moneyc. Currencyd. Moola

This is anything generally accepted as a means of paying for goodsand services.

a. Cashb. Moneyc. Currencyd. Peso

This is another name for the Federal Reserve System.a. Fedb. SECc. FDIC

8/8/2019 irene zara cantos module

5/22

d. Homeland society

The Role of Financial Management

Key Terms

Accounts payable is a file or account sub-ledger that records amounts that aperson or company owes to suppliers, but has not paid yet (a form ofdebt),sometimes referred as trade payables. When an invoice is received, it is added tothe file, and then removed when it is paid. Thus, the A/P is a form ofcredit thatsuppliers offer to their customers by allowing them to pay for a product or serviceafter it has already been received.

Accounts Receivables (A/R) is one of a series ofaccounting transactions dealingwith the billing of a customer for goods and services they have ordered.

A budget (from old French bougette, purse) is generally a list of all plannedexpenses and revenues. It is a plan for saving and spending.[1] A budget is animportant concept in microeconomics, which uses a budget line to illustrate thetrade-offs between two or more goods. In other terms, a budget is an organizationalplan stated in monetary terms.

In finance, capital structure refers to the way a corporation finances its assetsthrough some combination of equity, debt, or hybrid securities. A firm's capitalstructure is then the composition or 'structure' of its liabilities. For example, a firm

that sells $20 billion in equity and $80 billion in debt is said to be 20% equity-financed and 80% debt-financed. The firm's ratio of debt to total financing, 80% inthis example, is referred to as the firm's leverage. In reality, capital structure maybe highly complex and include dozens of sources. Gearing Ratio is the proportion ofthe capital employed of the firm which come from outside of the business finance,e.g. by taking a short term loan etc.

Cash refers to money in the physical form ofcurrency, such as banknotes and coins.

In bookkeeping and finance, "cash" refers to current assets comprising currency or currency

equivalents that can be accessed immediately or near-immediately (as in the case of money

market accounts). Cash is seen either as a reserve for payments, in case of a structural orincidental negative cash flow or as a way to avoid a downturn on financial markets.

The discount rate is an interest rate a central bankcharges depository institutions that borrow

reserves from it.

Finance- Finance is the science of funds management. The general areasof finance are business finance, personal finance, and public finance. Finance

http://en.wikipedia.org/wiki/Suppliershttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Invoicehttp://en.wikipedia.org/wiki/Credit_(finance)http://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/French_languagehttp://en.wikipedia.org/wiki/Budget#cite_note-0http://en.wikipedia.org/wiki/Microeconomicshttp://en.wikipedia.org/wiki/Budget_linehttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Hybrid_securityhttp://en.wikipedia.org/wiki/Leverage_(finance)http://en.wikipedia.org/wiki/Moneyhttp://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/Banknotehttp://en.wikipedia.org/wiki/Coinhttp://en.wikipedia.org/wiki/Bookkeepinghttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Money_markethttp://en.wikipedia.org/wiki/Money_markethttp://en.wikipedia.org/wiki/Cash_flowhttp://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/Depository_institutionhttp://en.wikipedia.org/wiki/Fundinghttp://en.wikipedia.org/wiki/Suppliershttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Invoicehttp://en.wikipedia.org/wiki/Credit_(finance)http://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/French_languagehttp://en.wikipedia.org/wiki/Budget#cite_note-0http://en.wikipedia.org/wiki/Microeconomicshttp://en.wikipedia.org/wiki/Budget_linehttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Assetshttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Hybrid_securityhttp://en.wikipedia.org/wiki/Leverage_(finance)http://en.wikipedia.org/wiki/Moneyhttp://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/Banknotehttp://en.wikipedia.org/wiki/Coinhttp://en.wikipedia.org/wiki/Bookkeepinghttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Money_markethttp://en.wikipedia.org/wiki/Money_markethttp://en.wikipedia.org/wiki/Cash_flowhttp://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/Depository_institutionhttp://en.wikipedia.org/wiki/Funding

8/8/2019 irene zara cantos module

6/22

includes saving money and often includes lending money. The field offinance deals with the concepts of time, money, risk and how they areinterrelated. It also deals with how money is spent and budgeted.

The financial control factors fall into the categories of:

Significant investment

Unreimbursed expenses

Opportunity for profit or loss

Services available to the market

Method of payment

Inventory means goods and materials, or those goods and materials themselves,held available in stock by a business. This word is also used for a list of the contentsof a household and for a list for testamentary purposes of the possessions ofsomeone who has died. In accounting, inventory is considered an asset.

Investment is the commitment of money or capital to purchase financialinstruments or other assets to gain profitable returns in the form ofinterest, income{dividend}, or appreciation of the value of the instrument. [1] It is related to savingor deferring consumption. Investment is involved in many areas of the economy,such as business management and finance no matter for households, firms, orgovernments. An investment involves the choice by an individual or an organizationsuch as a pension fund, after some analysis or thought, to place or lend money in avehicle, instrument or asset, such as property, commodity, stock, bond, financialderivatives (e.g. futures or options), or the foreign asset denominated in foreigncurrency, that has certain level of risk and provides the possibility of generatingreturns over a period of time

Marketable securities are very liquid as they tend to have maturities of less thanone year. Furthermore, the rate at which these securities can be bought or sold haslittle effect on their prices.

http://en.wikipedia.org/wiki/Savinghttp://en.wikipedia.org/wiki/Timehttp://en.wikipedia.org/wiki/Moneyhttp://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Good_(economics_and_accounting)http://en.wikipedia.org/wiki/Materialshttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Will_(law)http://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Moneyhttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Incomehttp://en.wikipedia.org/wiki/Investment#cite_note-0http://en.wikipedia.org/wiki/Saving_(money)http://en.wikipedia.org/wiki/Consumption_(economics)http://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Business_managementhttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Commodityhttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Financial_derivativeshttp://en.wikipedia.org/wiki/Financial_derivativeshttp://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Savinghttp://en.wikipedia.org/wiki/Timehttp://en.wikipedia.org/wiki/Moneyhttp://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Good_(economics_and_accounting)http://en.wikipedia.org/wiki/Materialshttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Will_(law)http://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Moneyhttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Incomehttp://en.wikipedia.org/wiki/Investment#cite_note-0http://en.wikipedia.org/wiki/Saving_(money)http://en.wikipedia.org/wiki/Consumption_(economics)http://en.wikipedia.org/wiki/Economyhttp://en.wikipedia.org/wiki/Business_managementhttp://en.wikipedia.org/wiki/Financehttp://en.wikipedia.org/wiki/Real_estatehttp://en.wikipedia.org/wiki/Commodityhttp://en.wikipedia.org/wiki/Stockhttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Financial_derivativeshttp://en.wikipedia.org/wiki/Financial_derivativeshttp://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Option_(finance)

8/8/2019 irene zara cantos module

7/22

The major responsibilities of financial managers are to develop a financialplan, improve cash flow, develop budgets, set financial controls, and budgetcapital. Financial management is the effective acquisition and use of money.In order to manage finances properly, a company must have a financial plan.This is a forecast of financial requirements and the future financing sources.Financial management focuses on cash flows. Companies with relatively highaccounting profits generally have relatively high cash flows. Financialmanagers improve a company's cash flows by monitoring the working capitalaccounts:

Cash Inventory Accounts receivable Accounts payable

Common techniques used to improve cash flows in working capital accountsare:

Shrinking accounts receivable collection periods Dispatching bills on a timely basis Paying bills no earlier than necessary

Controlling level of inventory Investing excess cash to earn interest

Aggressive financial managers also use these electronic cash managementtechniques:

Move cash between accounts on a daily basis Invest excess cash on hand in short-term investments called

marketable securities

Marketable securities include stocks, bonds, money-market funds, and other

investments that can convert into cash quickly. They are interest-bearing ordividend-paying investments. Marketable securities are usually contingencyfunds. Most managers invest these funds in relatively risk-free investmentslike government securities or well-grounded companies.

Financial managers are also accountable for developing a budget. This is aplanning and control tool reflecting expected revenues, operating expenses,and cash receipts and outlays. It is the financial blueprint. Accountants

8/8/2019 irene zara cantos module

8/22

provide most data for the budgets because they understand the company'soperating costs. Once the financial manager develops the budget, themanager compares actual results to projections. The variances give themanager an idea of what corrective action, or financial control, to take. Themaster operating budget:

Sets a standard for expenditures Provides guidelines for controlling costs Offers an integrated and detailed plan for the future

Capital budgeting is the process for evaluating proposed investments inselect projects that provide the best long-term financial return. Financialmanagers do this to develop capital budgets and plan for the firm's capitalinvestments. Before the financial manger makes investments, the managermust decide:

Whether to make capital investments Which capital investments to make How to finance those investments made

The cost of capital is the average interest rate it must pay on financing. It issimilar to the interest rate you must pay when purchasing a house. It is notincluded in the initial price of the house, but is an additional expense thatshould be considered. There are three main factors that affect the interestrate a particular company must pay:

Risk associated with the company - how likely is it that the company

will repay? Most common interest rate currently available - rates fluctuate with

economic environment What type of financing is chosen

The prime interest rate (prime) is the lowest interest rate banks offer onshort-term loans to preferred borrowers. The discount rate is the interestrate the Federal Reserve Banks charge on loans to commercial banks andother depository institutions. Companies must take the fluctuations of theserates into account when making financial decisions. Internal financing maynot have an associated interest rate, but it does have an opportunity cost.

This means that your cost is affected by what you cannot otherwise do withthat money - investing, for example. The company's capital structure is themix of debt to equity.

8/8/2019 irene zara cantos module

9/22

Financial System

Key terms:

Money is any object that is generally accepted as payment for goodsand services and repayment ofdebts in a given country or socio-economiccontext.[1][2] The main functions of money are distinguished as: a medium ofexchange; a unit of account; a store of value; and, occasionally, a standard

of deferred payment.

In economics, the term currency can refer to a particular currency, forexample, the American Dollar, or to the coins and banknotes of a particularcurrency, which comprise the physical aspects of a nation's money supply.The other part of a nation's money supply consists of money deposited inbanks (sometimes called deposit money), ownership of which can betransferred by means ofcheques or other forms of money transfer such ascredit and debit cards. Deposit money and currency are money in the sensethat both are acceptable as a means of exchange, but money need notnecessarily be currency.

A demand deposit or bank money refers to the funds held in demanddeposit accounts in commercial banks.[1] These account balances are usuallyconsidered money and form the greater part of the money supply of acountry.

There are two types of financial institution: deposit institutions andnondeposit institutions. Deposit institutions accept deposits from customers

http://en.wikipedia.org/wiki/Paymenthttp://en.wikipedia.org/wiki/Goods_and_serviceshttp://en.wikipedia.org/wiki/Goods_and_serviceshttp://en.wikipedia.org/wiki/Debtshttp://en.wikipedia.org/wiki/Money#cite_note-0http://en.wikipedia.org/wiki/Money#cite_note-1http://en.wikipedia.org/wiki/Medium_of_exchangehttp://en.wikipedia.org/wiki/Medium_of_exchangehttp://en.wikipedia.org/wiki/Unit_of_accounthttp://en.wikipedia.org/wiki/Store_of_valuehttp://en.wikipedia.org/wiki/Standard_of_deferred_paymenthttp://en.wikipedia.org/wiki/Standard_of_deferred_paymenthttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Money_supplyhttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Demand_deposit_accounthttp://en.wikipedia.org/wiki/Demand_deposit_accounthttp://en.wikipedia.org/wiki/Commercial_bankshttp://en.wikipedia.org/wiki/Demand_deposit#cite_note-0http://en.wikipedia.org/wiki/Moneyhttp://en.wikipedia.org/wiki/Money_supplyhttp://en.wikipedia.org/wiki/Paymenthttp://en.wikipedia.org/wiki/Goods_and_serviceshttp://en.wikipedia.org/wiki/Goods_and_serviceshttp://en.wikipedia.org/wiki/Debtshttp://en.wikipedia.org/wiki/Money#cite_note-0http://en.wikipedia.org/wiki/Money#cite_note-1http://en.wikipedia.org/wiki/Medium_of_exchangehttp://en.wikipedia.org/wiki/Medium_of_exchangehttp://en.wikipedia.org/wiki/Unit_of_accounthttp://en.wikipedia.org/wiki/Store_of_valuehttp://en.wikipedia.org/wiki/Standard_of_deferred_paymenthttp://en.wikipedia.org/wiki/Standard_of_deferred_paymenthttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Money_supplyhttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Demand_deposit_accounthttp://en.wikipedia.org/wiki/Demand_deposit_accounthttp://en.wikipedia.org/wiki/Commercial_bankshttp://en.wikipedia.org/wiki/Demand_deposit#cite_note-0http://en.wikipedia.org/wiki/Moneyhttp://en.wikipedia.org/wiki/Money_supply

8/8/2019 irene zara cantos module

10/22

or members, and they offer checking and saving accounts, loans, and otherbanking services. Nondeposit institutions offer specific financial services butdo not accept deposits. In the past each category was strictly defined, butthe Depository Institutions Deregulation and Monetary Control Act of 1980deregulated banking and made it possible for all financial institutions to offer

a wider range of services. This blurred the differentiation betweeninstitutions.

A time deposit (also known as a term deposit, particularly in Canada,Australia and New Zealand; a bond in the United Kingdom; fixed deposit inIndia and in some other countries) is a money deposit at a bankinginstitution that cannot be withdrawn for a certain "term" or period of time.When the term is over it can be withdrawn or it can be held for another term.Generally speaking, the longer the term the better the yield on the money. Acertificate of deposit is a time-deposit product.

A credit card is a small plastic card issued to users as a system ofpayment. It allows its holder to buy goods and services based on the holder'spromise to pay for these goods and services. [1] The issuer of the card createsa revolving account and grants a line of credit to the consumer (or the user)from which the user can borrow money for payment to a merchant or as acash advance to the user.

A debit card (also known as a bank card or check card) is a plastic cardthat provides an alternative payment method to cash when makingpurchases. Functionally, it can be called an electronic check, as the funds arewithdrawn directly from either the bank account, or from the remaining

balance on the card. In some cases, the cards are designed exclusively foruse on the Internet, and so there is no physical card.

A smart card, chip card, or integrated circuit card (ICC), is any pocket-sized card with embedded integrated circuits. There are two broadcategories of ICCs. Memory cards contain only non-volatile memory storagecomponents, and perhaps dedicated security logic. Microprocessor cardscontain volatile memory and microprocessor components. The card is madeof plastic, generally polyvinyl chloride, but sometimes acrylonitrile butadienestyrene or polycarbonate . Smart cards may also provide strong securityauthentication for single sign-on within large organizations.

The money market is a component of the financial markets for assetsinvolved in short-term borrowing and lending with original maturities of oneyear or shorter time frames. Trading in the money markets involvesTreasurybills, commercial paper, bankers' acceptances, certificates of deposit, federalfunds, and short-lived mortgage- and asset-backed securities.[1] It providesliquidity funding for the global financial system.

http://en.wikipedia.org/wiki/Guaranteed_Investment_Certificatehttp://en.wikipedia.org/wiki/Australiahttp://en.wikipedia.org/wiki/New_Zealandhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Banking_institutionhttp://en.wikipedia.org/wiki/Banking_institutionhttp://en.wikipedia.org/wiki/Timehttp://en.wikipedia.org/wiki/Certificate_of_deposithttp://en.wikipedia.org/wiki/Plastichttp://en.wikipedia.org/wiki/Paymenthttp://en.wikipedia.org/wiki/Credit_cards#cite_note-0http://en.wikipedia.org/wiki/Revolving_accounthttp://en.wikipedia.org/wiki/Line_of_credithttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Merchanthttp://en.wikipedia.org/wiki/Cash_advancehttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Bank_accounthttp://en.wikipedia.org/wiki/Integrated_circuithttp://en.wikipedia.org/wiki/Memory_cardhttp://en.wikipedia.org/wiki/Microprocessorhttp://en.wikipedia.org/wiki/Polyvinyl_chloridehttp://en.wikipedia.org/wiki/Acrylonitrile_butadiene_styrenehttp://en.wikipedia.org/wiki/Acrylonitrile_butadiene_styrenehttp://en.wikipedia.org/wiki/Polycarbonatehttp://en.wikipedia.org/wiki/Authenticationhttp://en.wikipedia.org/wiki/Single_sign-onhttp://en.wikipedia.org/wiki/Financial_markethttp://en.wikipedia.org/wiki/Treasury_security#Treasury_billhttp://en.wikipedia.org/wiki/Treasury_security#Treasury_billhttp://en.wikipedia.org/wiki/Commercial_paperhttp://en.wikipedia.org/wiki/Bankers'_acceptancehttp://en.wikipedia.org/wiki/Mortgage-backed_securityhttp://en.wikipedia.org/wiki/Asset-backed_securityhttp://en.wikipedia.org/wiki/Money_market#cite_note-0http://en.wikipedia.org/wiki/Market_liquidityhttp://en.wikipedia.org/wiki/Global_financial_systemhttp://en.wikipedia.org/wiki/Guaranteed_Investment_Certificatehttp://en.wikipedia.org/wiki/Australiahttp://en.wikipedia.org/wiki/New_Zealandhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Banking_institutionhttp://en.wikipedia.org/wiki/Banking_institutionhttp://en.wikipedia.org/wiki/Timehttp://en.wikipedia.org/wiki/Certificate_of_deposithttp://en.wikipedia.org/wiki/Plastichttp://en.wikipedia.org/wiki/Paymenthttp://en.wikipedia.org/wiki/Credit_cards#cite_note-0http://en.wikipedia.org/wiki/Revolving_accounthttp://en.wikipedia.org/wiki/Line_of_credithttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Merchanthttp://en.wikipedia.org/wiki/Cash_advancehttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Bank_accounthttp://en.wikipedia.org/wiki/Integrated_circuithttp://en.wikipedia.org/wiki/Memory_cardhttp://en.wikipedia.org/wiki/Microprocessorhttp://en.wikipedia.org/wiki/Polyvinyl_chloridehttp://en.wikipedia.org/wiki/Acrylonitrile_butadiene_styrenehttp://en.wikipedia.org/wiki/Acrylonitrile_butadiene_styrenehttp://en.wikipedia.org/wiki/Polycarbonatehttp://en.wikipedia.org/wiki/Authenticationhttp://en.wikipedia.org/wiki/Single_sign-onhttp://en.wikipedia.org/wiki/Financial_markethttp://en.wikipedia.org/wiki/Treasury_security#Treasury_billhttp://en.wikipedia.org/wiki/Treasury_security#Treasury_billhttp://en.wikipedia.org/wiki/Commercial_paperhttp://en.wikipedia.org/wiki/Bankers'_acceptancehttp://en.wikipedia.org/wiki/Mortgage-backed_securityhttp://en.wikipedia.org/wiki/Asset-backed_securityhttp://en.wikipedia.org/wiki/Money_market#cite_note-0http://en.wikipedia.org/wiki/Market_liquidityhttp://en.wikipedia.org/wiki/Global_financial_system

8/8/2019 irene zara cantos module

11/22

A commercial bank is a type of financial intermediary and a type ofbank. Commercial banking is also known as business banking. It is a bankthat provides checking accounts, savings accounts, and money marketaccounts and that accepts time deposits.[1] After the implementation of theGlass-Steagall Act, the U.S. Congress required that banks engage only in

banking activities, whereas investment banks were limited to capital marketactivities. As the two no longer have to be under separate ownership underU.S. law, some use the term "commercial bank" to refer to a bank or adivision of a bank primarily dealing with deposits and loans fromcorporations or large businesses. In some other jurisdictions, the strictseparation of investment and commercial banking never applied.Commercial banking may also be seen as distinct from retail banking, whichinvolves the provision of financial services direct to consumers. Many banksoffer both commercial and retail banking services.

Thift- A savings and loan association in the United States

A credit union is a cooperative financial institution that is owned andcontrolled by its members and operated for the purpose of promoting thrift,providing credit at reasonable rates, and providing other financial services toits members.[1][2][3] Many credit unions exist to further communitydevelopment[4] or sustainable international development on a local level.

Commercial finance companies have in recent years become a favoriteoption for entrepreneurs seeking small business loans. These institutionsgenerally charge higher interest rates than banks and credit unions, but theyalso are more likely to approve a loan request. Most loans obtained through

finance companies are secured by a specific asset as collateral, and thatasset can be seized if the entrepreneur defaults on the loan.

Insurance is a form of risk management primarily used to hedgeagainst the risk of a contingent, uncertain loss. Insurance is defined as theequitable transfer of the risk of a loss, from one entity to another, inexchange for payment. An insurer is a company selling the insurance; aninsured or policyholder is the person or entity buying the insurance policy.The insurance rate is a factor used to determine the amount to be chargedfor a certain amount of insurance coverage, called the premium. Riskmanagement, the practice ofappraising and controlling risk, has evolved as

a discrete field of study and practice.

A line of credit is any credit source extended to a government,business or individual by a bank or other financial institution. A line of creditmay take several forms, such as overdraft protection, demand loan, exportpacking credit, term loan, discounting, purchase of commercial bills, etc. It iseffectively a bank account that can readily be tapped at the borrower's

http://en.wikipedia.org/wiki/Financial_intermediaryhttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Commercial_bank#cite_note-0http://en.wikipedia.org/wiki/Glass-Steagall_Acthttp://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Capital_markethttp://en.wikipedia.org/wiki/Retail_bankhttp://en.wikipedia.org/wiki/Savings_and_loan_associationhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Cooperative_bankinghttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Credit_(finance)http://en.wikipedia.org/wiki/Credit_union#cite_note-0http://en.wikipedia.org/wiki/Credit_union#cite_note-autogenerated2007-1http://en.wikipedia.org/wiki/Credit_union#cite_note-2http://en.wikipedia.org/wiki/Community_developmenthttp://en.wikipedia.org/wiki/Community_developmenthttp://en.wikipedia.org/wiki/Credit_union#cite_note-3http://en.wikipedia.org/wiki/International_developmenthttp://www.answers.com/topic/collateralhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Hedge_(finance)http://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Uncertaintyhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Decision_modelhttp://en.wikipedia.org/wiki/Credit_(finance)http://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Overdrafthttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Exporthttp://en.wikipedia.org/wiki/Financial_intermediaryhttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Commercial_bank#cite_note-0http://en.wikipedia.org/wiki/Glass-Steagall_Acthttp://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Capital_markethttp://en.wikipedia.org/wiki/Retail_bankhttp://en.wikipedia.org/wiki/Savings_and_loan_associationhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Cooperative_bankinghttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Credit_(finance)http://en.wikipedia.org/wiki/Credit_union#cite_note-0http://en.wikipedia.org/wiki/Credit_union#cite_note-autogenerated2007-1http://en.wikipedia.org/wiki/Credit_union#cite_note-2http://en.wikipedia.org/wiki/Community_developmenthttp://en.wikipedia.org/wiki/Community_developmenthttp://en.wikipedia.org/wiki/Credit_union#cite_note-3http://en.wikipedia.org/wiki/International_developmenthttp://www.answers.com/topic/collateralhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Hedge_(finance)http://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Uncertaintyhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Decision_modelhttp://en.wikipedia.org/wiki/Credit_(finance)http://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Overdrafthttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Export

8/8/2019 irene zara cantos module

12/22

discretion. Interest is paid only on money actually withdrawn. Lines of creditcan be secured by collateral or unsecured.

An automated teller machine (ATM), also known as a Cash Machineand by several other names (see below), is a computerised

telecommunications device that provides the clients of a financial institutionwith access to financial transactions in a public space without the need for acashier, human clerk or bank teller. On most modern ATMs, the customer isidentified by inserting a plastic ATM card with a magnetic stripe or a plasticsmart card with a chip, that contains a unique card number and somesecurity information such as an expiration date or CVVC (CVV).Authentication is provided by the customer entering a personal identificationnumber (PIN).

Financial institutions offer lines of credit to make money available foruse any time after the institution grants the loan. This working capital has a

usual term of one year. Banks can cancel line of credit at any time.

Checking accounts are demand deposit - money that customers useanytime, whereas time deposits are bank accounts that pay interest andrequire advance notice before customers can withdraw the money. Savingsaccounts are time deposit accounts. Money in savings accounts can bewithdrawn at any time, but may be subject to fees. The most common typeof savings account is the statement savings account, also called thepassbook savings account. This type of account earns nominal interest, butoffers the most flexibility for users. A money-market savings account earnsmore interest, but has restrictions such as a limited number of withdrawals

per month. A certificate of deposit (CD) earns even more interest than amoney-market account, but again it has more restrictions. Money in a CDremains for a set period. Early withdrawal presents a penalty fee.

Credit cards are small plastic pieces that allow users to buy productsimmediately with a short-term loan. For that convenience, credit cardcompanies charge a high interest and annual fees for any balance remainingin the account after the monthly books close. Another alternative to currencyis a debit card. It looks like a credit card, but functions like a check. Itimmediately debits the checking account for the purchase. A smart card isthe newest addition to card convenience. In addition to tracking checking

account balances, a debit card can contain information like the customer'saddress, frequent flyer account, or health insurance records. It stores thisinformation on a chip embedded in the card.

http://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Collateral_(finance)http://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/Bank_tellerhttp://en.wikipedia.org/wiki/ATM_cardhttp://en.wikipedia.org/wiki/Magnetic_stripehttp://en.wikipedia.org/wiki/Smart_cardhttp://en.wikipedia.org/wiki/Integrated_circuithttp://en.wikipedia.org/wiki/Card_Security_Codehttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Collateral_(finance)http://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/Bank_tellerhttp://en.wikipedia.org/wiki/ATM_cardhttp://en.wikipedia.org/wiki/Magnetic_stripehttp://en.wikipedia.org/wiki/Smart_cardhttp://en.wikipedia.org/wiki/Integrated_circuithttp://en.wikipedia.org/wiki/Card_Security_Codehttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Personal_identification_number

8/8/2019 irene zara cantos module

13/22

Financialinstitution

Description

Commercialbank

Deposit institutionProfit-orientedOperates under state or national

charterMakes profit by charging customers

fees and interest rates higher than theypay for the money

Thrift Deposit institutionProfit orientedSavings and loans - use most deposits

8/8/2019 irene zara cantos module

14/22

to make mortgage home loansMutual savings banks - owned by

depositors

Credit union

Deposit institution

Non-profit member-owned

organizationTake deposits only from membersPay favorable interest rates because

they are tax-exempt

Insurancecompany

Non deposit institutionProvides insurance coverage for life,

property, and other potential lossesInvests payments in real estate,

construction projects, and otherinvestments

Pensionfund

Non deposit institutionSet up by companies to provide

retirement benefits for employeesMoney contributed by the company

and its employees is put into securitiesand other investments

Financecompany

Non deposit institutionLends money to consumers and

businesses for home improvements,expansion, purchases, and other

purposes

Brokeragefirm

Non deposit institutionAllows investors to buy and sell

stocks, bonds, and other investmentsMany offer checking accounts, high-

paying savings accounts, and loans tobuy securities

Three electronically based systems ease banking chores: ATMs, EFTS,and online banking. Deposit institutions offer automatic teller machines

(ATMs) for companies to perform basic transactions anytime. Withdraws anddeposits are available anytime. Electronic funds transfer system (EFTS) isanother form of electronic banking. This computerized system completesfinancial transactions. More than one third of all workers use EFTS if theirpaychecks are direct deposited. The third electronically based system isonline banking. Withdrawals, transfers, bill paying, and balance inquiries arecommon online tasks. This is the most convenient for customers, and themost cost effective for institutions.

8/8/2019 irene zara cantos module

15/22

Nearly 9,000 banks failed during the Great Depression from 1929 to 1934.The Banking Act of 1933 established the Federal Deposit Insurance Company(FDIC) that insures money on deposit, up to $100,000, in U.S. banks. TheFDIC collects insurance premiums from member banks and deposits thepremiums into the U.S. Treasury's Savings Association Insurance Fund for

thrifts, or Bank Insurance Fund for banks. The National Credit UnionAssociation protests deposits in credit unions. In addition to insurance, thefederal government has agencies that supervise and regulate banks, andcomply with regulations.

State banking commissions regulate state-chartered banks Federal Office of the Comptroller of the Currency regulates nationally-

chartered banks Federal office of the thrift supervision regulates thrifts Federal Reserve System regulates banking system in general

The number of U.S. financial institutions has declined since the bankingindustry deregulation in 1980 - from 14,146 to 8,358. Bank combinations,competitive pressure, and financial problems caused this decline. The 1999Financial Services Modernization Act repealed the Glass-Steagall Act(Banking Act of 1933) and portions of the 1956 Bank Holding Act that keptbanks out of securities and insurance. The repeal of these created bothmega-banks offering full service, and community banks concentratingservices for a small area. The Riegle-Neal Interstate Banking and BranchingEfficiency Act of 1994 reverse legislation dating back to 1927 that restricted

consumers from making deposits, cashing checks, and handling bankingtransactions to one branch of their bank.

Regulators refer to the separation of securities research functions and banklending functions within the same company as a Chinese wall. This invisiblewall prevents bankers and securities personnel from influencing one another.Community banks are smaller banks that concentrate on serving the needsof local consumers and businesses. According to a recent Federal Reservestudy, small banks are now earning more on assets than their hugecompetitors.

8/8/2019 irene zara cantos module

16/22

The Functions of the FederalReserve System

The U.S. Federal Reserve Board (Fed) is a government-appointed group thatoversees the U.S. central banking system. It is a network of 12 district banksthat controls the nation's banking system. Members are appointed by thepresident to 14-year terms, staggered at two year intervals. All nationalbanks are required to be members, but state-chartered banks are optional.

The Fed regulates the nation's money supply to help stabilize the economyand control inflation by managing the amount of money available. Thismonitory policy will increase or decrease interest rates. The discount rate isthe interest rate that the Fed charges on loans to commercial banks. The

prime interest rate (prime) is the lowest interest rate banks offer on short-term loans to preferred borrowers. There are four key ways the Fed changesthe money supply. The first is to change the reserve requirement. If the Fedincreases the reserve requirement, the money supply will decrease. Thesecond way the Fed can change the money supply is to change the discountrate. If the Fed lowers the discount rate, the money supply is increased. Thethird way is to conduct open market operations, or sell government bonds. Ifthe Fed buys open-market operations, then the money supply is increased.The last way the Fed can change the money requirement is to establishselective credit controls. This changes the margin requirements. If there arefewer controls, then the money supply is increased.

Currency includes bills and coins that make up a country's cash money, whilemoney is anything generally accepted as a means of paying for goods andservices. Money exists in three forms: currency, demand deposit, and timedeposit. To be an effective medium of exchange, money must have thesecharacteristics:

Divisible Portable Durable Difficult to counterfeit Stable value

The Fed keeps a close eye on the money supply. To do this, they look atvarious combinations of currency. Money is measured on a scale of M1-M3.

M1 - narrow measure that consists of currency, demand deposits, andNOW accounts.

8/8/2019 irene zara cantos module

17/22

M2 - broader measure that includes all M1 plus savings deposits,money market funds, and time deposits under $100,000, and otherrestricted deposits

M3 - broadest measure of the money supply includes M2 plus timedeposits of $1000+, and other restricted deposits

Activity:Picture-Picture

Group the class into 4. The class will picture out the situation preparedby the teacher

1. Picture out the situation inside the bank.2. Picture out that the businessman transact in other businessman.3. Picture out the common responsibility of a financial manager.

4. Choose one financial institution then picture out the common situationbased on its description above.

8/8/2019 irene zara cantos module

18/22

Post Test

Encircle the correct answer.

Which is not a working capital account?a. None of the above

b. Accounts payablec. Accounts payabled. Accounts receivable

Which is a common technique used to improve a working capitalaccount?

a. Dispatching bills when necessaryb. Paying bills earlyc. Leaving excess cash in checking accountsd. Expanding accounts receivable collection periods

Which statement is never true?a. Marketing securities are low riskb. Marketable securities are dividend-paying investmentsc. Marketable securities are interest bearing investmentsd. None of the above

This offers an integrated and detailed plan for the future.a. Financial statementsb. Financial planc. Master budgetd. Budge

This is corrective action.a. Limit orderb. Budgetingc. Financial controld. Margin trading

This is an example of a demand-deposit account.a. A checking accountb. A passbook savings accountc. A statement savings account

d. A CD

Which is an example of a deposit institution?a. Finance companyb. Brokerage firmc. Commercial bankd. Pension fund

8/8/2019 irene zara cantos module

19/22

This institution invests payments in real estate, constructionprojects, and other investments.

a. Thriftb. Insurance companyc. Credit union

d. Commercial bank

Nearly 9,000 banks failed during this time.a. The Great Depressionb. World War IIc. World War Id. The 1980s recession

The Glass-Steagall Act established this.a. NCUAb. FDIC

c. FTCd. SEC

This measure of the money supply includes currency, demanddeposits, and NOW accounts.

a. M1b. Smart cardsc. M2d. Fed supply

What does the monitory policy do?

a. Determine which banks are certifiedb. Control the stock marketc. Regulate supply and demandd. Increase or decrease interest rates

This is activity of the Federal reserve to buy and sell governmentbonds on the open market.

a. Reserve activityb. Mutual fundsc. Open market operationsd. M3

If the Fed buys open market operations, what happens?a. The money supply is increasedb. The interest rates risec. The cash reserves are decreasedd. The discount rates rise

8/8/2019 irene zara cantos module

20/22

This is the Federal Reserves power to set credit terms on varioustypes of loans.

a. Selective credit controlsb. Credit monitorc. Congressional appointment

d. Span of authority

Answer Keys:

8/8/2019 irene zara cantos module

21/22

Pre test1. d2. d3. d4. c

5. c6. a7. d8. a9. c10. c11. d12. a13. c14. b15. a

Post test1. a2. b3. a4. b5. c6. c7. c8. b9. a

10. a11. a12. a13. c14. b15. b

Bibliography:

www.yahoo.com

http://www.yahoo.com/http://www.yahoo.com/

8/8/2019 irene zara cantos module

22/22

www.google.com

Webster dictionary.

http://www.google.com/http://www.google.com/