Business Finance 4th Qrtr

• Stocks - shares of ownership and security that represents ownership of a function of the inquiry corporation.
• Stocks are intangible.
• Units of stocks are called shares.
• Shareholders/Stockholders - the owner of the issuing company and it is determined by the no. of shares it owns.
• Shareholders/Stockholders invest their money into a business, providing financial security, as well as overseeing how the directors of the company manage it.
• Shareholders/Stockholders issue and raise stocks for corporates for the expansion and operation of the company. (to raise capital)
• How to earn income from earning stocks?

  Dividends and Capital Gains
• Bonds - debt instruments used in order to borrow money.
• Bond Issuers may use bonds in terms of loan, interest and time.
• Interest Payment is called Coupon
• Characteristics of Bonds

  1. Face Value
  2. Coupon Rate
  3. Coupon Date
  4. Maturity Date
• Face Value


  money amount the bond will be worth at maturity, yet the preference of bond issuer if they issue bonds calculate interest
• Coupon Rate (Interest Rate)


  rate of interest the bond issuer will pay.
• Coupon Dates


  dates the bond issuer will pay interest pay, usually semi-annually.
• Maturity Date


  the date on which the principal amount of a note, draft, acceptance bond, or other debt instrument becomes due.
• Categories of Bonds:

  1. Corporate Bonds
  2. Municipal Bonds
  3. Gov't Bonds
  4. Agency Bonds
• Corporate Bonds


  corp issue bonds instead of loans bc of low interest rates.
• Municipal Bonds


  states and municipalities issue bonds (tax free)
• Gov't Bonds

  US: Treasury issued a year or < is called Bills.

  If 1-10 years, called Notes.

  If >10 years, Bonds.

  Phil issues both dollar and pesos:

  If pre-maturity date is 1 year or <, Treasury Bills.

  If 2-25 years, Treasury Bonds.
• Agency Bonds


  bonds issued by gov't affiliate agencies ex: BPI, DENR
• Varieties of Bonds:

  1. Zero-Coupon Bonds
  2. Convertible Bonds
  3. Callable Bonds
  4. Puttable Bonds
• Zero-coupon Bonds 


  do not pay coupon payment but discounted.
• Convertible Bonds


  embedded options that allow bond holders to convert their bonds into stocks.
• Callable Bonds


  one that can be called by company b4 it matures to get it back from the bondholders and issue it at a lower interest rate. (riskier for bond buyer if increase in value)
• Puttable Bonds


  allows bond holders to put/sell bonds to company b4 it matures. (advantage: bond holders)
• Money Management - the process of budgeting, saving, investing, spending or otherwise overseeing the capital usage of an individual or group.

  • can also refer more narrowly to investment management and portfolio management.
• Money Management Cycle:

  1. Earning
  2. Spending
  3. Saving
  4. Investing
• Earning - where an individual will make a list of his/her earnings.
• Spending - identify a "spending" pattern in which the individual will make a list of all the necessary expenditures (needs) so it can be deducted to its gross income.
• Savings - remaining portion of spending.
• Investing - he/she will choose which investment type he/she will use.
• Money Management can be proactive with periodic or regular financial planning, or reactive to specific events without financial planning.
• 50-20-30 budget rule: 50% of your income should go to necessities, 20% to wants, and 30% to savings.
• Pros of Money Management:

  • helps reduce inessential expenditures.
  • lowers the risk of running out of money.
  • helps individuals achieve their financial goals in the long run
• How to manage personal finaces?

  • Assess your Financial Situation
  • Create a Budget
  • Choose a Bank that is Right for You
  • Pay Taxes
  • Manage Debt
  • Invest your Money
  • Plan your Retirement
  • Plan for When You Die
• Assess your Financial Situation - determining one's net worth to place a monetary value on one's financial situation.
• Create a Budget - a budget is a good way to set financial priorities like saving for retirement or a vacation and managing debt.
• Choose a Bank that is Right for You - it is important to choose a bank that will help you accomplish your financial goals.
• Pay Taxes - Paying taxes is an important part of managing personal finances.
• Manage Debt - high-interest debt can lead to disastrous cons. Therefore, an individual can sell investments, negotiate with creditors to repay the debt in a payment plan, or file for bankruptcy.