D076 Finance Skills for Managers
1. Finance: The study of managing and allocating funds at the personal or business level
The management and allocation of capital with the objective of investing, forecast- ing,
budgeting, saving, borrowing, lending and so on. Finance uses accounting info. to achieve these
objectives.
Finance is forward looking, accounting is backward looking.
2. Three primary areas in finance: Business finance Investments
Financial institutions
3. Accounting: The system of recording, reporting, and summarizing past financial information
and transactions
Backward looking
4. Capital: A financial asset that can be used by a firm or individual. Examples of capital may
be machinery or cash held by a firm
5. Business finance: An area of finance that deals with sources of funding, the capital structure
of corporations, the actions that managers take to increase the value of the firm to its owners,
and the tools and analysis used to allocate financial resources.
6. Capital structure: the mixture of debt and equity maintained by a firm
7. Investments: An area of finance that involves deciding which assets to invest in to create
wealth in the future
8. Asset pricing: The process of valuing assets. (Major sub-discipline of invest- ments)
You can't know how much an asset is worth until it is purchased. Once purchased the current
market value is known.
9. Current market value: What someone would pay right now for an asset
10.Financial institutions: An area of finance that includes firms or organizations that exist to
accept a wide variety of deposits, to offer investment products to individuals and businesses,
to provide loans, or to broker financial transactions.
11.Utility: The total satisfaction received from consuming goods and services.
12.Publicly traded firms: Firms that have issued shares to the public.
13.Privately held companies: Firms that have not issued shares to the public where the
ownership rights are privately held.
14.3 main tasks a financial manager does to maximize shareholder wealth: - making investment
decisions
, D076 Finance Skills for Managers
- making financing decisions
- managing working capital
15.Investment decisions: Most important task for financial managers. Assesses the costs and
benefits of each potential investment in order to wisely use the money that shareholders have
invested in the firm.
16.Financing decisions: Decisions made for investments. If investments are large, the firm may
need to issue new stocks, bonds (debt) to raise capital to finance them.
17.Research and development (R&D): The business function responsible for improving and
developing services and products
18.Cash management: Managing the day-to-day finance operations of a firm.
19.Tax strategies: Methods used to minimize the amount of taxes a business pays.
20.Financial policy implementation: Incorporating new finance ideas within a firm
21.Venture capitalists: Professional managers of investment capital that typically invest in very
young g new ventures
22.Harvest: Generating cash or stock from the sales or IPO of companies in the portfolio of
investments.
23.Teller: An entry-level commercial bank position with the responsibility to interact with
customers at the bank's front desk or drive-through window.
24.Credit analysts: A commercial bank position with the responsibility to assess the riskiness of
lending borrowers and determining whether or not loans should be extended to potential bank
clients.
25.Personal bankers: A commercial bank position with the responsibility to find and attract
new clients.
26.Trusts: An arrangement that allows a third party to hold assets on behalf of a beneficiary
or beneficiaries.
27.Estates: Everything that a person owns or controls, especially at death
28.Wills: A legal expression of an individual's wishes concerning the deposition of his or her
property after death
29.Careers in finance: Corporate finance
Investment banking
Private equity Commercial
banking Financial planning
Insurance
Real estate
30.Financial analyst - corporate finance: Works in corporate finance, large firms. Includes
managing financial reports and providing analysis that is used to make strategic decisions.
Works across management on strategic planning initiatives, budgeting, and forecasting.
, D076 Finance Skills for Managers
31.CFO: Chief financial officer. Highest ranking officer in corporate finance. Over- sees the
financial analysis and decision making of the firm.
32.Investment banking: Investment banks perform mergers and acquisitions, cor- porate
offerings, sales and trading.
33.Private equity: Includes angel investors, venture capitalists, and takeover firms deals with
investments in firms that are privately held and whose ownership is not yet bought or sold ion
any public stock exchange.
34.Commercial banking: A financial institution that accepts deposits, offers check- ing and
savings accounts, extends loans and provides other services for the public
35.Financial planning: Work with individuals to help them achieve their financial goals
36.Insurance: Agent/broker, underwriter, loss adjuster,,risk manager, claims inves- tigator,
actuary, appraiser, and more
37.Real estate: Includes property such as land and buildings that can be valued, invested, or
serve as the basis for a financial transaction
38.Personal finance steps: Analyzing financial data : budgeting Assessing
financial goals: set financial goals
Financing your goals: fund your investments
Investing to achieve goals: invest money in checking, savings, CD's, stocks, bonds etc
39.Liquidity: The ability to turn financial securities into cash easily without losing significant
value.
40.Treasury securities: A debt instrument (bond) that is issued by the United States
government in order to raise capital
41.Revenues: The top line of the income statement. The total amount of money a business
brings in (before subtracting any costs).
42.Corporate bonds: A debt instrument that is used by a corporation in order to raise capital
43.Stock: A share of ownership in a company
44.Money market: A type of financial market used for short-term assets that are held for less
than one year.
45.Capital markets: A type of financial market used for long-term assets that are held for
greater than one year
46.Primary market: The financial market where securities (stocks and/or bonds) are first sold.
47.Syndicate: A group of intermediaries that is used to oversee the issuance of stocks and/or
bonds.
, D076 Finance Skills for Managers
48.Initial public offering (IPO): When a privately held company first offers shares of stock to
outside investors to raise capital, therefore becoming a publicly owned company.
49.Secondary market: The financial market where securities are traded after the initial
issuance
Referred to as the stock market
50.Auction market: A secondary market with a physical location and where prices are
determined by investors willingness to pay
51.The New York Stock Exchange (NYSE): A physical trading floor and a comput- er network
where stocks are bought and sold. It is the largest stock exchange in the world.
52.Dealer market: a secondary market made up of multiple dealers that hold an inventory of
securities and quote prices
53.NASDAQ: A computer network where stocks are bought and sold. It is the second-largest
stock exchange in the world. Typically, technology-related companies will go public through this
exchange.
54.Specialist: A market maker on the NYSE that holds an inventory of securities and acts as a
liquidity provider to those who wish to buy and sell.
55.Risk: The possibility that the realized or actual return will differ from the expected return
56. bid-ask spread: The difference between the bid and ask prices that compensate the
specialist for the risk that he or she bears for willingness to provide liquidity.
57.Efficient market: A market in which prices fully reflect all the available informa- tion about a
specific security.
58.The U.S. Securities and Exchange Commission: An independent federal gov- ernment agency
that (1) protects investors, (2) maintains fair, orderly, and efficient markets, and (3) facilitates
capital formation.
59.Depository institutions: Financial institutions that accepts monetary deposits and provides
loans.
Savings banks, commercial banks, savings and loan associations, credit unions
60.Savings and loan associations: A type of depository institution also known as a "thrift"
institution that places a significant focus on providing loans for residential mortgages and real
estate.
61.non-depository institutions: Financial institution that is not allowed to accept monetary
deposits but may perform functions such as lending money or acting as an intermediary
between savers and lenders.
1. Finance: The study of managing and allocating funds at the personal or business level
The management and allocation of capital with the objective of investing, forecast- ing,
budgeting, saving, borrowing, lending and so on. Finance uses accounting info. to achieve these
objectives.
Finance is forward looking, accounting is backward looking.
2. Three primary areas in finance: Business finance Investments
Financial institutions
3. Accounting: The system of recording, reporting, and summarizing past financial information
and transactions
Backward looking
4. Capital: A financial asset that can be used by a firm or individual. Examples of capital may
be machinery or cash held by a firm
5. Business finance: An area of finance that deals with sources of funding, the capital structure
of corporations, the actions that managers take to increase the value of the firm to its owners,
and the tools and analysis used to allocate financial resources.
6. Capital structure: the mixture of debt and equity maintained by a firm
7. Investments: An area of finance that involves deciding which assets to invest in to create
wealth in the future
8. Asset pricing: The process of valuing assets. (Major sub-discipline of invest- ments)
You can't know how much an asset is worth until it is purchased. Once purchased the current
market value is known.
9. Current market value: What someone would pay right now for an asset
10.Financial institutions: An area of finance that includes firms or organizations that exist to
accept a wide variety of deposits, to offer investment products to individuals and businesses,
to provide loans, or to broker financial transactions.
11.Utility: The total satisfaction received from consuming goods and services.
12.Publicly traded firms: Firms that have issued shares to the public.
13.Privately held companies: Firms that have not issued shares to the public where the
ownership rights are privately held.
14.3 main tasks a financial manager does to maximize shareholder wealth: - making investment
decisions
, D076 Finance Skills for Managers
- making financing decisions
- managing working capital
15.Investment decisions: Most important task for financial managers. Assesses the costs and
benefits of each potential investment in order to wisely use the money that shareholders have
invested in the firm.
16.Financing decisions: Decisions made for investments. If investments are large, the firm may
need to issue new stocks, bonds (debt) to raise capital to finance them.
17.Research and development (R&D): The business function responsible for improving and
developing services and products
18.Cash management: Managing the day-to-day finance operations of a firm.
19.Tax strategies: Methods used to minimize the amount of taxes a business pays.
20.Financial policy implementation: Incorporating new finance ideas within a firm
21.Venture capitalists: Professional managers of investment capital that typically invest in very
young g new ventures
22.Harvest: Generating cash or stock from the sales or IPO of companies in the portfolio of
investments.
23.Teller: An entry-level commercial bank position with the responsibility to interact with
customers at the bank's front desk or drive-through window.
24.Credit analysts: A commercial bank position with the responsibility to assess the riskiness of
lending borrowers and determining whether or not loans should be extended to potential bank
clients.
25.Personal bankers: A commercial bank position with the responsibility to find and attract
new clients.
26.Trusts: An arrangement that allows a third party to hold assets on behalf of a beneficiary
or beneficiaries.
27.Estates: Everything that a person owns or controls, especially at death
28.Wills: A legal expression of an individual's wishes concerning the deposition of his or her
property after death
29.Careers in finance: Corporate finance
Investment banking
Private equity Commercial
banking Financial planning
Insurance
Real estate
30.Financial analyst - corporate finance: Works in corporate finance, large firms. Includes
managing financial reports and providing analysis that is used to make strategic decisions.
Works across management on strategic planning initiatives, budgeting, and forecasting.
, D076 Finance Skills for Managers
31.CFO: Chief financial officer. Highest ranking officer in corporate finance. Over- sees the
financial analysis and decision making of the firm.
32.Investment banking: Investment banks perform mergers and acquisitions, cor- porate
offerings, sales and trading.
33.Private equity: Includes angel investors, venture capitalists, and takeover firms deals with
investments in firms that are privately held and whose ownership is not yet bought or sold ion
any public stock exchange.
34.Commercial banking: A financial institution that accepts deposits, offers check- ing and
savings accounts, extends loans and provides other services for the public
35.Financial planning: Work with individuals to help them achieve their financial goals
36.Insurance: Agent/broker, underwriter, loss adjuster,,risk manager, claims inves- tigator,
actuary, appraiser, and more
37.Real estate: Includes property such as land and buildings that can be valued, invested, or
serve as the basis for a financial transaction
38.Personal finance steps: Analyzing financial data : budgeting Assessing
financial goals: set financial goals
Financing your goals: fund your investments
Investing to achieve goals: invest money in checking, savings, CD's, stocks, bonds etc
39.Liquidity: The ability to turn financial securities into cash easily without losing significant
value.
40.Treasury securities: A debt instrument (bond) that is issued by the United States
government in order to raise capital
41.Revenues: The top line of the income statement. The total amount of money a business
brings in (before subtracting any costs).
42.Corporate bonds: A debt instrument that is used by a corporation in order to raise capital
43.Stock: A share of ownership in a company
44.Money market: A type of financial market used for short-term assets that are held for less
than one year.
45.Capital markets: A type of financial market used for long-term assets that are held for
greater than one year
46.Primary market: The financial market where securities (stocks and/or bonds) are first sold.
47.Syndicate: A group of intermediaries that is used to oversee the issuance of stocks and/or
bonds.
, D076 Finance Skills for Managers
48.Initial public offering (IPO): When a privately held company first offers shares of stock to
outside investors to raise capital, therefore becoming a publicly owned company.
49.Secondary market: The financial market where securities are traded after the initial
issuance
Referred to as the stock market
50.Auction market: A secondary market with a physical location and where prices are
determined by investors willingness to pay
51.The New York Stock Exchange (NYSE): A physical trading floor and a comput- er network
where stocks are bought and sold. It is the largest stock exchange in the world.
52.Dealer market: a secondary market made up of multiple dealers that hold an inventory of
securities and quote prices
53.NASDAQ: A computer network where stocks are bought and sold. It is the second-largest
stock exchange in the world. Typically, technology-related companies will go public through this
exchange.
54.Specialist: A market maker on the NYSE that holds an inventory of securities and acts as a
liquidity provider to those who wish to buy and sell.
55.Risk: The possibility that the realized or actual return will differ from the expected return
56. bid-ask spread: The difference between the bid and ask prices that compensate the
specialist for the risk that he or she bears for willingness to provide liquidity.
57.Efficient market: A market in which prices fully reflect all the available informa- tion about a
specific security.
58.The U.S. Securities and Exchange Commission: An independent federal gov- ernment agency
that (1) protects investors, (2) maintains fair, orderly, and efficient markets, and (3) facilitates
capital formation.
59.Depository institutions: Financial institutions that accepts monetary deposits and provides
loans.
Savings banks, commercial banks, savings and loan associations, credit unions
60.Savings and loan associations: A type of depository institution also known as a "thrift"
institution that places a significant focus on providing loans for residential mortgages and real
estate.
61.non-depository institutions: Financial institution that is not allowed to accept monetary
deposits but may perform functions such as lending money or acting as an intermediary
between savers and lenders.
