New Era University.

College of Accountancy
SCHOOL OF MANAGEMENT
No.9 Central Avenue, New Era, Quezon City 1107 Philippines
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Assignment Nos.9/The Basic Tools of Finance

Submitted by: Ciara Castañeto Submitted to: Prof. Aj Orencia

Date Submitted
July 12, 2021

Section Schedule
Wednesday 4:00-5:30PM
1. What is equity? Explain your answer in simple terms.

Simply put, equity is the ownership of a valuable asset. When the owner
contributes to the asset purchase's financing, ownership is established. Debt is
another option for funding the asset purchase. The quantity of equity needed to
buy an asset is proportional to the amount of debt owed on the item.

2. Define the term “temporary source of financing”.

Tax provisions, dividend provisions, bank overdraft, cash credit, trade deposits,
public deposits, bills discounting, short-term loans, inter-corporate loans, and
commercial paper are all examples of short-term sources. Retained earnings,
depreciation allowances, share capital, long-term loans, and debentures are all
long-term sources. A credit or loan facility provided to a company for a duration of
less than one year is known as short-term financing. It is a short-term loan
agreement offered to a business to bridge the gap between revenue and costs. It
aids the company in managing its current responsibilities, such as paying
employees' salaries and wages, as well as procuring raw supplies and inventories.

3. Why does statement of cash flow are important when assessing the financial
strength in the economy? Justify your answer.
Investors value the statement of cash flows because it reveals how much actual
cash a firm has earned. The income statement, on the other hand, frequently
includes noncash revenues or costs that the cash flow statement does not. The
relevance of a cash flow statement is that it is used to assess the financial position
of a business, i.e. the inflow and outflow of cash and cash equivalents in the firm
over the course of an accounting year, and it also aids the business in determining
the availability of cash.
References:
Borad, S. B. (2014, March 27). Sources of Working Capital. Retrieved July 11, 2021,
from eFinanceManagement website: https://efinancemanagement.com/working-capital-
financing/sources-of-working-capital#:~:text=Short%20term%20sources%20are%20tax
Meena, N. (2019, July 29). Short Term Sources of Finance: 2 Major Sources (with
Merits). Retrieved from Economics Discussion website:
https://www.economicsdiscussion.net/financial-management/short-term-sources-of-
finance/31757