Name: Jullie Carmelle Chatto

Date: November 16, 2021

Subject: Fin 8N Financial Management
Time: 1st Sem'21 C012-T24:30-5:30 M-Sat
Email: jchchatto@universityofbohol.edu.ph
Email Subject: MIDTERM EXAM FOR FINANCE 8
1. Explain the relationship between Financial Management, Accounting, and Economics?
Financial management is concerned with the management of finances in order to meet
the goals of a corporation. The study of economics focuses on the production,
distribution, and consumption of commodities. Accounting is the study of the
movement of money for both organizations and people. Economics is the bigger
picture, because it is like the foundation of the financial management and accounting.
Finance management is concerned with funding a firm's activities, whereas accounting
is concerned with documenting and reporting financial data of corporate organizations.

2. A finance manager has three major types of decisions to make: Investment decision, financing
decision, and dividend decision. Differentiate three and cite examples.

Investment decision is decisioning about how and what to do with the firm’s fund,
where it should be investment and how sustainable it is. An example for this decision is
deciding whether is it wise to buy a certain machinery for production or not. On the
other hand, financing decision deals with what to do with the funds raised or where to
allocate the money of the company. Example is whether a company makes a profit or
not, interest on borrowed funds must be paid. Lastly, dividend decision is the decision
that is mainly on the distribution of profits for the shareholders’ and the share for the
retained earnings for future contingencies. For example, a corporation with few
operations should return unused capital to shareholders by increasing dividends.

3. Explain why the manager’s primary responsibility should be able to maximize shareholder’s
wealth and give only secondary consideration to other stakeholder’s welfare?
When business managers attempt to maximize their company's current wealth, they are
essentially attempting to boost the company's stock price. As the stock price rises, so
does the firm's worth and the wealth of its shareholders. By increasing shareholder
wealth, management optimizes the current value of the projected future returns to the
firm's owners, or the value of dividends and capital gains, which characterizes the
company's economic condition.
4. Explain the relationship between finance, marketing, and manufacturing. Right after, cite a
situation that would clearly illustrate the relationship between the three.
Manufacturing is concerned with the design and manufacture of a product. Marketing is
the process of selling, promoting, and distributing a product. Manufacturing is the
process of producing items by utilizing labor, machinery, tools, and other formulation.
Manufacturing and marketing are crucial for a company's existence since they dictate
what items will be manufactured and how they will be marketed. A ideal scenario that
will demonstrate the three's relationship. First and foremost, finance is concerned with
the monetary elements of a firm; the finance manager will distribute cash for a certain
product or project. Manufacturing is concerned with the creation of a product or project,
whereas Marketing is concerned with the product's endorsement and advertisement.
5. Explain thru giving out examples on when it is better to have a business which is: a. single
proprietorship; b. partnership; c. corporation.
a. A single proprietorship is best suited for small businesses with little risk and earnings. It is
best developed while the company still has a small, loyal group of clients rather than a
large number of consumers.
6. Elaborate on why it is difficult for potential competitors to enter a market. (Be sure that you
have stated the factors and explain)
The barriers to entry make it difficult for potential rivals to enter a market. High start-up
expenses or other impediments that prohibit new competitors from simply entering an
industry or sector of business are referred to as barriers to entry. Common entrance
hurdles include specific tax breaks for existing businesses, patent protection, a strong
brand identification, customer loyalty, and significant switching costs. Other
impediments include the requirement for new businesses to get licenses or regulatory
approval before they may begin operations. There are entry obstacles for a variety of
reasons. Certain obstacles may be meant to safeguard public safety but have the
unintentional consequence of benefiting existing enterprises, or they may be erected
owing to the intrinsic scarcity of public resources required by these sectors, or they
may be erected to intentionally protect favored industries.

7. What is the function/purpose of the following financial institutions? Name one actual example
for each.
a. Invesment banks f. Life insurance companies
b. Commercial banks g. Mutual funds
c. Financial services corporations h. Exchange trade funds
d. Credit unions i. Hedge funds
e. Pension funds j. Private equity companies

a. Investment banks facilitate the acquisition and selling of bonds, stocks, and other assets,
as well as assisting corporations with initial public offerings, which are when companies first
go public and sell shares. Example: Asian Alliance Investment Corporation

b. Commercial banks operate as deposit account administrators for both businesses and
people, albeit they are largely focused on business accounts, and they issue public loans
using the money they have deposited. Example: BDO Private Bank

c. Finance services firms give loans to individuals but do not accept deposits in the same way
that banks do. Finance services businesses borrow money at a low interest rate from
sources such as commercial banks and lend it at a higher interest rate. Example: BancNet

d. Credit unions encourage savings and thrift while also providing clients with credit at low
interest rates. Example: UnionBank

e. Pension funds ensure that there will be enough money to cover employees' pensions once
they retire in the future. Example: Pag-IBIG Fund
 f. In exchange for the client's premium payments, a life insurance company distributes a lump
amount known as a death benefit to beneficiaries after your death. Example: Sun Life of
Canada Inc.
g. A mutual fund constantly gathers money from a large number of participants and invests it
in stocks, bonds, money market instruments, other assets, or even cash. Example: ATRAM
Alpha Opportunity Fund, Inc.
h. The primary intention of investing in ETFs was to accomplish long-term goals, but they may
be traded like any other stock, with investors able to short or purchase on margin.
8. What would happen to a country’s standard of living if people lost faith in the safety of financial
institutions? Elaborate.
9. What is the importance of knowing the factors that influence the exchange rates (in the
international trade) and foreign risk?
10.