Finance DECA Performance Indicators
Terms in this set (28)
Discuss legal considerations in the finance industry.
The 1999 Gramm-Leach-Bliley (GLBA) Act protected consumer information and prevented data breaches. Another recent legal action taken is the U.S. Securities and Exchange Commission (SEC) wanting to impose fees on market data (info on trades in U.S. financial markets). While the SEC's responsibility is to keep trade fair and equitable, many financial institutions are against this added cost to investment.
Discuss the effect of tax laws and regulations on financial transactions.
There are four types of financial transaction tax: Securities, Currency, Bank and Automated Payment. These taxes, known as financial transaction taxes, help keep financial markets stable, allows for equitable tax collection across a nation and lowers the risk of tax evasion.
Discuss the nature and scope of compliance in the finance industry.
There are numerous regulations that must be followed in the finance industry. The Financial Industry Regulatory Authority (FINRA) was created by Congress to monitor the industry. FINRA performs regular, routine exams at financial firms to determine compliance including but not limited to the anti-fraud provisions of the Securities Exchange Act of 1934, the Securities Act of 1933, FINRA's advertising rules and Regulations of the Federal Reserve Board.
Describe the use of technology in compliance.
Oversight groups like the Financial Industry Regulatory Authority (FINRA) use multiple types of technology to monitor billions of securities transactions on a daily basis. For example, cloud computing provides the opportunity to process massive amounts of data while performing surveillance. Additionally, by using algorithms and patterns in data, compliance teams can identify market manipulations. Financial firms benefit from additional technology that enables compliance documents to be submitted electronically and the creation of databases including the Central Registration Depository (WebCRD), BrokerCheck, Investment Advisor Regulation Depository (IARD) and the Individual Advisor Public Disclosure (IAPD).
Explain the responsibilities of finance professionals in providing client services.
A financial professional, who works with clients to create budgets, retirement plans, investing strategy, must first have exceptional knowledge of the industry to respond to client needs. Additionally, communication skills are paramount as clients are discussing sensitive financial matters including marriage and planning for death. The ability to listen to clients and show empathy while being responsive to a client's needs will build trust and establish a long term relationship.
Use customer Relationship Management (CRM) technology.
Customer Relationship Management (CRM) technology is used to understand how your company uses data to influence interactions with current and future customers. CRM assists a business to understand how data is used to influence decision making to increase profit.
Explain the need to save and invest.
When an individual or business has created a set of financial goals, the action step of saving and investing will help create wealth needed to attain those financial goals. Saving and investing can protect an individual or business from unexpected emergencies, reduce the need for debt and provide long term financial stability.
Describe the role of financial institutions.
A financial institution conducts transactions such as investments, loans or deposits. There are a variety of financial institutions that can provide services in this industry including Commercial Banks, Investment Banks, Insurance Companies, Brokerages, Investment Companies, Unit Investment Trusts (UIT), Face Amount Certificates, Management Investment Companies, and NonBank entities. All of these institutions interact with consumers in attaining their financial goals.
Explain the types of financial markets.
There are multiple markets that investors use to generate wealth and provide firms the opportunity to raise money for capital. One of the most recognized is the Capital Market which trades stocks and bonds. The Money Market trades cash investments (like cash deposits); so named for its high liquidity and maturity time period. The Cash Market is used for goods that are sold for cash and are delivered immediately.
Discuss the nature of convergence/consolidation in the finance industry.
The consolidation seen in the finance industry recently has been influenced by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. This legislation provides added protection for consumers, has increased regulation and expenses for financial institutions to operate. This often impacts the smaller, local banks ability to create a profit and therefore encourages consolidation with larger financial institutions to share the increased costs to do business.
Describe the relationship between economic conditions and financial makrets.
The financial markets of a country can reflect the current state of an economy but they are not always linked. However, if an economy is growing, business profits will increase as consumers spend discretionary income. If an economy is headed toward a recession, and consumers are less likely to make purchases, a business' profit could decrease which reduces thr business' value in a financial market.
Explain the nature and scope of financial globalization.
Financial globalization is the worldwide development of economic, financial, trade and communication integration. This pushes business executives to consider broad views in the global marketplace as countries, and their economies, become interconnected and interdependent.
Describe sources of securities information.
There are many places that a consumer or business can gather information on securities including any local financial institution.
Interpret securities tables.
A securities table provides information on a public auction of securities. It also provides an investor with information about an auction including: what security is available, the issue date, maturity date, terms and conditions of the sale and various bid closing times.
Calculate gross revenue.
The first step in determining gross revenue is to decide a period of time to evaluate the business. To calculate gross revenue, multiply the number of items sold by the selling price of the item. To understand the overall gross revenue for a business, this equation must be completed for each product line.
Calculate financial ratios.
There are five categories of financial ratios that can be calculated: Operating, Liquidity, Profitability, Activity and Financial Leverage. These ratios give a snapshot of a business' health at a given period of time. To calculate these ratios, use the data provided by a business' financial statements including the Income Statement, Balance Sheet and Cash Flow Statement.
Analyze daily transactions.
To analyze the daily transactions of a business, it is important to monitor the changes to the most basic accounting equation: Assets= Liabilities + Owner's Equity. Owner's equity is determined by Revenues and Expenses. If revenues increase, the Owner's Equity increases. If expenses increase, the Owner's Equity increases.
Explain the nature of costing procedures.
There are a variety of costs that need to be evaluated in a business including fixed costs, variable coasts, direct costs, indirect costs and standard costs which include direct materials, direct labor and overhead. By using costing methods, a company can understand the value of raw materials and how that affects the value of finished products.
Explain the affect of inventory systems on cost of goods sold.
Inventory is merchandise that is ready to sell to consumers - a current asset for a business. The Cost of Goods Sold (COGS) is the cost of merchandise sold to customers. Depending on various inventory systems, as products are sold, they can be recorded in financial statements differently, therefore affecting the actual costs of the merchandise to a company. FIFO refers to first in, first out while LIFO is last in, last out.
Describe the concept of economies of scale.
An Economy of Scale happens when a business can produce a larger number of goods and therefore lower the per-unit fixed cost of that product to produce. Since the fixed cost is shared over a larger number of goods, this allows a business to potentially increase its profits. A business can reach an economy of scale both internally and externally.
Explain the nature and scope of the financial-information management function.
The purpose of the financial-information management function is to oversee the financial resources of an organization. This includes determining what a company needs for capital (which funds should be used for investment), cash (what purchases should be made and at what time) and control (providing analysis of financial statements).
Explain the role of ethics in financial-information management.
The most important role of an employee in financial information management is to manage assets in order to keep a business healthy. This requires investing wisely and transparently and managing a business' cash flow to create optimum profit.
Describe the use of technology in the financial-information management function.
The financial information management function must balance the need to purchase technology for business operations and investing in technology that create enhanced products and services for consumers. For example, mobile technology now provides more convenience for both employees and consumers.
Demonstrate data mining techniques.
A company can use a variety of databases and software to analyze financial data through a mathematical process to find relationships and patterns to use for future decision making in sales, purchases, etc.
Describe the need to accurately report a business's financial position.
Reporting a business's financial position accurately is imperative to decision making across business operations including product purchase, salary management, marketing and technology. Without accurate data, future decisions could negatively affect the financial health of the business and create legal concerns.
Determine financial strengths/weaknesses of a business.
Using the financial statements for a business (income statement, balance sheet and cash flow statement), an investor can use 16 financial ratios to evaluate the strengths and/or weaknesses of a business. An income statement can provide a view of sales, expenses and profits; the balance sheet a view of assets, debt and equity; and the cash flow statement a view of the sources of cash and its uses.
Describe the relationship between accounting and finance.
An accounting perspective with a focus on cash flow affects a financial manager's ability to decide if a business has cash for future needs.
Explain the use of financial information to identify trends.
Financial statements can show a decision maker how a business will perform over time. Using data provided in those records, and analyzing that data using a variety of financial ratios, a business can forecast and anticipate future needs.
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