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FM > 1ST MIDTERM > Flashcards

1ST MIDTERM Flashcards

1
Q

● is one of the crucial prerequisites to start any business.

A

Finance

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2
Q

● Involves strategically planning, organizing, directing, and controlling an organization’s

A

Financial Management

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3
Q

governed by the principle that it must protect the financial interest of the investors and shareholders and ensure business growth.

A

Financial Management Scope

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4
Q

Financial Managers need to evaluate factors such as the cost of current and fixed assets, cost of marketing, need for butter capital, long-term operations, and human resources cost, etc.

A

Assessing Capital Needs

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5
Q

Is the framework that determines decisions such as debt-equity ratio in the short as well long-term.

A

Determination of Capital Structure

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6
Q

There is a need to frame efficient financial policies that govern cash control, the lending and borrowing processes, and so on.

A

Creation of Effective Financial Policies

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7
Q

Great Financial managers are able to navigate through different scenarios by making optimum use of the available financial resources.

A

Resource Optimization

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8
Q

For any business to grow confidently and have a good market reputation, an adequate amount of cash and liquidity is critical.

A

Fundraising

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9
Q

Smart fund allocation is as critical to a business’ financial health as fund-raising itself.

A

Fund Allocation

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10
Q

It determines its financial health and future growth.

A

Profit Planning

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11
Q

Good financial managers have to be well-versed with the capital market dynamics, and the risks associated.

A

Understanding Capital Markets

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12
Q

Determines a company’s mix of debt and equity financing.

A

Capital Structure

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13
Q

Involves evaluating long-term investments.

A

Capital Budgeting

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14
Q

Mitigating financial health risks by balancing current assets with liabilities.

A

Working Capital Management

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15
Q

Involves creating disbursement policies and strategies.

A

Dividend Management

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16
Q

● Guides companies through strategic processes, ensuring stability and growth.

A

Financial Managent Cycle

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17
Q

Includes analyzing past data to set financial goals.

A

Planning and Budgeting

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18
Q

Assigns value to capital resources, aligning funds with company goals.

A

Resource Allocation

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19
Q

Tracking transactions, and reducing fraud risks.

A

Operations and Monitoring

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20
Q

Focuses on analyzing financial performance by comparing it to previous periods.

A

Evaluation and Reporting

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21
Q

are in charge of financial reporting and the oversight of the accounting activities necessary to develop those reports.

A

Controllers

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22
Q

may be responsible for structuring loan and debt obligation and determining when and from whom to borrow funds.

A

Treasurer

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23
Q

is an executive level position and oversees the activities of the controller and treasurer.

A

Vice President of Finance (VP-F)

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24
Q

is in a “big picture” position.

A

Chief Financial Officers (CFO)

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25
Q

● Allows a firm to understand the past, present and future funding needs and distributions required to satisfy all interested parties.

  • Need to be experts in analyzing financial statements
A

Financial Planning

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26
Q

● It uses past, current, and pro forma (forward-looking) income statements.

A

Good Financial Planning

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27
Q

estimated the timing and magnitude of actual cash flows available to meet financial obligations.

A

Cash Flow Statements

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28
Q
  • a document
  • are critical for demonstrating the sources and uses of funds for a firm.
A

Balance Sheets

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29
Q
  • in the form of expected sales, cost of funds, and microeconomic and macroeconomic conditions are essential elements of financial planning.
  • becomes the process for adapting to those changes.
A

Forecasting

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30
Q

including ratio analysis, common size financial statements, and trend statements are important aspects of financial planning.

A

Financial Analysis

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31
Q
  • can help identify the differences or variance from expectations
  • road map
A

Budgeting

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32
Q

One of the financial roles pertaining to raising funds for the business operations.

A

Corporate Finance Roles

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33
Q

Handle financial restructuring of companies

A

Investment Banking Roles

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34
Q

It is an advanced field that requires sound knowledge of mathematics

A

Portfolio Management

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35
Q

Has crucial part of financial sectors operations

A

Risk Management

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36
Q

Banks are the key enabler

A

Commercial Banking Sector

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37
Q

Companies also employ managers and financial administrators to handle various procedures and regulations

A

Compliance and Internal Financial Management

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38
Q

both contain valuable information relating to various fiscal topics

A

Financial Statements and Financial Reports

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39
Q

these reports cover the pull scope

A

Quarterly or Annual Reports

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40
Q

these reports compromise information

A

External Reports

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41
Q

these reports allow the public to oversee government institution’s financial health

A

Government Reports

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42
Q

a note that listing several financial statements

A

Financial notes

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43
Q

these statements formal record of specific types of information relating to a business’s finances

A

Finance Statements

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44
Q

these statements that measures the long-term profitability

A

Income Statements

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45
Q

these statements how cash flowing in and out

A

Cash Flow Statements

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46
Q

these statements provide information about any change

A

Statement of Changes in Equity

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47
Q

3 sections in a balance sheet

A

Assets, Liability, and Equity

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48
Q

Formula of Balance Sheet

A

Owner’s Equity = Assets - Liability

49
Q

are assets your business plan to keep for a short period of time

A

Current Assets

50
Q

are assets your business plan to keep for a long period of time

A

Fixed assets (non-current assets)

51
Q

are assets you can’t touch

A

Intangible Assets

52
Q

information or process that set your business apart from others

A

Intellectual Property

53
Q

formally registered concepts that bring value to your business

A

Trademarks and Patents

54
Q

are usually things you will pay for during the next 12 months

A

Current Liabilities

55
Q

are thing that you will not pay for

A

Non-Current Liabilities

55
Q

also called shareholder’s equity companies

A

Owner’s Equity

55
Q

money has time value

A

Concept and Significance of Time Value of Money

56
Q

Outflows of cash are in our control as payments but there is no certainty for future cash flows

A

Risk and Uncertainty

56
Q

the money you receive today has more purchasing power than the money to be received in the future

A

Inflation

56
Q

taking the money today is probably the best bet

A

Investment Opportunities

56
Q

Formula of Time Value of Money (Future Value)

A

FV = PV / P (1 + i )t

56
Q

Individuals prefer current consumption to the future consumption

A

Consumption

57
Q

Formula of Time Value of money (Present Value)

A

PV = FV / (1 + i )t

58
Q

what you have or you need in today

A

Present Value of Money

58
Q

amount money you’ll have in the future

A

Future Value of Money

58
Q

present value of future sum of money is LOWER

A

Higher Discount Rate

59
Q

present value of future sum of money is HIGHER

A

Lower Discount Rate

60
Q

earning interest grows in each compounding period

A

compounding interest

61
Q

a timeline illustrates cash flows in an investments period

A

Cash Flow Timeline

62
Q

forecasting future investment returns helps individuals make informed decisions

A

Strategic Investment Planning

62
Q

any stream of cash flows indexed at the same point equals the sum of the present values of the cash flows

A

Cash Flow Additivity Principle

63
Q

present value is a crucial tool for evaluating risk and making risk-adjusted

A

Risk Mitigation

64
Q

involve using PV to assess different assets and balance portfolios for growth

A

Diversification and Portfolio Optimization

64
Q

making time a valuable asset in wealth-building

A

Time Management

65
Q

by discounting expected future cash flows

A

Discounted Cash Flow Analysis

66
Q

calculate how much a single deposit will grow over time with compound interest

A

Future Value (FV)

67
Q

is a series of fixed, periodic payments or received in the future, either immediately or after a delay

A

Annuities

67
Q

calculations are used to understand how much future amounts are worth today and adjust financial decisions accordingly

A

Present Value (PV)

68
Q

allow investments in options like mutuals funds with returns based on performance

A

Variable Annuity

69
Q

guarantees a minimum interest rate and fixed payments

A

Fixed Annuity

69
Q

tied to a stock market index combining securities and insurance features

A

Indexed Annuity

70
Q

covers insurance risk and commissions

A

Mortality and Expense Risk Charge

70
Q

payments at the beginning

A

Annuity Due

71
Q

payments at the end

A

Ordinary Annuity

72
Q

charges for second keeping

A

Administrative Fees

73
Q

fees for mutual funds within the annuity

A

Underlying Fund Expenses

74
Q

verify your broker or adviser if she/he is registered and review mutual fund documents before investing

A

Avoiding Fraud

74
Q

provides a way to value infinite cash flow, either constant or growing

A

Perpetuity

75
Q

early withdrawal before age 59 1/2 may have 10% IRS penalty plus regular income taxes

A

Penalties

76
Q

Flat Perpetuity Formula

A

PV = c / r

76
Q

is the simplest and it is straightforward as it doesn’t include terminal value

A

Flat Perpetuity

77
Q

this type accounts for cash flows that increase at a constant rate g indefinitely

A

Growing Perpetuity

77
Q

Growing Perpetuity Formula

A

PV = c / (r - g)

78
Q

required individual discounting to find the total present value

A

Uneven Cash Flows

79
Q

it can help borrowers identify lenders offering lower rates

A

Comparing Interest rates

80
Q

breaks down loans into manageable payments but total cost can vary based on the term and rate

A

Amortization

81
Q

higher prices usually mean higher monthly payments

A

Purchase Price

82
Q

the higher the rate, the more you will pay in interest

A

Interest Rate

83
Q

a longer-term result in lower monthly payments but more total interest paid

A

Loan Term

84
Q

is the decrease in an assets value over time

A

Depreciation

85
Q

reward you receive

A

return

86
Q

may pay a sum of money to the investor from time to time

A

income

87
Q

may increase in value

A

capital gain

88
Q
A
89
Q

how much money you have gained or lost form an investment over a certain period

A

calculation of return

90
Q

Simple Return Formula

A

Return = End Value - Beginning Value x 100

90
Q

this is the basic way to calculate

A

simple return or total return

91
Q

it adjusts the return to show it would have been over one year

A

Annualized Return

92
Q

Annualized Return Formula

A

Annualized Return = (End Value / Beginning Value) (number of years) - 1

93
Q

uncertainty in how much money you’ll actually make compared to what you expected to make

A

Concept of Risk

94
Q

firm anticipates earning from assets over some future period

A

Expected Return

95
Q

past return that was earned by the firm

A

Realized Return

96
Q
A
97
Q
A
98
Q
A
99
Q
A
100
Q
A
101
Q
A
102
Q
A

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