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12 - ABM > BUSINESS FINANCE > Flashcards

BUSINESS FINANCE Flashcards

1
Q

is the process of the act of preparing a financial budget. It’s refers to a plan which is expressed in a quantitative monetary value. In other words, it is the final output of the whole budgeting process

A

Budgeting

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2
Q

As a, plan the budget should provide clear directions to the business in attaining its predetermined goals and objectives.

A

Budgeting

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3
Q

is a group of individuals that prepares the financial plan of a company or country for a period of time

A

Budget committee

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4
Q

It’s charge of planning, creating, and maintaining the budget of an organization for a specific period. Budget committees do not only plan and review budgets, they are also responsible for how budgets are implemented.

A

Budget committee

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5
Q

The top management of organizations makes up their budget

A

Budget committee

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6
Q

Three ways to construct budget

A

● Top-down mandated approach
● Participative (bottom-up)
● Blended

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7
Q

Types of budget (CLUE: 2 TYPE OF BUD)

A
  1. Operating
    budget
  2. Financial budget
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8
Q

What’s under operation budget? CLUE: WE HAVE 7

A

a. Sales budget
b. A production budget
c. Purchases Budget
d. Cost of goods sold budget
e. Operating expense budget
f. A budgeted income statement

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9
Q

What are the 3 types of Financial budget?

A

a. Capital Budget
b. Cash budget
c. Budgeted balance sheet

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10
Q

Is the overall budget of the business

A

Master Budget

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11
Q

Formula for preparation of budget

A
  • Sales budget

FORMULA: NUMBER OF UNITS X SELLING PRICE

Note: Collection budget may also be prepared if the sales are on credit.

  • Purchases budget

FORMULA: NUMBER OF UNITS SOLD + ENDING INVENTORY – BEGINNING INVENTORY = NUMBER OF UNITS TO BE PURCHASE

Note: Purchases budget is for merchandising company use only.

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12
Q

Cost of sales are direct costs associated in the generation of sales. One way of projecting cost of sales is using the cost of sales ratio. Companies would generally have a consistent historical cost of sales ratio.

A

Working Capital Management

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13
Q

On the other hand is the administration and control of the company’s working capital. The primary objective is to achieve a balance between profitability and risk.

A

Working Capital Management

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14
Q

Three types of working capital financing policies the management cash

A
  1. Maturity-Matching working capital financing policy
  2. Aggressive working capital financing policy
  3. Conservative working capital financing policy
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15
Q

permanent working capital requirements should be financed by long-term sources while temporary working capital requirements should be financed by short-term sources of financing.

A

Maturity-Matching working capital financing policy

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16
Q

some of the permanent working capital requirement are finance by short-term sources of financing. Here most of the resources of the business are tied up in non-current assets and requires only small amount of cash, receivables and inventories.

A

Aggressive working capital financing policy

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17
Q

some of the temporary working capital requirements are financed by long-term sources of financing. High investment in current assets is considered conservative. Here the business has substantial amount of cash, receivables and inventories.

A

Conservative working capital financing policy

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18
Q

Managing working capital is important because failure to do so may result in the closure of business. It must be noted that working capital requirements increase as the size or volume of the business increased.

A

Conservative working capital financing policy

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19
Q

is the minimum level of current assets required by a firm to carry-on its business operations given its production capacity or relevant sales range.

A

Permanent Working Capital

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20
Q

is the excess of working capital over the permanent working capital given its production capacity or relevant sales range.

A

Temporary Working Capital

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21
Q

it’s the company’s investment in current assets such as cash, accounts receivables and inventories.

A

Working capital

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22
Q

it’s the difference between current assets and current liabilities.

A

Net Working Capital

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23
Q

Form the collection budget, identify how much would be collected in the cash budget period. Sales may be made in cash or for credit. Cash sales are translated to cash at the point of sale while credit sales are collected depending on the credit period. Credit periods may range from 10 days to more than a month depending on the strategy of the company

A

SALES BUDGET

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24
Q

Using the sales budget in units from previous illustration

A

PURCHASES BUDGET

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25
Q

Use the data from purchases budget

Note: Beginning Inventory is computed by multiplying the cost per unit and beginning inventory from purchases budget. Same goes with Purchases and Ending Inventory

A

COST OF GOODS SOLD

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26
Q

➢ Operation costs are a mix of variable and fixed costs. On the other hand, fixed costs remain the same no matter how the volume of sales has changed. This budget is usually prepared in advance as a goal or a plan of what to expect during the specified reporting period

A

Operating Expense Budget

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27
Q

is a statement of the firm’s planned inflows and outflows of cash. It is used by the firm to estimate its short-term cash requirements, with particular attention being paid to planning for surplus cash and for cash shortages

A

Cash budget or Cash forecast

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28
Q

It’s a field of study that deals with how corporations, organizations, and small businesses handle money.

A

Business Finance

29
Q

It’s defined as an organization or enterprising entity engaged in commercial, industrial, or professional activities. Businesses can be for-profit or non-profit organizations.

A

Business

30
Q

It’s defined as the management of money and includes activities like investing, borrowing, lending, budgeting, savings, and forecasting.

A

Finance

31
Q

Both a science and an art.

A

Finance

32
Q

Finance has three major areas

A
  • Personal finance
  • Corporate/Business finance
  • Public finance
33
Q

The management of the individual income is allocated based on an individual’s personal needs (such as household expenses, education, hospitalization, and acquisition of personal and real properties.)

A

Personal finance

34
Q

Focuses on handling and management of financial resources of a business organization. (It concerns proper budgeting, raising capital to meet company needs and objectives with debt and/or equity, and the efficient management of a company’s current assets and liabilities)

A

Corporate/Business finance

35
Q

The allocation of government income generates from either taxation or borrowings and the government expenditure based on the approved national and local appropriation orb budget. This is also called as fiscal administration.

A

Public finance

36
Q

It’s the activity concerned with planning, raising, controlling and ** administering of funds used in the business**. “Guthman and Dougal.”

A

Financial Management

37
Q

The usually consists of the accounting department and treasury department.

A

Finance Division

38
Q

The responsible for the financial health of an organization. They produce financial reports, direct investment activities, and develop strategies and plans for the long-term financial goals of their organization.

A

Financial Managers

39
Q

The set of institutions, such as banks, insurance companies, and stock exchanges that permit the exchange of funds.

A

Financial system

40
Q

Elements of the financial system are:

A
  • Lenders and Borrowers
  • Financial institutions
  • Financial instruments
  • Financial market
41
Q

There is no standard structure of a financial system that operates in the world. Varies among countries and the business organization.

A

FLOW OF FUNDS

42
Q

The borrowers borrow funds from the financial market through indirect means, such as through a financial intermediary

A

Indirect finance

43
Q

______ __ Are those receive more money than they spend.

A

Surplus units

44
Q

They provide their net savings to the financial markets. They are also termed, borrowers.

A

Ultimate lenders

45
Q

Unit that spend more money than they received.

A

Deficit units

46
Q

It’s the process of providing funds for business activities, making purchases, or investing. Financing takes place to help them achieve their goal. The bank is one of the institutions that facilitate financing activities.

A

Financing

47
Q

This is a method of financing where borrowers borrow funds directly from the financial market without using a third-party service, such as a financial intermediary.

A

Direct financing

48
Q

These arrangements take place through financial markets, markets in which lenders (investors) lend their savings directly to borrowers.

A

Direct financing

49
Q

This is when a business borrows money from a third party, such as a bank, rather than directly from investors. An indirect loan can refer to an installment loan.

A

Indirect financing

50
Q

The financial manager plays a crucial role in the business organization.

A

THE ROLE OF FINANCIAL MANAGER

51
Q

the business structure, they are responsible for managing the finance of the organization

A

THE ROLE OF FINANCIAL MANAGER

52
Q

Exercising decisions in finance is a delicate task that requires substantial knowledge of accounting and economics.

A

THE ROLE OF FINANCIAL MANAGER

53
Q

This decision-making function is broadly classified into operating decisions, investment decisions, and financing decisions.

A

THE ROLE OF FINANCIAL MANAGER

54
Q

The financial system is a term used to describe a system that allows the transfer of money between lenders and borrowers

A

THE ROLE OF FINANCIAL MANAGER

55
Q

The financial manager is responsible for the financial health of an organization through decision-making in investing and financing decisions.

A

THE ROLE OF FINANCIAL MANAGER

56
Q

It facilitates the flow of funds from the areas of surplus to the areas of deficit. The flow of funds can be through direct or indirect financing.

A

THE ROLE OF FINANCIAL MANAGER

57
Q

A financial system consists of individuals like borrowers and lenders and institutions like banks, stock exchanges, and insurance companies actively involved in the funds and assets transfer.

A

THE ROLE OF FINANCIAL MANAGER

58
Q

Types of Financial Markets

A

Primary Market
Secondary Market
Capital Market
Money Market

59
Q

It is a financial market where corporations can issue new shares of stock. This happens between the issuing corporation and the investor or investment bank. Primary market facilities the raising of the required amount when theInvestors directly buy the new shares from the issuing corporation.

A

Primary Market

60
Q

It is a market where financial securities are traded between or among the investors. Exists after the corporation has issued new shares to the investors in the primary market.

A

Secondary Market

61
Q

It is a market where stock and bonds are issued for medium and long-term periods.

A

Capital Market

62
Q

It is a market that trades commercial papers and treasury bills. Trading securities are intended to be held for less than one year (short-term).

A

Money Market

63
Q

It is an organized forum in which the suppliers and users of various types of funds can make transactions directly.* The place where trading equity securities (bonds, stock, etc.) occurs.*

A

FINANCIAL MARKETS

64
Q

This has a priority over common stock in terms of claims over the assets of a company.

A

Preferred Stock

65
Q

On the other hand, is the real owner of the company. If the company’s growth is spurring the common stockholders will benefit from the growth.

A

Common Stock

66
Q

Common Forms of Financial Instruments are

A
  • Cash
  • Checks
  • Loan
  • Bond
  • Stocks
67
Q

It’s refers to the contract that gives rise to the formation of financial assets of one entity and at the same time creation of financial liability in another entity

A

FINANCIAL INSTRUMENTS

68
Q
A

12 - ABM (1 decks)

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