BUSINESS FINANCE

Question 1

Inexpensive way for government and financial institutions to raise funds; for only short period of time.

Answer 1

MONEY MARKET

Question 2

They also earn highest interest. People avail money market funds because of their liquidity.

Answer 2

MOENY MARKET INSTRUMENTS

Question 3

What are the four debt-based Financial Instruments?

Answer 3

BANKER’S ACCEPTANCE, CERTIFICATE OF DEPOSIT, COMMERCIAL PAPER, REPURCHASE AGREEMENTS

Question 4

• Issued by the banks or mutual fund companies.
• No specific maturity date
• Default risk are low

Answer 4

MONEY MARKET FUND

Question 5

Short-term debt guaranteed by commercial banks.

Answer 5

BANKER’S ACCEPTANCE (BA)

Question 6

Bank issued savings certificates with short-term maturity.

Answer 6

CERTIFICATES OF DEPOSIT (CDs)

Question 7

Unsecured short-term corporate debt.

Answer 7

COMMERCIAL PAPER

Question 8

Examples of Money Market Funds

Answer 8

TREASURY BILLS, COMMERCIAL PAPERS, CONSUMER CREDIT/CREDIT CARD DEBT

Question 9

• Issued by treasury/government.
  -Mature within one year.
• Free from default risks.

Answer 9

TREASURY BILLS

Question 9

Short-term government securities

Answer 9

REPURCHASE AGREEMENTS (REPO)

Question 10

Issued by banks, credit unions, or finance companies.

Answer 10

CONSUMER CREDIT/ CREDIT CARD DEBT

Question 10

• Issued by financially sound business to fun investors and receivables.
• Mature less than one year

Answer 10

COMMERCIAL PAPER

Question 11

Examples of Long term-debt

Answer 11

TREASURY BONDS, TREASURY NOTES, MUNICIPAL BOND, CORPORATE BONDS

Question 12

• Interest rate are higher than Money Market Instruments.
• Locked in over the entire life of debt.

Answer 12

LONG-TERM DEBT

Question 13

• Referred to as Long Bonds
• Offered to investors in terms of 20 and 30 years to maturity.

Answer 13

TREASURY BONDS

Question 14

Similar to treasury bonds but have shorter terms.

Answer 14

TREASURY NOTES

Question 15

• Type of debt security.
• Offered to pay capital expenditures.

Answer 15

MUNICIPAL BOND

Question 16

• They perform data analysis and advise senior managers
• Responsible for the financial health of an organization

Answer 16

FINANCIAL MANAGERS

Question 17

Issued by corporation and have maturity date more than 30 years.

Answer 17

CORPORATE BONDS

Question 18

(Goals of Financial Manager)
Managing the right combination of assets and liabilities

Answer 18

EFFECTIVE WORKING CAPITAL MANAGEMENT

Question 18

(Goal of Financial Manager)
Companies need a detailed cash flow budget.

Answer 18

EFFECTIVE CASH MANAGEMENT

Question 19

(Goals of Financial Manager)
Overstocking and Understocking are undesirable for the market.

Answer 19

EFFECTIVE INVENTORY MANAGEMENT

Question 19

(Goals of Financial Managers)
Excess cash needs to be invested to earn income

Answer 19

EFFECTIVE INVESTMENT DECISIONS

Question 20

(Goals of Financial Manager)
Selecting right machinery and equipment.

Answer 20

PROPER ASSET SELECTION

Question 20

(Goals of Financial Manager)
Buying stocks or investing needs risk analysis and assessment.
- The riskier the project, the higher the return.

Answer 20

PROPER RISK MANAGEMENT

Question 21

Three Tools f Financial Managers

Answer 21

FINANCIAL POLICY-MAKING, FINANCIAL PLANNING AND BUDGETING, FINANCIAL ANALYSIS

Question 22

Selection of financial goals, development of financial policies and designation of the finance department.

Answer 22

FINANCIAL POLICY-MAKING

Question 23

Forecasting is an integral part of the planning process.

Answer 23

FINANCIAL PLANNING AND BUDGETING

Question 24

The process of evaluating business performance, projects, investment options, and other finance related activities

Answer 24

FINANCIAL ANALYSIS

Question 25

• Repost a company’s financial performance over a specific accounting period.
• Focuses on the revenue, expenses, gains and losses of a company.

Answer 25

INCOME STATEMENT

Question 26

The amount of goods and services sold in terms of price paid by the customer

Answer 26

NET REVENUE OR SALES

Question 27

Formula of Cost of Good Sold

Answer 27

COGS = BEGINNING INVENTORY + PURCHASED INVENTORY - ENDING INVENTORY

Question 27

The amount of goods and services sold in terms of costs to the company

Answer 27

COST OF GOOD SOLD

Question 28

Also known as sales profit or gross income

Answer 28

GROSS PROFIT

Question 29

All direct and indirect selling costs, operational overhead cost, and administrative cost

Answer 29

SELLING AND GENERAL ADMINISTRATIVE EXPENSES

Question 31

• Residual income after all costs have been included.
• Also called Earning Before Interest and Tax (EBIT)

Answer 31

OPERATING PROFIT

Question 32

Cost incurred by an entity for borrowed funds.

Answer 32

INTEREST EXPENSE

Question 33

Calculation of a firm’s earnings before taxes are deducted

Answer 33

INCOME BEFORE TAXES

Question 34

A liability owed to a federal, state, or local government within given time period

Answer 34

TAX EXPENSE

Question 35

The amount of a business makes after deducting costs, allowances, and taxes.

Answer 35

NET INCOME

Question 36

Cash dividends that a company pays out to its preferred shareholders

Answer 36

PREFERRED STOCK DIVIDENDS

Question 37

Portion of a company’s net income that remains after paying dividend to preferred shareholders.

Answer 37

EARNINGS AVAILABLE TO COMMON SHAREHOLDERS