Ch15 Flashcards
Finance
Function in the business that acquires and manages funds within the firm.
Financial management
the job of managing a firm’s resources to meet its goals and objectives
Financial managers
Examine financial data prepared by accountants and recommend strategies for improving the financial performance of the firm
Cash flow forecast
Forecast that predicts cash inflows and outflows in future periods, usually months or quarters
Budget
A financial plan that sets forth management’s expectations for revenues, and on the basis of those expectations, allocates the use of specific resources throughout the firm
Capital budget
A budget that highlights the firm’s spending plans for major asset purchases that often require large sums of money
Cash budget
A budget that estimates cash inflows and outflows during a particular period like a month or a quarter
Operating (or master) budget
An aggregate of the firm’s other budgets and summarizes its proposed financial activities
Financial control
Process in which a firm periodically compares its actual revenues, costs and expenses with this budget
Capital expenditures
Major investments in either tangible longterm assets, such as Land, buildings, and equipment or intangible assets, such as patents, trademarks, and copyrights
Debt financing
Refers to funds raised through various forms of borrowing that must be repaid
Equity financing
money raised from within the firm, from operations or through the sale of ownership in the firm stock
Trade credit
The practice of buying goods or services now and paying for them later
Secured loan
A loan back my collateral something valuable such as property
Unsecured loan
A loan that does not require any collateral
Line of credit
A given amount of unsecured short-term funds, a bank will lend to a business provided that the funds are readily available
Factoring
The process of selling accounts receivable for cash
Term long agreement
A promissory note that requires the borrower to repay the loan with interest in specified monthly or annual installments
Risk/return trade off
The greater the risk of lender takes in making a loan, the higher the rate of the interest
Bond
A corporate certificate indicating that an investor has lent money to a firm or government.
Debenture bond
A bond that is unsecured ( not backed by any collateral)
Stocks
shares of ownership in the company
Initial public offering (IPO)
First, public offering of a corporation’s stock
Venture capital
Money invested in new or emerging companies that some investors (venture capitalists) believe have great profit potential.
Leverage
Raising funds through borrowing to increase the firm’s rate of return
cost of capital
The rate of return to company must earn in order to meet the demands of its lenders and expectations of its equity holders
