Chapter 1 Textbook

Question 1

Assets used to produce goods and services in order to help a business function and they can be tangible or intangible

Answer 1

Real Assets

Question 2

What is the primary goal of a firm and what two key factors drive it?

Answer 2

Value Creation; Growth and Risk

Question 3

Three activities activities that every business faces in which cash is crucial

Answer 3

Investing, financing, operating

Question 4

Financial management at its heart involves managing what? And insuring there is enough of it to operate.

Answer 4

Cash

Question 5

The difference between current assets and current liabilities on the balance sheet which represents money tied up in inventory and money owed by customers who buy on credit

Answer 5

Working Capital

Question 6

The pattern and timing of where cash comes from and where it goes in a firm

Answer 6

Cash Flow Cycle

Question 7

Another name for the cash flow cycle

Answer 7

Cash Conversion Cycle

Question 8

Securities such as bonds and stocks that represent claims on the assets of a firm

Answer 8

Financial Instruments or Financial Assets

Question 9

Obligations to pay a specified amount or perform a particular amount or perform a particular service

Answer 9

Liabilities

Question 10

A financial instrument issued by a firm representing long-term debt

Answer 10

Bond

Question 11

Securities representing the direct ownership of a firm, or the residual claims on the assets essentially exchanged of ownership for a cash investment

Answer 11

Common Equity or Common Stock

Question 12

Owners of common shares or common equity who provide an immediate source of cash and trust managers to act in their interest as they are entitled to a certain portion of whatever profit is left after other claimants

Answer 12

Common Shareholders

Question 13

The difference between revenue and all associated expenses over a particular period of time

Answer 13

Profits, Net Earnings, Net Income, Net Profits

Question 14

A share of the profits of the firm distributed to shareholders

Answer 14

Dividends

Question 15

A financial manager represents the bridge between a firm’s real assets and its financial what?

Answer 15

Commitments

Question 16

1 assessing the current business
2 assessing future needs
3 developing long term financing strategies
4 assessing future investments

Answer 16

The Four Main Duties of Financial Managers

Question 17

The process of obtaining funds to pay for real assets and finding the best way to fund the business

Answer 17

Financing

Question 18

The cumulative amount of earnings retained or reinvested in the firm and not paid out as dividends

Answer 18

Retained Earnings

Question 19

The process of selecting investment projects in hopes of maximizing the value of a firm while mitigating the risk

Answer 19

Investing

Question 20

The process of managing short-term decisions pertaining to current assets and current liabilities

Answer 20

Working Capital Management

Question 21

Tangible or intangible items of value in a firm

Answer 21

Assets

Question 22

The mix of debt and equity that a firm uses to finance its operations. A longer term picture of a company/business/organization

Answer 22

Capital Structure

Question 23

The ultimate goal of financial managers is to maximize value for its what?

Answer 23

Shareholders

Question 24

Employees, investors, lenders, stock analyst, competitors are a few examples of non what entities interested in the a companies financial statements

Answer 24

Financial Management

Question 25

• Business Size-Up (economic conditions, industry key success factors, opportunities and risks, strengths and weaknesses)
• performance measurement (financial statement analysis)
• day-to-day cash management

Answer 25

Assessment of the Current Business

Question 26

• financial statement projections
• understanding investment decisions

Answer 26

Assessment of Future Financing Requirements

Question 27

• Understanding capital markets
• Determining the cost of capital
• raising long-term capital

Answer 27

Issues Related to Long-Term Financing Decisions

Question 28

• Measuring value
• creating value

Answer 28

Issues Related to Investments

Question 29

The role of the accounting department is to provide finance with what in an organized and systematic way as well as perform cost accounting

Answer 29

Information/Data

Question 30

A financial statement reflecting the value of a firm’s assets, liabilities, and a net worth at a particular time as well as the financing of those assets

Answer 30

Balance Sheet

Question 31

A financial statement indicating a firm’s revenues, expenses, and resulting income over a period of time and therefore a measure of the firm’s profitability

Answer 31

Income Statement

Question 32

A financial statement reflecting a firm’s cash inflows and outflows categorized into cash related to operating, investing, and financing

Question 33

Determining the proper allocations of costs associated with the creation of products and assist in creating budgets useful for financial planning

Answer 33

Cost Accounting