Chapter 1 Textbook Flashcards
Assets used to produce goods and services in order to help a business function and they can be tangible or intangible
Real Assets
What is the primary goal of a firm and what two key factors drive it?
Value Creation; Growth and Risk
Three activities activities that every business faces in which cash is crucial
Investing, financing, operating
Financial management at its heart involves managing what? And insuring there is enough of it to operate.
Cash
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
Working Capital
The pattern and timing of where cash comes from and where it goes in a firm
Cash Flow Cycle
Another name for the cash flow cycle
Cash Conversion Cycle
Securities such as bonds and stocks that represent claims on the assets of a firm
Financial Instruments or Financial Assets
Obligations to pay a specified amount or perform a particular amount or perform a particular service
Liabilities
A financial instrument issued by a firm representing long-term debt
Bond
Securities representing the direct ownership of a firm, or the residual claims on the assets essentially exchanged of ownership for a cash investment
Common Equity or Common Stock
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
Common Shareholders
The difference between revenue and all associated expenses over a particular period of time
Profits, Net Earnings, Net Income, Net Profits
A share of the profits of the firm distributed to shareholders
Dividends
A financial manager represents the bridge between a firm’s real assets and its financial what?
Commitments
1 assessing the current business
2 assessing future needs
3 developing long term financing strategies
4 assessing future investments
The Four Main Duties of Financial Managers
The process of obtaining funds to pay for real assets and finding the best way to fund the business
Financing
The cumulative amount of earnings retained or reinvested in the firm and not paid out as dividends
Retained Earnings
The process of selecting investment projects in hopes of maximizing the value of a firm while mitigating the risk
Investing
The process of managing short-term decisions pertaining to current assets and current liabilities
Working Capital Management
Tangible or intangible items of value in a firm
Assets
The mix of debt and equity that a firm uses to finance its operations. A longer term picture of a company/business/organization
Capital Structure
The ultimate goal of financial managers is to maximize value for its what?
Shareholders
Employees, investors, lenders, stock analyst, competitors are a few examples of non what entities interested in the a companies financial statements
Financial Management
- 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
Assessment of the Current Business
- financial statement projections
- understanding investment decisions
Assessment of Future Financing Requirements
- Understanding capital markets
- Determining the cost of capital
- raising long-term capital
Issues Related to Long-Term Financing Decisions
- Measuring value
- creating value
Issues Related to Investments
The role of the accounting department is to provide finance with what in an organized and systematic way as well as perform cost accounting
Information/Data
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
Balance Sheet
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
Income Statement
A financial statement reflecting a firm’s cash inflows and outflows categorized into cash related to operating, investing, and financing
Determining the proper allocations of costs associated with the creation of products and assist in creating budgets useful for financial planning
Cost Accounting
