Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Engineering Management > Chapter 12 > Flashcards

Chapter 12 Flashcards

1
Q

This function is an important management responsibility that deals with the procurement and administration of funds with the view of achieving the
objectives of business.

A

finance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

the three basic management functions

A

finance, production, marketing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Process Flow of the Finance Function

A

Determination of Fund Requirements
Procurement of Funds
Effective and Efficient Use of Funds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Any organization, including the engineering firm, will need funds for the following specific requirements:

A
  1. to finance daily operations
  2. to finance the firm’s credit services
  3. to finance the purchase of inventory
  4. to finance the purchase of major assets
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Money must be made available for the payment of the following:

A
  1. wages and salaries
  2. rent
  3. taxes
  4. power and light
  5. marketing expenses like those for advertising, entertainment, travel expenses, telephone and telegraph, stationery and printing, postage, etc.
  6. administrative expenses like those for auditing, legal, services, etc.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

(Sources of Funds) To finance its various activities, the engineering firm will have to make use of its cash inflows coming from various sources, namely:

A
  1. Cash sales
  2. Collection of Accounts Receivables.
  3. Loans and Credits.
  4. Sale of assets.
  5. Ownership contribution.
  6. Advances from customers.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Cash is derived when the firm sells its products or services. Which source of funds is being described?

A

Cash Sales

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Some engineering firms extend credit to customers. When these are settled, cash is made available. Which source of funds is being described?

A

Collection of Accounts Receivables

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

When other sources of financing are not enough, the firm will have to resort to borrowing. Which source of funds is being described?

A

Loans and Credits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Cash is sometimes obtained from the sale of the company’s assets. Which source of fund is being described?

A

Sale of assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

When cash is not enough, the firm may tap its owners to provide more money. Which source of funds is being described?

A

Ownership contribution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Sometimes, customers are required to pay cash advances on orders made. This helps the firm in financing its production activities. Which source of funds is being described?

A

Advances from customers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Loans and credits may be classified as:

A

short-term, medium-term, or long-term

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

_________ sources of funds are those with repayment schedules of less than one
year.

A

Short-term

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Short-term financing is provided by the following:

A
  1. trade creditors
  2. commercial banks
  3. commercial paper houses
  4. finance companies
  5. factors
  6. insurance companies
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

This refer to suppliers extending credit to
a buyer for use in manufacturing, processing, or reselling goods for profit.

A

Trade creditors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

The instruments used in trade credit
consist of the following:

A
  1. open-book credit
  2. trade acceptance
  3. promissory notes
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

This is unsecured and permits the customer to pay for goods delivered to him in a specified number of days.

A

open-book credit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

This is a time draft drawn by a seller upon a purchase payable to the seller as payee, and accepted by the purchaser as evidence that the goods shipped are satisfactory and that the price is due and payable.

A

trade acceptance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

This is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a certain sum of money to, or to the order of a specified person or to bearer.

A

promissory note

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

These are institutions which individuals or firms may tap as source of short-term financing.

A

Commercial banks

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Commercial banks grant two types of short-term loans:

A

(1) those which require collateral
(2) those which do not require collateral

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

These are those that help business firms in borrowing funds from the money market.

A

Commercial paper houses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

This is a short-term promissory note, generally unsecured, and issued by large, established firms.

A

commercial papers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

These are financial institutions that finance inventory and equipment of almost all types and sizes of business firms.

A

Business finance companies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Examples of finance companies in the Philippines

A

Philacor Credit Corporation
Consolidated Orix Leasing and Finance Corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Examples of commercial banks granting short-term loans

A

City Trust
Premier Bank
Land Bank

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

These are institutions that buy the accounts receivables of firms, assuming complete accounting and collection responsibilities.

A

Factors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

These are also possible sources of short-term funds. Industry reports indicate that these companies in the Philippines regularly make investments in short-term commercial papers and promissory notes.

A

Insurance companies

30
Q

Engineering firms will have to tap this when expenditures for capital assets become necessary.

A

long-term sources of funds

31
Q

Long-term sources of funds are classified as follows:

A
  1. long-term debts
  2. common stocks
  3. retained earnings
32
Q

Long-term debts are sub-classified into:

A

term loans
bonds

33
Q

This is a commercial or industrial loan from a commercial bank, commonly used for plant and equipment, working capital, or debt repayment.

A

term loan

34
Q

Term loans have maturities of how many years?

A

2 to 30 years

35
Q

This is a certificate of indebtedness issued by a corporation to a lender.

A

bond

36
Q

It is a marketable security that the firm sells to raise funds.

A

bonds

37
Q

These represent ownership of corporations.

A

common stocks

38
Q

These refer to corporate earnings not paid out as dividends.

A

Retained earnings

39
Q

Types of Bonds

A
  1. Debentures
  2. Mortgage bond
  3. Collateral trust bond
  4. Guaranteed bond
  5. Subordinated debentures
  6. Convertible bonds
  7. Bonds with warrants
  8. Income bonds
40
Q

This type of bond has no collateral requirement.

A

Debentures

41
Q

This type of bond is secured by real estate.

A

Mortgage bond

42
Q

This type of bond is secured by stocks and bonds owned by the issuing corporation.

A

Collateral trust bond

43
Q

The payment of interest or principal for this type of bond is guaranteed by one
or more individuals or corporations.

A

Guaranteed bond

44
Q

This type of bond has an inferior claim over other debts.

A

Subordinated debentures

45
Q

This type of bond are convertible into shares of common stock.

A

Convertible bonds

46
Q

This is the type of bond at which warrants are options which permit the holder to buy stock of the issuing company at a stated price.

A

Bonds with warrants

47
Q

This type of bond pays interest only when earned.

A

Income bonds

48
Q

To determine the best source of financing, Schall and Haley recommends that the following factors must be considered:

A
  1. flexibility
  2. risk
  3. income
  4. control
  5. timing
  6. other factors like collateral values, flotation costs, speed, and exposure
49
Q

This refers to the chance that the company will be affected adversely when a particular source of financing is chosen.

A

risk

50
Q

This subjects the borrowing firm to more risk than does financing with long-term
debt.

A

short-term debt

51
Q

In general, the objectives of engineering firms are as follows:

A
  1. to make profits for the owners;
  2. to satisfy creditors with the repayment of loans plus interest;
  3. to maintain the viability of the firm so that customers will be assured of a continuous supply products or services, employees will be assured of employment, suppliers will be assured of a market, etc.
52
Q

(Indicators of Financial Health) The financial health of an engineering firm may be determined with the use of three basic financial statements. These are as follows:

A
  1. Balance sheet
  2. Income statement
  3. Statement of changes in financial position
53
Q

also called statement of financial position

A

balance sheet

54
Q

also called statement of operations

A

income statement

55
Q

This refers to the uncertainty concerning loss or injury.

A

Risk

56
Q

The engineering firm is faced with a long list of exposure to risks, some of which are as follows:

A
  1. fire
  2. theft
  3. floods
  4. accidents
  5. nonpayment of bills by customers (bad debts)
  6. disability and death
  7. damage claim from other parties
57
Q

Risks may be classified as either __________ or __________.

A

pure or speculative

58
Q

__________ is one in which there is only a chance of loss. This means that there is no way of making gains.

A

Pure risk

59
Q

An example of this is the exposure to loss of the company’s motor car due to theft. These are insurable and may be covered by insurance.

A

pure risk

60
Q

___________ is one in which there is a chance of either loss or gain. This type of risk is not insurable.

A

Speculative risk

61
Q

An example of this is investment in common stocks. If one wants to make gains in the common stock market, the nuances and intricacies of investments must be learned and properly applied.

A

speculative risk

62
Q

This is an organized strategy for protecting and conserving assets and people.

A

Risk management

63
Q

The purpose of this is to choose intelligently from among all the available methods of dealing with risk in order to
secure the economic survival of the firm.

A

risk management

64
Q

This is designed to deal with pure risks.

A

Risk management

65
Q

The application of ____________ practices are directed towards speculative risks that are inherent and cannot be avoided.

A

sound management

66
Q

There are various methods of dealing with risks. They are as follows:

A
  1. the risk may be avoided
  2. the risk may be retained
  3. the hazard may be reduced
  4. the losses may be reduced
  5. the risk may be shifted
67
Q

This is a method of handling risk wherein the management assumes the risk.

A

Risk retention

68
Q

A ____________, also called self-insurance, is a conscious and deliberate assumption of a recognized risk.

A

planned risk retention

69
Q

Examples of __________ are hedging,
subcontracting, incorporation, and insurance.

A

risk shifting

70
Q

This refers to making commitments on both sides of a transaction so the risks offset each other.

A

Hedging

Engineering Management (8 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions