Brainscape's Knowledge GenomeTM

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


See full index

ENGRNG MAN > CHAPTER 12 - MANAGING THE FINANCE FUNCTION > Flashcards

CHAPTER 12 - MANAGING THE FINANCE FUNCTION Flashcards

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

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 FUNCTION

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

3 BASIC MANAGEMENT FUNCTION

A
  1. finance function
  2. production
  3. marketing
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

PROCESS FLOW OF FINANCE FUNCTION

A
  • ## determination of fund requirements
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

DETERMINATION OF FUND REQUIREMENTS

A
  1. to finance daily operations
  2. to finance 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
6
Q

FINANCING DAILY OPERATIONS

A
  1. wages and salaries
  2. rent
  3. taxes
  4. power and light
  5. marketing expense
  6. administrative expenses
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

MARKETING EXPENSES

A

advertising
entertainment
travel expenses
telephone and telegraph
stationery and printing
postage, etc.

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

ADMINISTRATIVE EXPENSES

A

auditing
legal
services
etc

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

it is often times unavoidable for firms to extend credit to customers. if the engineering firm manufactures product, sales terms vary from cash to 90-day credit extension to customers

A

FINANCING THE FIRM’S CREDIT SERVICES

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

when a new chemical manufacturing firm finds difficulty in convincing distributors to carry their products, a __________ may solve the problem

A

CREDIT EXTENTION

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

the maintenance of adequate inventory is crucial to many firm. raw materials, supplies, and parts are needed to be kept in a storage so they will be available when needed

A

FINANCING THE PURCHASE OF INVENTORY

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

will require sufficient funding and this must be secured

A

PURCHASE OF ADEQUATE INVENTORY

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

companies, at time, need to purchase major assets. when top management decides on expansion, there will be a need to make investments in capital assets like land, plan, and equipment

A

FINANCING THE PURCHASE OF MAJOR ASSET

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

SOURCES OF FUNDS

A
  1. cash sales
  2. collection of accounts receivables
  3. loans and credits
  4. sales of asset
  5. ownership contribution
  6. advances from customers
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

cash is derived when the firm sells its product or services

A

CASH SALES

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

some engineering firms extend credit to customers. when these are settled, cash is made available

A

COLLECTION OF ACCOUNTS RECEIVABLES

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

when other source of financing are not enough, the firm will have to resort to borrowing

A

LOANS AND CREDITS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

cash is sometimes obtained from the sales of company’s assets

A

SALE OF ASSETS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q
A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

when cash is not enough, the firm may tap its owners to provide more money

A

OWNERSHIP CONTRIBUTION

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

sometimes, customers are required to pay cash advances on orders made . this helps the firm in financing its production activities

A

ADVANCES FROM CUSTOMERS

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

Loans may be classified as

A
  1. short-term
  2. medium-term
  3. long-term
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

are those with repayment schedules of less than one year

A

SHORT-TERM SUORCES OF FUNDS

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

are sometimes required by short-term creditors

A

COLLATERALS

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

LONG-TERM ASSETS

A

Production equipment
Land
Building

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

ADVANTAGES OF SHORT-TERM CREDITS

A
  1. they are easier to obtain
  2. short-term financing are often less costly
  3. offers flexibility to the borrower
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

creditors maintain the view that the risk involved in short-term lending is also a short-term. thus short-term credits are made easily available to qualified borrowers

A

They are easier to obtain

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

since short term financing i favored by creditors, they make it available at less cost

A

Often less costly

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

after the borrower has settled his short-term debt, he may consider other means of financing, in contrast, eliminates, this option. he is stuck with the long-term funds even he is no longer requires it.

A

OFFERS FLEXIBILITY TO THE BORROWER

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

DISADVANTAGES OF SHORT-TERM CREDITS

A
  1. mature more frequently
  2. at times, be more costly than longer term debts
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Supplies of short-term funds. short term financing is provide 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
32
Q

refers to suppliers extending credit to a buy 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
33
Q

INSTRUMENTS USED IN TRADE CREDIT

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
34
Q

is unsecured and permits the customer to pay for goods delivery 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
35
Q

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
36
Q

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

A

PROMISSORY NOTES

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

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
38
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
39
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
40
Q

are those that help business firms in borrowing funds from the money market. under this scheme, the business firm is need of funds issues a commercial paper , which a short-term promissory note, generally unsecured, and issued by large, established firms

A

COMMERCIAL PAPER HOUSES

41
Q

is sold to investors through the commercial paper house

A

COMMERCIAL PAPER

42
Q

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

A

BUSINESS FINANCE COMPANIES

43
Q

EXAMPLE OF FINANCE COMPANIES IN THE PH

A

Philacor Credit Corporation and Consolidated Orix Leasing and Finance Corporation

44
Q

are institutions that buy the accounts receivables of firm, assuming complete accounting and collection responsibilities

A

FACTORS

45
Q

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

A

INSURANCE COMPANIES

46
Q

there are instances when the engineering firm will have to tap the long-term sources of funds. an example is when expenditures for capital assets become necessary.

A

LONR-TERM SOURCES OF FUND

47
Q

CLASIFICATION OF LONG-TERM SOURCES OF FUNDS

A
  1. long-term debts
  2. common stocks
  3. retained earnings
48
Q

Long-term debts are sub-classified into

A

Term Loans and Bonds

49
Q

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

A

TERM LOANS

50
Q

Term loans have maturities of

A

2 to 30 years

51
Q

Advantages of term loans as long-term source of funds are as follows:

A
  1. funds can be generated more quickly than other long-term sources
  2. they are flexible, i.e., they can be easily tailored to the needs of the borrower
  3. the cost of issuance is low compared to other long-term sources
52
Q

is a certificate of indebtedness issued by a corporation to lender. it is marketable security that the firm sells to raise funds

A

BONDS

53
Q

the source of long-term funds consist of issuance of common stocks. since common stocks represent ownership of corporations, many investors are placing money in them

A

COMMON STOCKS

54
Q

refer to corporate earnings not paid out as dividends. this simply means that whatever earnings that are due to stockholders of corporation are reinvested

A

RETAINED EARNINGS

55
Q

these can be used by the firm indefinitely, they become an important source of long-term financing

A

RETAINED EARNINGS

56
Q

TYPES OF BOND

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
57
Q

no collateral requirement

A

DEBENTURES

58
Q

secured by real estate

A

MORTGAGE BOND

59
Q

secured by stocks and bonds owned by the issuing corporation

A

COLLATERAL BONDS

60
Q

payment of interest or principal is guaranteed by one or more individuals or corporations

A

GUARANTEED BOND

61
Q

with an inferior claim over other debts

A

SUBORDINATED DEBENTURES

62
Q

convertible into shares of common stock

A

CONVERTIBLE BONDS

63
Q

warrants are options which permit the holder to buy stock of the issuing company at a stated price

A

BONDS WITH WARRANT

64
Q

pays interest only when earned

A

INCOME BONDS

65
Q

BEST SOURCES OF FUNDING

A
  1. flexibility
  2. risk
  3. income
  4. control
  5. timing
  6. other factors like collateral values, flotation cost, speed and exposure
66
Q

is the prohibition on the issuance of additional debt instruments by borrower

A

RESTRICTION

67
Q

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

A

RISK

68
Q

“subjects the borrowing firm to more risk than does financing long-term debt”

A

SHORT-TERM DEBT

69
Q

the various sources of funds, when availed of, will have their own individual effects in the net income of the engineering firm

A

INCOME

70
Q

when new owner are taken in because of the need for additional capital, the current group of the owner may lose control of the firm

A

CONTROL

71
Q

the financial market has its up and downs

A

TIMING

72
Q

OTHER FACTORS

A
  1. Collateral values
  2. Flotation cost
  3. Speed
  4. Exposure
73
Q

are there assets available as collateral

A

COLLATERAL VALUES

74
Q

how much it will cost to issue bonds or stocks

A

FLOTATION COST

75
Q

how fast can the funds required to be raised

A

SPEED

76
Q

to what extent will the firm be exposed to other parties

A

EXPOSURE

77
Q

3 BASIC FINANCIAL STATEMENT

A
  1. Balance sheet
  2. Income Statement
  3. Statement of changes in financial position
78
Q

is a very important concept that the engineer manager be familiar with. it confront people everyday

A

RISK

79
Q

LIST OF EXPOSURE TO RISK

A
  1. fire
  2. theft
  3. floods
  4. accidents
  5. nonpayment of bills by customers (bad debts)
  6. disability and death
  7. damage claim form other parties
80
Q

CLASSIFICATION OF RISK

A
  1. pure risk
  2. speculative
81
Q

is one in which “ there is only a chance of loss” this means that there is no way of making gains. are insurable and may be covered by insurance

A

PURE RISK

82
Q

is one in which there is a chance of either loss or gain, thus type of risk is not insurable. an example is investment in common stocks

A

SPECULATIVE RISK

83
Q

is designed to deal with pure risks, while the application of sound management practices are directed towards speculative risks that are inherent and cannot be avoided

A

RISK MANAGEMENT

84
Q

METHODS OF DEALING WITH RISK

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 ma be shifted
85
Q

is a method of handling risk where in the management assumes the risk

A

RISK RETENTION

86
Q

a planned risk retention , also called ___________, is a conscious and deliberate assumption of a recognized risk

A

SELF-INSURANCE

87
Q

may be reduced by simply instituting appropriate measures in a variety of business activities

A

HAZARDS

88
Q

EXAMPLES OF EFFORTS ON LOSS REDUCTION

A
  1. physically separating buildings to minimize losses in case of fire
  2. using fire roof materials on interior building construction
  3. storing inventory in several locations to minimize losses in case of fire and theft;
  4. maintaining duplicate records to reduce accounts receivable losses
  5. transporting goods in separate vehicles instead of concentrating high values in single shipments
  6. prohibiting key employees from travelling together
  7. limiting legal liabilities by forming several separate corporations
89
Q

another method of handling risk

A

RISK SHIFTING

90
Q

EXAMPLE OF RISK SHIFTING

A

hedging,
subcontracting,
incorporation, and
insurance

91
Q

refer to making commitments on both sides of a transaction so the risk offset each other

A

HEDGING

92
Q

a stockholder is able to make profits out of his investments but without individual responsibility for whatever errors in decisions are made by the management

A

In a corporation

93
Q

EXAMPLES OF INSURANCE PRODUCTS SOLD BY A COMPANY

A

-Fire
-Marine
- Casualty
- Engineering
- Aviation
-Bonds

94
Q

FIRE

A

fire and applied perils, business interruption

95
Q

MARINEcash in transit

A

hull insurance, shipowner’s liability insurance protection and indemnity

96
Q

CASUALTY

A

motorcar, property floater, personal accident, comprehensive general liability, money, security, and payroll, cash in transit, burglary

97
Q

ENGINEERING

A

Contractor’s all risk,
Machinery breakdown,
Contractor’s plant and equipment all risk,
Erector’s all risk,
Boilers and explosion,
Electronic insurance
Consequential losses

98
Q

AVIATION

A

Hull and liabilities insurance,
Airport operation liability,
Hangarkeeper’s liability,
Aircraft refueling liability,
Pilot’s licensure insurance,
Pilot/ Crew personal accident cover

99
Q

BONDS

A

all kinds of bonds

ENGRNG MAN (6 decks)

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