chapter 15 Flashcards
responsible for planning and overseeing the financial resources of a firm
financial manager
managing the pattern of cash inflows (revenues) and outflows (debt payments)
cash-flow management
checking performance against strategic plans, making adjustments, preparing budgets to ensure that sufficient cash is on hand to meet operational and debt-service needs
financial control
a plan to achieve a desired financial status
financial planning
accounts payable, accounts receivable, invetory
short-term operating expenses
inventories + (accounts receivable - account payable)
working capital
funding fixed assets that have a long life and a lasting value: lands, buildings, machinery
long-term capital expenditures
allows firms to cover operational expenses and implement short-term plans
short-term funds
the granting of credit by a selling firm to a buying firm
trade credit
ship now and pay after
open-book credit
sign agreement and then ship
promissory note
signed statement of payment terms attached
trade draft
the borrower is required to put up collateral
secured short-term loans
banks do not ensure that the funds will always be available as needed
line of credit
banks guarantee availability of the funds
revolving credit agreements
a firm sells unsecured notes for less than their face value. then repurchases them in 30-72 days for the face value
commercial paper
borrowing money for 3-10 years at a fixed or floating rate
long-term loans
a promise by the borrower to pay the lender an amount of money on the maturity date
corporate bonds
assets are pledged as security for the bond
secured bonds
not backed by any security and only sold financially by strong corporations that carry lower risk for investors
unsecured bonds
certificates are only of value to registered holders
registered bonds
holders clip coupons from the bond to receive interest payments- anyone with the coupon can redeem it
bearer bonds
may be called at anytime or after a minimum period of time, and paid off for a specified call price
callable bonds
redemption rates are staggered so that the bond is paid off gradually ove time
serial bonds
option of receiving common stock instead of cash
convertible bonds
a firm sells ownership rights by issuing shares
common stock
financing by retaining profits in the firm and not paying dividends to shareholders
retained earnings
current price of a share on the secondary securities market
market value
shareholders’ equity divided by the number of shares outstanding
book value
arbitrary value set by the company’s board of directors and stated on stock certificates
par value
require fixed payments, as do bonds
preferred shares
the mix of debt vs equity
capital structure
sale and purchase of newly issued stocks or bonds
primary securities market
sale and purchase of previously issued stocks and bonds
secondary securities market
financial specialists who issue new securities
investment bankers
organizations that provide a setting for members to buy and sell stock in accordance with the rules of the exchange
stock exchanges
individuals licenses to buy and sell securities for customers in the secondary market
stockbrockers
the largest exchange in Canada with 110 members
Toronto stock exchange
numerous dealers who trade among themselves for smaller firms and those not listed on exchanges
the over-the-counter market
the worlds first electronic stock market
national association of securities dealers automated quotation
summarize trends in the stock market and specific industries
market indexes
a period of falling stock prices
bear market
a period of rising stock prices
bull market
an order to a broker to buy or sell a certain security at the current market price
market order
an order to a broker to buy a certain security only if its price is less than or equal to a given limit
limit order
an order to a broker to sell a certain security if its price falls to a certain level or below
stop order
the purchase or sale of sock in units of 100 shares
round lot
the purchase or sale of stock in units of other than 100 shares
odd lot
investor makes a down payment on a portion of the price with the rest financed by the broker
margin trading
a invester “borrows” shares from the broker and sells them
short sale
a company that pools the resources of many investors and uses funds to purchase various types of securities
mutual fund
a bundle of stock and/ or bonds that is in an index tracking the overall movement of a market
exchange- traded fund
private pools of money that try to give positive returns, regardless of stock-market performance
hedge funds
undifferentiated products
commodities
the purchased right to buy a particular stock at a certain price until a specified date
call option
the purchases right to sell a particular stock at a certain price until a specified date
put option
laws regulating how firms back up securities
blue-sky-law
detailed registration statement about a new stock filed with a provincial securities exchange
prospectus
conserving a firms financial power or assets by minimizing the financial effect of accidental losses
risk management
uncertainty about future events
risk
the chance for gain or loss
speculative risk
only the change of loss
pure risk
transfer a risk to another individual or firm via contract
risk transfer
prevent, reduce or minimize losses
risk control
cover losses with its own funds
risk retention
