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Management 100 > Chapter 17: Financial Management > Flashcards

Chapter 17: Financial Management Flashcards

1
Q

Finance

A

The function in a business that acquires funds for the firm and manages them within the firm

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2
Q

Financial management

A

The job of managing a firms resources to meet its goal and objectives

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3
Q

Financial managers (not management)

A

Managers who examine the financial data by accountants and reccomend strategies for improving the financial performance of the firm

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4
Q

3 reasons why a firm fails financially

A

Undercapitalization (insufficient funds)
Poor control over cash flow
Inadequate expense control

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5
Q

Time value of money

A

A dollar in hand today is worth more than a dollar promised at some time in the future

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6
Q

Financial planning 3 steps

A

1) forecasting a firms short term and long term financial needs
2) developing a budget to meet those needs
3) establishing financial control to see weather the company is achieving its goal

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7
Q

Short term forecast

A

Forecast that predicts revenue, costs, and expense for a period of one year or less

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8
Q

Cash flow forecast

A

Forecast that predicts the cash inflow and outflows in future periods, usually months or quarters

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9
Q

Long term forecast

A

Forecast that predicts revenue, cost, and expenses for a period longer than one year

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10
Q

Budget

A

Financial plan that sets forth managements expectations, and, on the basis of those expectations, allocates the use of specific resources throughout the firm

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11
Q

Capital budget

A

A budget that forecasts a firms spending plans for major asset purchases that often require large sums of money, like property, buildings, and equipment

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12
Q

Cash budget

A

A budget that estimates a firms cash inflows and outflows during a particular period (month or quarter)

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13
Q

Operating (master) budget

A

The budget that ties together all of a firms other budgets and summarizes the business proposed finances activities

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14
Q

Financial control

A

Process in which a firm periodically compares its actually revenue, costs, and expenses with its projected ones

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15
Q

Capital expenditures

A

Major investments in either tangible or long term assets, such as land, buildings, and equipment or intangible assets such as patents and trademarks

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16
Q

Debt financing

A

Funds raised through various forms of borrowing that must be repaid

17
Q

Equity financing

A

Money raised from within the firm, from operations or through the sale of ownership in the firm

18
Q

Short term financing

A

Borrowed funds that are needed for one year or less

19
Q

Long term financing

A

Borrowed funds that are need for more than a year

20
Q

Trade credit

A

The practice of buying goods and services now and paying for them later

21
Q

Promissory note

A

A written contract with a promise to pay

22
Q

Secured loan

A

Loan backed by collateral

You don’t pay us back we take your house

23
Q

Unsecured loan

A

Loan that does not require any collateral

24
Q

Line of credit

A

A given amount of unsecured funds a bank will lend to a business

25
Q

Commercial finance companies

A

Organizations that make short term loans to borrowers who offer tangible assets as collateral

26
Q

Credit profile

A

A borrowers financial track record in the form of borrowing history

27
Q

4 C’s of credit

A

Character
Capacity
Capital
Conditions

28
Q

Factoring

A

The process of selling accounts receivable for cash

29
Q

Term loan agreement

A

A promissory note that requires the borrower to repay the loan in specified instalments

30
Q

Bond

A

Cooperate certificate indicating that an investor has lent money to a firm or a government

31
Q

Maturity date

A

Exact date the issuer of a bond must pay

32
Q

Interest

A

Payment the bond issuer makes to the bond holders for use of borrowed money

33
Q

Stocks (shares)

A

Shares of ownership in a company

34
Q

Initial public offering

A

The first public offering of a corporations stock

35
Q

Stock certificate

A

Evidence of stock ownership that specifies the name of a company, the number of shares, and the type of stock

36
Q

Dividends

A

Part of a firms profits that may be distributed to shareholders as either cash payments or additional shares of stock

37
Q

Common stock

A

The most basic form of ownership in a firm

38
Q

Preferred stock

A

Stock that gives its openers preference in the payment of dividends and an ealier claim on assets

39
Q

Venture capital

A

Money that is involved in new or emerging companies that are perceived as having great profit potential

Management 100 (17 decks)

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