Chapter 18 & 19 & 20 Flashcards
Finance
the function in a business that acquires funds for the firm and manages those funds within the firm.
Financial Management
the job of managing a firm’s resources to meet its goals and objectives.
Financial managers
examine financial data and recommend strategies for improving financial performance.
- Responsible for obtaining funds, effectively control use of funds.
- Planning, auditing, managing taxes, advising top management on financial matters. Budgeting.
Budget
sets forth management’s expectations and allocates the use of specific resources throughout the firm. The budget is the guide for financial operations and expected financial needs.
Financial control
a process in which a firm periodically compares its actual revenues, costs, and expenses, with its budget.
Capital Expenditures
major investments in either tangible long term assets such as land, buildings, and equipment or intangible assets such as patents, trademarks, and copyrights.
Debt Financing
funds raised through various forms of borrowing that must be repaid.
Equity financing
money raised from within the firm, from operations or through the sale of ownership in firm (stock or venture capital).
Short term financing
funds needed for a year or less.
Long term financing
funds needed for more than a year.
Trade credits
the practice of buying goods and services now and paying for they later. Businesses often get payment terms such as 2/10 net 20 when receiving trade credit.
Promissory note
an agreement with a promise to pay a supplier a specific sum of money at a definite time.
Line of credit
a given amount of unsecured short-term funds a bank will lend to a client firm, provided that the funds are readily available.
Venture Capital
money that is invested in new or emerging, often higher-risk companies, that are perceived as having great profit potential.
Leverage
raising needed funds through borrowing to increase the firm’s rate of return.
Cost of capital
the rate of return a company must earn in order to meet the demands of its lenders and expectations of its equity holders.
Securities markets
financial marketplaces for stocks and bonds and serve two primary functions.
- Assist businesses in finding long term funding to finance capital needs.
- Provide private investors a place to buy and sell securities such as stocks and bonds.
Primary markets
handle the sale of new securities.
Secondary markets
handle the trading of securities between investors (buyers, and sellers) with the proceeds of the sale going to the seller of the security.
Initial public offering (IPO)
the first public offering of a corporation’s stock.
Facebook went public with its IPO at a stock price of $38.00 per share, and recently it was selling at a stock price of $225.00 per share.
Investment bankers
specialists who assist the issue and sale of new securities.
Institutional investors
large organizations, such as pension funds or mutual funds, that invets their own funds or the funds of others in order to accumulate positive returns on their invested capital.
Stock exchange
an organization whose members can buy and sell (exchange) securities for companies and investors.
Over-the-counter (OTC) market
exchange that provides a means to trade stocks not listed on the national exchanges.
NASDAQ
a nationwide electronic system that communicates over-the-counter trades to brokers.
New York Stock exchange
biggest marketplace for investors to buy and sell shares of stock in the world. Located on wall street in downtown Manhattan in NYC and owned by Intercontinental Exchange. The NYSE has a history that goes back more than 200 years, and most of the largest, bets-known, and most prestigious businesses in the world choose to list their share on the stock exchange.
