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MGST 217 > Chapter 18 > Flashcards

Chapter 18 Flashcards

1
Q

Financial Management

A

The art and science of managing a company’s money so that it can meet its goals.

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2
Q

Return

A

Opportunity for profit.

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3
Q

Risk

A

The potential for loss or chance of investment not meeting expected level of return.

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4
Q

Risk-Return Trade Off

A

A basic principle in finance that holds that the higher the risk, the greater the return required.

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5
Q

Short Term Forecasts

A

Projections of revenues, costs of goods, and operating expenses over one year.

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6
Q

Long Term forecasts

A

Projections of a company’s activities and the funding for those activities over a period that is longer than a year. Typically 2 to 10 years.

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7
Q

Budgets

A

Formal written forecasts of revenues and expenses that set spending limits based on operational forecasts; includes cash budgets, capital budgets and operating budgets.

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8
Q

Cash Budgets

A

Budgets for income and outflow of cash and help company plan for surpluses and shortages of cash.

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9
Q

Capital Budgets

A

Budgets that forecast a company’s outlasts for fixed assets ( plants and equipment) typically covering a period of seven years.

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10
Q

Operating Budgets

A

Budgets that combine sales forecasts with estimates of productions costs and operating expenses to forecast profits

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11
Q

Cash Management

A

The process of making sure that a company has enough cash on hand to pay bills as they are due and to meet unexpected expenses.

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12
Q

Treasury Bill (T-Bill)

A

An investment issued by the government

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13
Q

Certificate of deposit (CD)

A

Time deposit offered by financial Institutions

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14
Q

Commercial Paper

A

Unsecured short term debt an IOU issued by a financially strong operation.

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15
Q

Marketable securities

A

Short Term investments that are easily converted to cash.

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16
Q

Accounts receivable

A

Sales for which a company has not yet been paid.

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17
Q

Capital Expenditures

A

Investments in long lived assets such as land, buildings, machinery and equipment that are meant to produce profit beyond one year.

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18
Q

Capital Budgeting

A

The process of analyzing long-term projects and selecting those that offer the best returns while maximizing the company’s value.

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19
Q

Unsecured Loans

A

Loans for which the borrower does not have to pledge specific assets as security

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20
Q

Trade Credit

A

The extension of credit by the seller to the buyer between the time the buyer receives the goods or services and when it pays for them

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21
Q

Accounts Payable

A

A purchase for which a buyer has not yet paid the seller

22
Q

Line of Credit

A

An agreement between a bak and a business or person that specifies the maximum amount of short term borrowing the bank will allow to that person or business

23
Q

Revolving Credit Agreement (revolving line of credit)

A

A line of Credit that allows the borrower to have access to funds agin once they have been repaid.

24
Q

Secured Loans

A

Loans for which the borrower is required to pledge specific assets as collateral or security.

25
Q

Factoring

A

A form of short term financing in which a company sells its accounts receivable outright at a discount to a factor.

26
Q

Financial Risk

A

The chance that a company will be unable to make scheduled interest and principal payments on its debt.

27
Q

Term Loan

A

A business loan with an annual maturity of more than one year; can be unsecured or secured

28
Q

Bonds

A

Securities that represent a long term debt obligations (liabilities) issues by corporations or governments.

29
Q

Mortgage Loan

A

A long term loan made against real estate as collateral

30
Q

Common Shares

A

Te most widely form of ownership with the right of owner(shareholder) to vote on important corporate decisions.

31
Q

Dividends

A

Profits of the company that are distributed to the shareholders

32
Q

Share or Stock Dividends

A

Payments to shareholders in the form of more shares; can replace or supplement cash dividends

33
Q

Retained Earnings

A

Profits that have been reinvested in the company.

34
Q

Preferred Shares

A

Shares that unlike common shares, have a specified fixed dividend but typically not a voice in management.

35
Q

Risk Management

A

The process of identifying and evaluating risks and selecting and managing techniques to adapt to risk exposures.

36
Q

Peril

A

A hazard or a source of danger.

37
Q

Speculative Risk

A

The chance of either loose or gain without insurance against the possible loss

38
Q

Insurance

A

The promise of compensation for certain financial losses.

39
Q

Insurance policy

A

A written agreement that defines what the insurance covers and the risks that the insurance company will bear for the insured party.

40
Q

Underwriting

A

A review process of all insurance applications and the selection of those who meet the standard.

41
Q

Insurable interest

A

An insurance applicant’s chance of loss if a particular peril occurs.

42
Q

Insurable Risk

A

A risk that an insurance company will cover; must meet certain criteria.

43
Q

Law of Large Numbers

A

Insurance companies predictions of the likelihood that a peril will occur, used to calculate premiums.

44
Q

Deductibles

A

The amounts that the insured must pay before insurance benefits begin.

45
Q

Employment insurance

A

Payment of benefits to laid off workers while they seek new jobs.

46
Q

Workers Compensation

A

Payments to cover the expenses of job related injuries and diseases including medical costs, rehabilitation and job retraining if necessary.

47
Q

Canada Pension Plan

A

Insurance that provides retirement disability, death and health benefits.

48
Q

Provincial or territorial Healthcare

A

Health insurance programs provided by the provinces.

49
Q

Business Interruption Insurance.

A

Insurance that covers costs such as rental foo temporary facilities, wage and salary payments to employees, payments for leased equipment, fixed payments, and profits that would have been earned during that period.

50
Q

Theft Insurance

A

A broad insurance coverage that protects businesses against losses from stealing.

51
Q

Professional Liability Insurance

A

Insurance designed to protect top corporate management, who can be the target of malpractice lawsuits.

52
Q

Enterprise Risk Management (ERM)

A

A company-wide, strategic approach to identifying, monitoring and managing all elements of a company’s risk.

MGST 217 (3 decks)

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