Chapter 18- Financial management

Question 0

Financial management

Answer 0

Managing a firms resources so it can meet its goals and objectives

Question 1

Finance

Answer 1

acquires funds for the firm and manages those funds within the firm

Question 2

Financial managers

Answer 2

examine financial data and recommend strategies for improving the financial performance

Question 3

Short-term forecast

Answer 3

Predicts revenues, costs, and expenses for a period of one year or less

Question 4

Cash flow forecast

Answer 4

Predicts the cash inflows and outflows in future periods

Question 5

Long-term forecast

Answer 5

Predicts revenues costs and expenses for a period longer then one year

Question 6

Budget

Answer 6

allocates the use of specific resources based on managements expectations

Question 7

Capital budget

Answer 7

highlights a firm spending plans for major asset purchases that often acquire large sums of money

Question 8

Cash budget

Answer 8

Budget the estimates cash inflows and outflows during a particular period

Question 9

Operating ( or master ) budget

Answer 9

Ties together the firms other budgets and summarizes it’s proposed financial activities

Question 10

Financial control

Answer 10

periodically compares is actual revenues, costs, and expenses with its budget

Question 11

Capital expenditures

Answer 11

Major investments in either tangible long-term assets

Question 12

Debt financing

Answer 12

Funds raised through various ways of borrowing that must be repaid

Question 13

Equity financing

Answer 13

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

Question 14

Short-term financing

Answer 14

Funds needed for a year or less

Question 15

Long-term financing

Answer 15

Funds needed for more than a year

Question 16

Trade credit

Answer 16

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

Question 17

Promissory note

Answer 17

A written contract with a promise to pay a supply a specific sum of money at a definite time

Question 18

Secured loan

Answer 18

A loan backed by collateral

Question 19

Unsecured loan

Answer 19

A loan that doesn’t require any collateral

Question 20

Line of credit

Answer 20

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

Question 21

Revolving credit agreement

Answer 21

A line of credit that’s guaranteed that usually comes with a fee

Question 22

Commercial finance companies

Answer 22

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

Question 23

Factoring

Answer 23

The process of selling accounts receivable for cash

Question 24

Commercial paper

Answer 24

Unsecured promissory notes of $100,000 and up the mature in 270 days or less

Question 25

Term loan agreement

Answer 25

And promissory note that requires a borrower to repay loan in specified installments

Question 26

Risk/return trade-off

Answer 26

Principle that the greater the rest in lender takes in making the loan, the higher the interest rate required

Question 27

Indenture terms

Answer 27

The terms of agreement in a bond issue

Question 28

Secured bond

Answer 28

A bond issued with some form of collateral

Question 29

Unsecured bond

Answer 29

A bond backed only by the reputation of the issuer

Question 30

Venture capital

Answer 30

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

Question 31

Leverage

Answer 31

Raising needed funds through borrowing to increase a firms rate of return

Question 32

Cost of capital

Answer 32

The rate of return a company must earn in order to meet the demands of its lenders and expectations of its equity holders