Chapter 8 Flashcards
Financial management
Activities and decisions undertaken with regard to the financing and investment requirements of an organisation
Financial forecasting and planning
An ongoing process that involves forecasting financial performance, planning the sources and uses of funds, and monitoring cash flows
Bank overdraft
A short-term loan whereby a bank gives permission to a borrower to have a negative bank balance up to a pre-arranged limit
Contributed capital
Funds contributed to a business by the owner(s). Represents a portion of owners’ or shareholders’ equity
Current assets
Cash, or assets which are expected to be converted to cash within one year
Long-term assets
Assets which are expected to provide benefits over more than one accounting year
Inventory
Goods for resale, or to be used in production of goods for sale. Also known as stock in trade.
Accounts receivable
Short-term debt due from a customer, on account of goods sold in the normal course of business. Also known as debtors.
Economic life
The useful life of a business asset
Private sector
The business sector of the economy. Excludes government departments and state-owned enterprises
Wealth maximisation
Represents the goal of financial management. Refers to maximising the wealth of the firms owners. For a company, this is achieved by maximising the market price of the company’s shares
Owners equity, partnership capital
A residual claim by the owner(s) on the assets of the business, after payment of all liabilities
Public sector
Government departments and state-owned enterprises
Commercial
Relating to commerce; profit-oriented
Loss
A negative ‘profit’ arising when expenses exceed income
