Chapter 9 Flashcards
Financial Management
Accounts receivable
Money is owed to an organization for products or services purchased on credit
Bond indenture
A contract that specifies the terms of an agreement between bondholders and bond issues
Bond
A debt certificate issued by federal state, local and foreign governments, utilities, incorporations, both non-and for-profit
Budget
An internal financial plan to forecast income and expenses over a set period of time.
Capital budget
A financial plan for the purchase and depreciation of an organizations, major assets that include property plant and equipment
Capital expenditures
Major investments in tangible or intangible, long-term assets.
What is the role of a financial manager?
They are responsible for developing financial plans, predicting trends, preparing monitoring and allocating budgets creating an interpreting financial reports, analyzing project, cash flows, managing accounts, receivable and payable directing financing and investment activities, conducting financial audits and analyzing tax implications, and collaborate with a chief financial officer or top management
Cash budget
A financial plan of the cash in flows of an organization over a period of time to help managers anticipate borrowing needs operating cost in a debt repayment plan
Commercial paper
And unsecure promissory note of 100,000 or more that matures in 270 days or less
Credit sales
Sales that allow goods and services to be received by a purchaser right away and payment to be made by specified time in the future.
Debt financing
Money borrowed from outside the organization from a bank investment firm or commercial lender that must be repaid
Equity financing
Money raised from within the organization from operations or through the sale of ownership
Financial controls
The policies and procedures put in place to manage an organizations financial plans and achieve its financial objectives
Finance
The science of managing money
Financial management
The effective management of money to accomplish organizational objectives
Financial planning
The process of determining an organization‘s future needs, and how to achieve them
First in first out method
An inventory accounting method that uses the first inventory purchase hypothetically at a lower cost and result in a lower cost of good sold and higher net income
Forecasting
The process of making predictions about the future based on the past data and current trends
Intangible assets
Investments and patent trademarks and copyrights
Inventory
The wrong materials were in process and finish goods that are part of an organization assets, and or will be offered for sale
Last in first out method
An inventory accounting method that uses the last inventory purchased first and results in a higher cost of good
Line of credit
An arrangement where an organization is preapproved to receive a fixed amount of funds upon request, but funding is not guaranteed if the bank does not have the money available to lend
Long-term forecast
A forecast that predicts revenues and expenses for a period of more than one year and as long as 10 years
Marketable securities
Low risk securities with durations that range from one day to one year, and that can easily be bought and sold on the market
Master budget
A detailed financial plan for the entire organization, that ties together the budgets for individual divisions, departments, and projects to address and organization goals
Retained earnings
The profit a company keeps and reinvest internally in the organization
Revolving credit agreement
A related type of bank financing to a line of credit that guarantees the availability of funds for a fee
Risk return trade-off
A business principle that states that the greater the risk to the lender, the higher, the interest rate to the borrower
Secured loan
A type of financing back by collateral something with value such as property equipment or inventory
Short term forecast
A forecast that predicts revenues and expenses for a period of one year or less
Tangible assets
Investments in land, buildings plants, equipment, and vehicles
Term loan agreement
A long-term loan that requires a promissory note to be signed by the bar were promising to repeat the long principle with interest in monthly installments
Time value of money
A principle of finance that states that money is worth more today than in the future due to its potential to earn interest
Trade credit
Credit extended by suppliers for the purchase of their products and services
Unsecured loan
A type of financing that is not back by any collateral
How can managers maximize the use of operating funds through four areas?
By daily operations, credit sales, inventory acquisition, and capital expenditures
What is the goal of managing money flow?
To maximize the cash on hand to make current obligations and avoid excessive cash buildup in an account that does not make money
Why is inventory management essential?
To maximize profitability and boost cash flow
How can capital expenditures be vital to an organization?
It helps to support and research new innovations, expand production capabilities, and grow current levels of output
What are the two major sources of long-term funding?
Debt borrowing and equity ownership
What are three sources of equity?
Sale of ownership or stock, the reinvestment of organizational earnings or retained earnings, and the utilization of venture capital funds from investors
What are some traits of venture capitalist?
They are wealthy and risk, tolerant investors they enjoy part ownership in the company and expect higher than average return on their investment. They tend to invest in industries they are familiar with it. It’s usually reserved for financing new emerging high risk high return businesses.
