Finance Management

Question 1

Finance

Answer 1

Get capital into the firm and manage it

Question 2

Financial Management

Answer 2

Management of the firm’s resources so it can achieve its goals

Question 3

Financial Managers

Answer 3

Study data presented by accountants and make recommendations for the top management, which they can use to improve the strategies used to improve the company’s financial health

Question 4

Three most observed reasons for a firm’s financial downfall

Answer 4

Undercapitalisation, little control over cash flows, little control over spending

Question 5

Financial Planning

Answer 5

Analysis of long- and short-term money flows in a firm

Question 6

Short-term Forecast

Answer 6

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

Question 7

Long-term Forecast

Answer 7

Predicts revenues, costs and expenditures for a period longer than one year

Question 8

Cash Flow Forecast

Answer 8

Prediction of the cast inflows and outflows

Question 9

Budget

Answer 9

Most firms set up a yearly budget that contains predictions of management and descriptions of how resources are used in the firm

Question 10

Capital Budget

Answer 10

Focuses on the plans for purchasing large assets

Question 11

Cash Budget

Answer 11

Predicts the cash inflow and outflow to predict cash position at the end of the year

Question 12

Operational or Master Budget

Answer 12

Adds together all the other budgets and gives a summary of the proposed financial activities

Question 13

Financial Control

Answer 13

Process in which a firm periodically compares the budgets to the actual numbers

Question 14

Reasons why firms need operational capital

Answer 14

Managing daily operations, managing debtors, obtaining necessary inventory, large capital expenditures

Question 15

Debt Financing

Answer 15

Capital obtained through a number of different loans

Question 16

Equity Financing

Answer 16

Capital obtained from the company itself (issuing shares)

Question 17

Short-term Financing

Answer 17

Consists of all the amounts needed for a period of one year or less

Question 18

Long-term Financing

Answer 18

Consists of the amounts needed for a period longer than one year

Question 19

Trade Credit

Answer 19

Purchasing goods or services on credit

Question 20

Promissory Notes

Answer 20

Declarations given to a supplier which guarantee payment within a certain period or time. The supplier can sell these to the bank, who will then take over the amount payable

Question 21

Forms of Short-term Financing

Answer 21

Trade credit, promissory notes, secured loan, unsecured loan, line of credit, revolving credit agreement, commercial financing firms

Question 22

Factoring

Answer 22

Financing method in which a business owner sells accounts receivable at a discount to a third-party funding source to raise capital

Question 23

Commercial Papers

Answer 23

Composition of non-secured payables with a value of $100,000 and its duration is 270 days

Question 24

Term-loan Agreement

Answer 24

Promissory note that states that the loan must be repaid in specified terms

Question 25

Identure Terms

Answer 25

Agreements within a debenture

Question 26

Three ways of Equity Financing

Answer 26

Selling shares, reinvesting profits, venture capital

Question 27

Leverage

Answer 27

Raising of capital by borrowing to increase the rate of return