financial mamagement quiz Flashcards
3) define working capital, net working capital and working capital management
Working capital is an organizations current assets minus current liabilities.
Net working capital is current assets less current liabilities.
Working capital management is the management of the current assets and current liabilities of the organization
1) explain and discuss as to what are the various long-term debt?
There are several forms of long-term debt. They include capital leases, unsecured long term loans, mortgages and bonds. They capital lease is a form of long-term financing in which a long term noncancelable contractual agreement is made to lease a capital asset. Unsecured long term loan is a loan with no specific collateral. They have higher interest rates. A mortgage is a secured long term loan, secured with collateral, usually real estate. Bonds payable is formal borrowing arrangement in which a transferable certificate represent the debt. The holder of the bond may sell it, in which case the liability is O’d by the new owner.
4) can a profitable organization run out of money? Explain your answer
Yes there are many reasons why a profitable organization may run out of money. If any part of the working capital cycle fails then there will be dire consequences. If the organization is not on mission it may not collect cash which would mean that there would be no money to buy supplies or pay the workers causing the organization to run out of money.
5) discuss the advantages of a careful inventory management system
It can save money for the organization. The lower the level of inventory, the less an organization must pay out to suppliers, and the greater the amount of money it can keep an interest bearing savings accounts or investment
6) what is a management control system? What is it compared to in the chapter?
It is a set of policies and procedures designed to keep operations going according to plan. Such systems also detect variations from plans and provide managers with information needed to take corrective actions when necessary. Management control systems have often been compared to thermostats
7) explain and discuss some of the principal impacts that Sarbane’s Oxley act is likely to have on a not-for-profit organization that decide to follow the provisions of the law
Protects whistle blowers and penalizes those who retaliate. Judiciary boards should have greater understanding of fiduciary responsibility. Overall more managerial accountability.
8) explain and discuss the elements of an internal control system
ICS is broken down into accounting and administrative control. Accounting controls = before the fact controls. Administrative control= after the fact controls.
Explain and discuss the advantages and disadvantages of leasing
Advantages of leasing is pay less up front with usually no down payment and make profit right away. Disadvantage of leasing is usually pay more later on and pay more upfront with the disadvantage of spending that money elsewhere
