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Business 121 > Financial Management (18 L.S.) > Flashcards

Financial Management (18 L.S.) Flashcards

Chapter 18

1
Q

A financial forecast that is for one year or less in considered a(n) ___ - ____ forecast.

A

short-term forecast

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2
Q

Which of the following is true about venture capitalist:

  • They only operate in international markets
  • They have assigned many major companies during start-up
  • They invest in businesses with high potential
  • They are a new method of raising capital in the U.S.
A
  • They have assigned many major companies during start-up

- They invest in businesses with high potential

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3
Q

A long-term forecast’s time period is generally more than…

A

1 year

-they are sometimes as long as 5 or 10 years!

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4
Q

What are the three steps in the financial planning process in order?

A

1-forecasting the firm’s short-term and long-term financial needs
2-developing budgets to meet those needs
3-establishing financial controls to see whether the company is achieving its goals

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5
Q

Items that may back a secured bond include:

A
  • real estate

- machinery and equipment

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6
Q

Financial management is about managing a firm’s ____, so that it can meet its goals and objectives.

A

Resources

-including all of the firms assets, which include funds (cash), and other short-term assets and long-term assets.

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7
Q

The risk/return trade off principle means that…

A

The greater the risk for a lender making a loan, the higher the interest rate.

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8
Q

Unsecured, short-term funds a bank will lend to a business, provided the funds are readily available, as called a(n):

A

Line of credit

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9
Q

Finance is the function of acquiring and managing ____.

A

Funds

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10
Q

Which of the following is a capital expenditure:

  • Building and equipment
  • Land
  • Patents and copyrights
  • Inventory and materials
A
  • Building and equipment
  • Land
  • Patents and copyrights
  • -Long-term assets and investments in these are capital expenditures
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11
Q

The firm that buys goods and services on a given day, but pays for them later using a(n) ____ credit.

A

Trade

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12
Q

____ are the owners of a public corporation.

A

Stockholders

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13
Q

Which of the following about commercial finance companies are true:

  • They make short-term loans
  • They are almost always small businesses
  • They were made illegal in 2008 financial crisis
  • They charge higher rates than banks
  • They want borrowers to offer tangible assets as collateral
A
  • They make short-term loans
  • They charge higher rates than banks
  • They want borrowers to offer tangible assets as collateral
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14
Q

Money invested in a new or emerging companies that investors believe have great profit potential is…

A

Venture capital

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15
Q

A firm raising funds through various forms of borrowing with the intent to pay it back is using ___ financing.

A

Debit financing

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16
Q

Which of the following are true about factoring accounts:

  • it is the accounts receivable of a firm sold for a discount
  • Factoring is a new business process started in the 1990’s
  • The firm that buys the accounts receivable collects the amount due
  • It is very rare today
  • Small businesses often use it for financing in the short term
A
  • it is the accounts receivable of a firm sold for a discount
  • The firm that buys the accounts receivable collects the amount due
  • Small businesses often use it for financing in the short term
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17
Q

Firms will leverage (raise needed funds through borrowing) because it will…

A

increase a firm’s rate of return on ownership’s investment

18
Q

Firms will leverage (raise needed funds through borrowing) because it will…

A

increase a firm’s rate of return on ownership’s investment

19
Q

A line of credit that is guaranteed but usually comes with a fee is called…

A

revolving credit

20
Q

A ____ ____ forecast is part of a short-term forecast to predict monies coming in and going out of a firm.

A

Cash Flow

21
Q

Which are correct statements about pledging:

  • It is illegal under the Sherman Antitrust Act
  • As accounts receivable is paid, the money is forwarded to the lender as repayment of the loan
  • A firm’s accounts receivable is used as basis for loan
  • It is a promise to buy a firm’s product in the future
  • The firm gets a percentage of accounts receivable pledged as a loan
A
  • As accounts receivable is paid, the money is forwarded to the lender as repayment of the loan
  • A firm’s accounts receivable is used as basis for loan
  • The firm gets a percentage of accounts receivable pledged as a loan
22
Q

A(n) ___-____ agreement is a promissory note that requires the borrower to repay the loan with interest in specified monthly or annual installments.

A

Term-Loan

23
Q

A loan backed by collateral, something valuable like property, is called a(n)…

A

Secured loan

24
Q

Items that may back a secured bond include:

  • Machinery and equipment
  • Personal promise to pay
  • Real estate
  • Long-term goodwill on balance sheet
A
  • Machinery and equipment

- Real estate

25
Q

When a firm decides on a bond term, interest and repayment date, the ____ is being prepared.

A

indenture

26
Q

Financial control is a process though which a firm periodically compares its budget to which of the following:

  • Revenues
  • Cost
  • Expenses
  • Stock price
A
  • Revenues
  • Cost
  • Expenses
27
Q

When a firm is not putting an asset up as collateral for a loan, the loan is considered….

A

unsecured

28
Q

When a firm sells its accounts receivable at a discount in return for cash, the firm is….

A

Factoring

29
Q

Three types of main budgets in financial management include:

A
  • Capital budget
  • Cash budget
  • An operating or master budget
30
Q

A(n) ____ bond is one that is backed by assets which may be claimed if the bond’s interest is not paid.

A

Secured bond

31
Q

What is true about COMMERCIAL PAPER:

  • It is good for unknown businesses
  • It matures in 270 days or less
  • It is unsecured promissory notes
  • It is long term
  • It has values of $100,000 and up
A
  • It matures in 270 days or less
  • It is unsecured promissory notes
  • It has values of $100,000 and up
32
Q

When a company allocates the use of specific resources throughout the firm based on a financial plan indicating management’s expectations, then the company is using a(n) ___ as the basis for making decisions.

A

Budget

33
Q

A financial plan is important to a business because it…

A

Greatly increases the firm’s chance of success

34
Q

Equity financing includes money raised from…

A

within the firm and operations

35
Q

With regarding to payment in financing, concern for maturity dates of obligations is a sign of ___ financing

A

Debt

36
Q

Determinants of how much money a firm should borrow include the…

A
  • The seasonal environment of the business
  • The cash flow forecasts
  • The cost of inventory
37
Q

The ____ department is responsible for preparing budgets, preparing cash flow analysis, and planning expenditures.

A

Finance

38
Q

Needs for operating funds include…

A
  • managing day-by-day needs of the business
  • Controlling credit operations
  • acquiring needed inventory
  • making capital expenditures
39
Q

____ ____ represents the profit a firm keeps and reinvests in the firm.

A

Retained earnings

40
Q

With regard to tax considerations in financing, the fact that interest is tax deductible is a sign of ____ financing.

A

Debt

41
Q

Lenders and stockholders must be satisfied with a firm’s ____ of capital.

A

Cost

42
Q

Customers are happy when firms extend ___ for purchases.

A

Credit

Business 121 (5 decks)

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