Lesson 12 - Managing the Finance Function

Question 1

Determination of Fund Requirements

Answer 1

1. To finance daily operations
2. To finance the firm’s credit service
3. To finance the purchase inventory
4. To finance the purchase of major assets

Question 2

Financing Daily Operations

Answer 2

1. Wages and salaries
2. Rent
3. Taxes
4. Power and light
5. Marketing expenses
6. Administrative expenses

Question 3

Sources of Funds

Answer 3

1. Cash sales
2. Collection of accounts receivables
3. Loans and credits
4. Sales of assets
5. Ownership contributions
6. Advances from customers

Question 4

Short-term financing is provided by the ff:

Answer 4

1. Trade creditors
2. Commercial banks
3. Commercial paper houses
4. Finances companies
5. Factors
6. Insurance companies

Question 5

To determine the best source, the following factors must be considered:

Answer 5

1. Flexibility
2. Risk
3. Income
4. Control
5. Timing
6. Other factors like collateral values, flotation cost, speed, and exposure

Question 6

Three Basic Financial Statements

Answer 6

1. Balance sheet
2. Income Statement
3. Statement of changes in financial position

Question 7

Types of Risk

Answer 7

1. Fire
2. Theft
3. Floods
4. Accidents
5. Nonpayment of bills by customer
6. Disability and death
7. Damage claim from other party

Question 8

Methods of dealing with Risk

Answer 8

1. Risk may be avoided
2. Risk may be retained
3. Hazards may be reduced
4. Losses may be reduced
5. Risk may be shifted