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engi man finals > man. the finance function > Flashcards

man. the finance function Flashcards

1
Q

is an important management responsibility that deals with the procurement and administration of funds with the view of achieving the objectives of business.

A

finance function

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2
Q

4 determination of fund requirements

A
  1. finance daily operations
  2. finance the firm’s credit services
  3. finance the purchase of inventory
  4. finance the purchase of major assets
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3
Q

6 financing daily operations

A
  1. wages and salaries
  2. rent
  3. taxes
  4. power and light
  5. marketing expenses
  6. administrative expenses
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4
Q

6 sources of funds

A
  1. cash sales
  2. collection of accounts receivables
  3. loans and credits
  4. sale of assets
  5. ownership contribution
  6. advances from customers
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5
Q

cash is derived when the firm sells its products or services. SF

A

cash sales

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6
Q

some engineering firms extend credit to customers. when these are settled, cash is made available. SF

A

collection of accounts receivables

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7
Q

when other sources of financing are not enough, the firm will have to resort to borrowing. SF

A

loans and credits

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8
Q

cash is sometimes obtained from the sale of the company’s assets. SF

A

sale of assets

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9
Q

when cash is not enough, the firm may tap its owners to provide more money. SF

A

ownership contribution

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10
Q

sometimes customers are required to pay cash advances on orders made. this helps the firm in financing its production activities. SF

A

advances from customers

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11
Q

are those with repayment schedules of less than one year.

A

short-term sources of funds

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12
Q

6 supplies of short-term funds

A
  1. trade creditors
  2. commercial banks
  3. commercial paper houses
  4. finance companies
  5. factors
  6. insurance companies
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13
Q

refer to suppliers extending credit to a buyer for use in manufacturing, processing, or reselling goods for profit. SSTP

A

trade creditors

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14
Q

3 instrument use in trade credit

A
  1. open-book credit
  2. trade acceptance
  3. promissory notes
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15
Q

is unsecured and permits the customer to pay for goods delivered to him in a specified number of days.

A

open-book credit

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16
Q

is a time draft drawn by a seller upon a purchase payable to the seller as payee, and accepted by the purchaser as evidence that the goods shipped are satisfactory.

A

trade acceptance

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17
Q

is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at fixed or determinable future time.

A

promissory note

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18
Q

are institutions which individuals or firms may tap as source of short-term financing.

A

commercial banks

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19
Q

commercial banks 2 types of loans

A
  1. does require collateral
  2. does not require collateral
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20
Q

are those that help business firms in borrowing funds from the money market.

A

commercial paper houses

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21
Q

is sold to investors through the commercial paper house.

A

commercial paper

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22
Q

are financial institution that finance inventory and equipment of almost all types and sizes of business firms.

A

business finance companies

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23
Q

are institutions that buy the accounts receivables of firms, assuming complete accounting and collection responsibilities.

A

factors

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24
Q

are also possible sources of short-term funds.

A

insurance companies

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25
Q

long-term sources of funds are classified into 3

A
  1. long-term debts
  2. common stocks
  3. retained earnings
26
Q

2 types of long-term debts

A
  1. term loans
  2. bonds
27
Q

is a commercial or industrial loan from a commercial bank, commonly used for plant and equipment, working capital, or debt repayment.

A

term loans

28
Q

have maturities of 2 to 30 years.

A

term loans

29
Q

is a certificate of indebtedness issued by a corporation to a lender.

A

bonds

30
Q

it is a marketable security that the firm sells to raise funds.

A

bonds

31
Q

the third source of long-term funds consists of the issuance. many investors are placing their money in them.

A

common stocks

32
Q

can be cheaper and more stable sources of long-term funds

A

common stocks

33
Q

refer to corporate earnings not paid out as dividends.

A

retained earnings

34
Q

this simply means that whatever earnings that are due to the stockholders of a corporation are reinvested

A

retained earnings

35
Q

8 types of bond

A
  1. debentures
  2. mortgage bond
  3. collateral trust fund
  4. guaranteed bond
  5. subordinated debentures
  6. convertible bonds
  7. bonds with warrants
  8. income bonds
36
Q

feature - no collateral requirement

A

debentures

37
Q

feature - secured by real estate

A

mortgage bond

37
Q

feature - secured by stocks and bonds owned by the issuing corporation

A

collateral trust bond

38
Q

feature - payment of interest or principal is guaranteed by one or more individuals or corporations

A

guaranteed bond

39
Q

feature - with an inferior claim over other debts

A

subordinated debentures

40
Q

feature - convertible into shares of common stock

A

convertible bonds

41
Q

feature - warrants are options which permit the holder to buy stock of the issuing company at a stated price.

A

bonds with warrants

42
Q

feature - pays interest only when earned

A

income bonds

43
Q

6 best source of financing according to schall and haley

A
  1. flexibility
  2. risk
  3. income
  4. control
  5. timing
  6. other factors like collateral values, flotation costs, speed, and exposure
44
Q

3 financial statement

A
  1. balance sheet
  2. income statement
  3. statement of changes in financial position
45
Q

also called statement of financial position

A

balance sheet

46
Q

also called statement of operations

A

income statement

47
Q

2 classification of risk

A
  1. pure
  2. speculative
48
Q

is one in which there is only a chance of loss. this means that there is no way of making gains.

A

pure risk

49
Q

is one in which there is a chance of either loss or gain. this type of risk is not insurable.

A

speculative risk

50
Q

is an organized strategy for protecting and conserving assets and people.

A

risk management

51
Q

the purpose is to choose intelligently from among all the available methods of dealing with risk in order to secure the economic survival of the firm.

A

risk management

52
Q

5 methods of dealing with risk

A
  1. risk may be avoided
  2. risk may be retained
  3. hazard may be reduced
  4. losses may be reduced
  5. risk may be shifted
53
Q

is a method of handling risk wherein the management assumes the risk.

A

risk retention

54
Q

a planned risk retention is also called ————–

A

self-insurance

55
Q

is a conscious and deliberate assumption of a recognized risk.

A

self-insurance

56
Q

exist when management does not recognize that a risk exists and unwisely believes that no loss could occur.

A

unplanned risk retention

57
Q

may be reduced by simply instituting appropriate measures in a variety of business activities.

A

hazards

58
Q

refers to making commitments on both sides of a transaction so the risks offset each other.

A

hedging

59
Q

is a very important management activity.

A

financing

60
Q
A

engi man finals (5 decks)

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