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engman finals > MANAGING THE FINANCE FUNCTION > Flashcards

MANAGING THE FINANCE FUNCTION Flashcards

1
Q

Stated that financial management involves making financial decisions
that align organizational objectives with personal motivations.

A

Weston & brigham

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2
Q

Stated that finance function encompasses the “acquisition and
administration of funds to achieve business objectives

A

Robert medina

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3
Q

It is one of the three basic management functions with the other two as
production and marketing.

A

FINANCE FUNCTION

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4
Q

It consists of raising, providing, and managing all the net, capital, or
funds of any kind to be used in connection with the business.

A

FINANCING

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5
Q

He stated that finance function is the process of acquiring and utilizing
the funds of a business.

A

R.c. osborn

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6
Q

These are necessary to keep the business running smoothly but are not
directly related to its core operations

A

Incidental finance function

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7
Q

These are directly involved in the strategic decision-making of the
business.

A

Executive finance function

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8
Q

This can significantly impact the long-term success of the business.

A

Executive finance function

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9
Q

These decisions involve allocating capital to long-term projects that
promise to generate future returns and enhance the company’s
competitive position

A

investments

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10
Q

This involves determining the portion of profits to distribute to
shareholders as dividends and the portion to retain for reinvestment.

A

Dividend decision

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11
Q

Refers to the process of determining how to manage and allocate a
company’s resources to ensure it has enough liquid assets to meet its
short-term obligations and operational needs

A

LIQUIDITY DECISION

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12
Q

It measures the relative profitability of an investment by comparing its
present value of future cash flows to its initial cost.

A

Profitability index

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13
Q

This provides a framework in investment decisions.

A

CAPITAL BUDGETING

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14
Q

It measures the time it takes for an investment to recover its initial cost.

A

PAYBACK PERIOD

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15
Q

Serves as a vital early warning system for a company, indicating
whether it is experiencing a shortage of readily available funds.

A

Liquidity ratios

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16
Q

Also called the working capital ratio, it measures your company’s
ability to generate cash to meet your short-term financial
commitments.

A

CURRENT RATIO

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17
Q

This type of ratio does not take inventory into account, and it is
alternatively referred to as the acid test ratio.

A

QUICK RATIO

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18
Q

Also called efficiency ratios, these are used to measure a company’s
ability to convert their production into cash or income.

A

Activity ratios

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19
Q

It allows you to see how long it takes for inventory to be sold and
replaced during the year.

A

INVENTORY TURNOVER RATIO

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20
Q

Measures how fast your company can convert its cash on hand into
inventory, and then convert inventory back into cash.

A

Cash conversion cycle

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21
Q

They have a nominal or ‘face’ value, typically of $1 or 50 cents. The
market value of a quoted company’s shares bears no relationship to
their nominal value

A

ORDINARY SHARES

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22
Q

Provides a way of raising new share capital by means of an offer to
existing shareholders, inviting them to subscribe cash for new shares
in proportion to their existing holdings.

A

Rights issues

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23
Q

Refers to shares of common or preferred stock that are used as
collateral to secure a loan from another party. The loan earns a fixedinterest rate, much like a standard loan, and can be secured or
unsecured

A

LOAN STOCKS

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24
Q

The amount of profit a company has left over after paying all its
direct costs, indirect costs, income taxes and its dividends to
shareholders

A

Retained earnings

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25
Q

The process by which a financial institution provides funds to a
borrower. Often called a lender, the institution typically receives
interest in return for the loan

A

Bank lending

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26
Q

A contract between a borrower and the owner for the use of an asset
where the borrower agrees to pay the owner a specific amount over a
specific time to use the borrowed asset

A

LEASE

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27
Q

A form of instalment credit, similar to leasing, with the exception that
ownership of the goods passes to customer on payment of the final
credit instalment, whereas a lessee never becomes the owner of the
goods.

A

HIRE PURCHASE

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28
Q

Where government provides finance to companies in cash grants and
other forms of direct assistance, as part of its policy of helping to
develop the national economy, especially in high technology
industries and in areas of high unemployment.

A

GOVERNMENT ASSISTANCE

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29
Q

Method of expanding business on less capital than would otherwise
be needed. For suitable businesses, it is an alternative to raising extra
capital for growth.

A

FRANCHISING

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30
Q

Generally, an organization prefers options which are ______ and
_____ rather than those which have restrictive provisions

A

FLEXIBLE, EASIER

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31
Q

There is the ______ in equity as the share capital must be repaid only
at the time of winding up, and dividends need not be paid if there is
no profit

A

LEAST RISK

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32
Q

he various sources of funds will have their own individual effects in
the net income of the engineering firm. When the firm borrows, it
must generate enough income to cover the cost of borrowing and still
be left with sufficient returns for the owners

A

INCOME

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33
Q

A company decides whether it wants to sacrifice its ______ over the
company before choosing the perfect source of funds.

A

CONTROL

34
Q

The financial market has its ups and downs. This means that there are
times when certain means of financing provide better benefits than at
other times.

A

TIMING

35
Q

Schall & Haley factor that must be considered that questions “Are
there assets available as collateral?”

A

Collateral values

36
Q

Schall & Haley factor that must be considered that questions “How
much will it cost to issue bonds or stocks?

A

FLOTATION COST

37
Q

Schall & Haley factor that must be considered that questions “How
fast can the funds required be raised?

A

Speed

38
Q

Schall & Haley factor that must be considered that questions “To
what extent will the firm’ be exposed to other parties?

A

EXPOSURE

39
Q

Every source of funds involves some kind of _____.

A

RISK

40
Q

Identification of investment opportunities is the _ step in capital
budgeting.

A

1ST

41
Q

Post-implementation review is the _ step in capital budgeting.

A

6TH

42
Q

Capital rationing is the _ step in capital budgeting.

A

4TH

43
Q

Project evaluation is the _ step in capital budgeting

A

2ND

44
Q

Decision-making and implementation are the _ step in capital
budgeting.

A

5TH

45
Q

Risk analysis is the _ step in capital budgeting.

A

3RD

46
Q

Incidental finance function involves activities like accounts payable
and receivable management, payroll processing, cash flow
management, financial reporting.

A

TRUE

47
Q

Executive finance function ensures that the business has the financial
resources it needs to operate.

A

FALSE

48
Q

Executive finance function needs skills like attention to detail,
accuracy, strong communication skills.

A

FALSE

49
Q

To be assured of a continuous supply of funds, there is a need to
manage properly the finance function.

A

TRUE

50
Q

If the engineer manager is running the firm as a whole, he must not be
concerned with the determination of the amount of funds required.

A

FALSE

51
Q

Capital rationing involves estimating the costs and benefits associated
with the project over its entire life.

A

FALSE

52
Q

Risk analysis includes considering factors such as market conditions,
competition, technological changes, and other external influences.

A

TRUE

53
Q

Post implementation review involves prioritizing and selecting the
most promising projects when there is limited available capital.

A

FALSE

54
Q

Management makes decisions about which projects to undertake.

A

TRUE

55
Q

Average days payable ratio looks at the average number of days
customers take to pay for your products or services.

A

FALSE

56
Q

Average collection period ratio measures the average number of days
it takes for a company to pay its suppliers.

A

FALSE

57
Q

Average days inventory indicates the average number of days it takes
to sell your inventory.

A

TRUE

58
Q

Broad classifications of finance function. Enumerate alphabetically.

A

Executive
Incidental

59
Q

Classifications of finance function. Enumerate alphabetically.

A

LONG TERM, SHORT TERM

60
Q

Five types of activity ratios. Enumerate alphabetically.

A

Average collection period ratio
Average days inventory
Average days payable ratio
Cash conversion cycle
Inventory turnover ratio

61
Q

Enumerate alphabetically the sources of funds for a company.

A

BANK BORROWING
Business expansion scheme funds
Capital markets
Franchising.
Government sources
Loan stock
Retained earnings
Venture capital

62
Q

Two forms of security of Loan Stocks. (Enumerate Alphabethically)

A

AMOUNT, PURPOSE

63
Q

Factors of a banker when asked by a business customer for a loan or
overdraft facility.

A

Fixed charge
Floating chargE
Repayment
Security
Term

64
Q

Calculates how well the company’s various resources are being used.

A

Return on assets ratio

65
Q

Is the amount of money a company has left after paying all the direct
costs of producing or purchasing the goods or services it sells

A

Gross profit margin

66
Q

Measures how well the business is doing in relation to the investments
made.

A

Return on equity

67
Q

It measures how much a company earns (usually after taxes) relative
to its sales

A

Net profit margin

68
Q

Measures the overall debt level of a business, as well as a business’s
ability to repay new and existing loans.

A

Leverage ratios

69
Q

It determines a company’s level of indebtedness, in other words, the
proportion of its assets that is owned by its creditors.

A

Debt-to-asset ratio

70
Q

Measures how much you are using debt to finance your business
relative to equity

A

Debt-to-equity ratio

71
Q

It is also referred to as the statement of operations, provides a summary
of the firm’s revenue, expenses, and net income/loss over a defined
period

A

Income statement

72
Q

It is also known as the statement of financial position, shows an
overview of the company’s assets, liabilities, and equity at a specific
point in time.

A

BALANCE SHEET

73
Q

This depicts how the company’s cash and equivalents have changed
over the same period.

A

Statement of changes in financial position

74
Q

Refers to the potential for negative consequences or losses associated
with a decision or action taken while conducting engineering projects.

A

RISK

75
Q

Is a risk that has the potential for loss or damage, but not for gain

A

Pure risk

76
Q

Is a risk that has the potential for both loss and gain.

A

Speculative risk

77
Q

Refers to the systematic identification, evaluation, and mitigation of
possible hazards and dangers to an enterprise’s assets, profits, and
operations.

A

Risk management

78
Q

Method of shifting risk where a company registers with a state and
becomes a legal entity

A

INCORPORATION

79
Q

A method of shifting risk where a company delegates a portion of the
duties and obligations of a contract to a third-party company.

A

SUBCONTRACTING

80
Q

Is a strategy used in advanced risk management that aims to reduce or
mitigate potential losses by taking an offsetting position in a related
security or asset

A

Hedging

81
Q

If loss occurs, the company is reimbursed by an insurer for the loss
incurred subject to the terms of the pre-discussed policy

A

BUYING INSURANCE

82
Q

Can be a financial risk to companies, especially those that rely on the
timely payment of invoices to maintain cash flow.

A

Nonpayment of bills by customers

engman finals (5 decks)

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