Part I

Question 1

capital

Answer 1

The more permanent sources of funds used by a
company, such as long-term debt, preferred stock,
and common equity

Question 2

disaster recovery

Answer 2

The restoration of systems and communications after

an event causes an outage.

Question 3

economies of scale

Answer 3

A relationship that occurs when an increase in sales

lowers the average cost per unit sold.

Question 4

financial planning

Answer 4

An organizational function that involves determining
the need for present and future funding to support
operations. An important part of this function is
the forecasting of revenues, income, and external
financing required to support the company’s planned
growth.

Question 5

financial risk

Answer 5

The risk that the overall value of an organization may
change in response to a change in interest or foreign
exchange rates.

Question 6

liquidity

Answer 6

The ability of an organization to convert assets into

cash quickly and without a significant risk of loss.

Question 7

operating cycle

Answer 7

A representation of the flow of funds through a
company from the acquisition of raw materials,
through the production cycle and the sale of
products or services, and finally to the collection of
payments from customers.

Question 8

shared services center (SCC)

Answer 8

A department or operation within a multiunit
organization tasked with supplying multiple business
units and their respective divisions and departments
with specialized services, such as information
technology, human resources, or accounts payable
services.

Question 9

working capital

Answer 9

The sum of a company’s current asset accounts
(primarily cash, accounts receivable, and inventory)
less the sum of its current liability accounts (primarily
payables and accrual accounts). Also known as net
working capital.

Question 10

working capital gap

Answer 10

The time gap between a cash outflow and a cash

inflow.