Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Financial Management 121 > Semester Test 1 > Flashcards

Semester Test 1 Flashcards

1
Q

Define financial management

A

-Planning, organising, directing and controlling the financial acts of the org

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the key objectives of financial management

A

-Create wealth for the business
-Generate cash
-Provide adequate ROI bearing in mind risks that the org is taking and the resources invested

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the 3 elements to the process of financial management

A

-Financial Planning
-Financial Control
-Financial decision-making

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Define Financial Planning

A

Management must ensure that enough funding is available @ all times to meet objectives (short, medium and long-term)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Define Financial control

A

Financial control addresses Q’s like
-Are assets being used efficiently?
-Are the business assets secure?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Define financial decision making

A

-Key aspects of financial decision making relate to
»Investment
»Financing
»Dividends

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

List and explain the three aspects that determine
the price volatility of a bond.

A

-Time to maturity
»the longer the outstanding term = more sensitive the bond price
-Coupon rate
»the lower the coupon rate = more sensitive the bond’s price
-Yield
»the lower the yield of a bond = more volatile the price of the bond

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Provide objectives of a FM

A

-Ensure regular and adequate supply of funds to the concern
-Ensure optimum funds utilization
-Ensure safety of investment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the role of a FM

A

-Business management
-Goal achievement
-Management of cash
-Investment of cash

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the forms of orgs

A

-CC’s
-Companies
-Partnerships
-Sole Proprietors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the goal of a FM

A

Maximize shareholder wealth

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Describe the decision making process

A

-Step 1: Identify objectives
>Specify Co’s objectives
-Step 2: Search for alternative course of action
»Look for strats that might assist in achieving goals
-Step 3: Select appropriate alternative course of action
»Course that best responds to the objective
-Step 4: Implement decision
»Implement course of action as part of long-term planning process
-Step 5: Compare actual and planned outcomes
»Performance reports should be prepared
-Step 6: Respond to divergence from plan

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Define risk

A

The degree of uncertainty and/or potential financial loss inherent in an investment decision

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

True or False
Effective int rate is always higher than nominal int rate?

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Define critical thinking

A

The analysis of facts to form a judgement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Core activities of critical thinking

A

-Analysis
-Evaluation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

A claim is justified if…

A

-… it can be shown beyond reasonable doubt to be true, and
-… it can be shown to have a high probability

18
Q

A number is divisible by 3 if…

A

…when all the number in it are added up, if the ans = divisible of 3 then OG # divisble by 3

19
Q

A number is divisible by 4 if…

A

…if the last 2 digits are divisble by 4

20
Q

A number is divisible by 6 if…

A

…its an even number and its divisible by 3 also

21
Q

A number is divisible by 7 if…

A

… when you double the last digit and minus from remaining digit of OG, if answer is a MULTIPLE of 7, then OG (w/ all #s) = divisible

22
Q

A number is divisible by 8 if…

A

… last 3 digits are divisibly by 8

23
Q

A number is divisible by 9 if…

A

… if sum of all number is divisible by 9, OG is divisible

24
Q

1000g = 1kg = 1 000 000mg
1g = 0.001kg = 0.000 001mg

A

same w/ litres

25
Q

What are the types of interest rates?

A

-Money market rate
-Call money rates
-Capital market rated
-LIBOR (London Interbank Offered Rate)
-Repo Rate
-Prime interest rate

26
Q

Define the repo rate and provide its current %

A

-Its the rate @ which the central bank of a country lends money to commercial banks in the event of any shortfall of funds
-=8.25%

27
Q

Define the prime int rate and provide its current %

A

-The lowest rate to which a clearing bank will lend to its clients on overdraft
-=9%

28
Q

How are int rates in SA determined

A

SARB sets them in response to whats happening and whats expected to happen in the economy

29
Q

Define a bond

A

A contract btwn lenders and a borrowing org, typically a firm/govt body

30
Q

What are characteristics of bonds

A

-It represents borrowed funds
-bondholders receive periodic int payments
-Have no voting rights
Bonds have a fixed maturity

31
Q

Calc work
1) Time to maturity =
2) Par value/Face value =
3) Market value =
4) Coupon rate =
5) Yield to maturity

A

1) N
2) FV
3) PV
4) PMT
5) I/Y

32
Q

Define a debenture

A

Loan stock (corporate bonds) which are secured on some or all of the assets of the Co

33
Q

What are the type of debentures

A

-Mortgage debentures
-Floating charge debentures

34
Q

What are the investment characteristics of debentures

A

Risk
>Risk of default and secured assets value is not enough to cover the loan
>The rights of debenture holders are overseen by trustees (eg banks)
Return
>Carry risk and not always marketable
Marketability
>Worse than govt bonds

35
Q

What are the characteristics of debentures

A

-Int payments are tax deductible
-Have a fixed redemption date and carry a fixed rate of int

36
Q

What are the characteristics of unsecured loan stocks

A

-No specific security for the loan
-Ranked equally w/ other creditors of the issuing Co

37
Q

What are the investment characteristics of unsecured loan stock

A

Risk
>No security but more secured than ordinary shares
Return
>Yields are higher than debentures and govt stocks to compensate for poorer marketability
Marketability
>Similar to debentures but worse than govt stocks

38
Q

What are the investment characteristics of share capital

A

Risk
>Uncertainty and volatility of future income
Return
>High potential return for high risk
Marketability
>Depends on the size of the Co and future profit growth, but usually marketable

39
Q

What are the investment characteristics of preference shares

A

Risk
>Ranked between loan capital and above OS if the Co is liquidated
>Risk is higher than holding loan stock but return is higher
Return
>For all investors, the expected return on PS is likely to be less the OSs because risk of PS is less
Marketability
>Similar to loan capital

40
Q

Whats the difference btwn PS and OS

A

PS dividends are limited to a fixed amount

Financial Management 121 (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions