Session 1 Flashcards
What are the 5 areas of finance?
- Corporate finance
- Investments
- Financial institutions
- International finance
- Fintech
What is the difference between Finance and Accounting
Accounting is the language of Finance.
What is business finance?
- What long-term investments should you take on? That is, what lines of business will you be in, and what sorts of buildings, machinery, and equipment will you need?
- Where will you get the long-term financing to pay for your investments? Will you bring in other owners, or will you borrow the money?
- How will you manage your everyday financial activities, such as collecting from customers and paying suppliers?
What does the Controller’s Office do?
The controller’s office handles cost and financial accounting, tax payments, and management information systems.
What does the treasurer’s office do?
The treasurer’s office is responsible for managing the firm’s cash and credit, its financial planning, and its capital expenditures. These treasury activities are all related to the three general questions raised above in response to the question of what business finance is,
What is Capital Budgeting?
The process of planning and managing a firm’s long-term investments is called capital budgeting.
What is the goal of capital planning?
Evaluating the size, timing, and risk of future cash flows is the essence of capital budgeting. To identify investment opportunities that are worth more to the firm than they cost to acquire. Loosely speaking, this means that the value of the cash flow generated by an asset exceeds the cost of that asset.
What is the most important thing in evaluating a business decision?
the size, timing, and risk of the cash flows will be, by far, the most important things we will consider.
What does the firm’s capital Structure refer to?
The specific mixture of long-term debt and equity the firm uses to finance its operations. The financial manager has two concerns in this area. First: How much should the firm borrow? Second: What are the least expensive sources of funds for the firm?
In addition to deciding on the financing mix, what else does the financial manager have to decide?
Exactly how and where to raise the money. Choosing among lenders and among loan types is another job handled by the financial manager.
What is Working Capital ?
The term working capital refers to a firm’s short-term assets, such as inventory, and its short-term liabilities, such as money owed to suppliers. Managing the firm’s working capital is a day-to-day activity that ensures the firm has sufficient resources to continue its operations and avoid costly interruptions. This involves a number of activities related to the firm’s receipt and disbursement of cash.
What are some questions about working capital that must be answered ?
(1) How much cash and inventory should we keep on hand? (2) Should we sell on credit to our customers? (3) How will we obtain any needed short-term financing? (4) If we borrow in the short term, how and where should we do it?
What is the capital budgeting decision?
What do you call the specific mixture of long-term debt and equity that a firm chooses to use?
Into what category of financial management does cash management fall?
