Topic 13: Ch. 18

Question 1

Financial control

Answer 1

Periodically comparing your actual revenues, cost and expenses with your budget

Question 2

Capital expenditures

Answer 2

Major investments in either tangible long-term assets, such as land, buildings, and equipment or intangible assets, such as patents, trademarks, and copyrights

Question 3

Debt financing

Answer 3

Funds raised through various forms of borrowing that must be repaid

Question 4

Equity financing

Answer 4

Money raised from within the firm, from operations or through the sale of ownership in the firm

Question 5

trade credit

Answer 5

The process of buying goods and services now and paying for them later

Question 6

Promissory note

Answer 6

A written agreement with a promise to pay a supplier a specific sum of money

Question 7

Secured loan

Answer 7

A loan backed by collateral

Question 8

Unsecured loan

Answer 8

Requires no collateral

Question 9

Line of credit

Answer 9

Unsecured, short-term funds, a bank will lend to a business

Question 10

Factoring

Answer 10

Selling accounts receivable for cash

Question 11

Term loan agreement

Answer 11

A promissory note that requires the borrower to repay the loan in specified installments

Question 12

Venture capital

Answer 12

Money that is invested in new or emerging companies that are perceived as having great profit potential

Question 13

Leverage

Answer 13

Raising needed funds through borrowing to increase a firms rate of return

Question 14

Cost of capital

Answer 14

Rate of return a company must earn in order to meet demands