Chapter 16 Understanding Financial Management and Securities Markets Flashcards
Key terms used in Chapter 16 of Openstax Introduction to business (50 cards)
Questions
Answers
The art and science of managing a firm’s money so that it can meet its goals is called __________.
financial management
The inflow and outflow of cash for a firm are called ___________.
cash flows
A(n) ___________ is an opportunity for profit.
return
The potential for loss or the chance that an investment will not achieve the expected level of return is called ______________.
risk
The ____________________ is a basic principle in finance that holds that the higher the risk, the greater the return that is required.
risk-return trade-off
____________ is the process of making sure that a firm has enough cash on hand to pay bills as they come due and to meet unexpected expenses.
cash management
___________________ are short-term investments that are easily converted into cash.
marketable securities
Unsecured short-term debt, an IOU, issued by a financially strong corporation is ______________.
commercial paper
Sales for which a firm has not yet been paid are _____________.
accounts receivable
Investments in long-lived assets, such as land, buildings, machinery, equipment, and information services, that are expected to provide benefits over a period longer than one year are ___________.
capital expenditures
The process of analyzing long-term projects and selecting those that offer the best returns while maximizing the firm’s value is called _______________.
capital budgeting
Borrowers does not have to pledge specific assets as security for ____________ loans.
unsecured loans
The extension of credit by the seller to the buyer between the time the buyer receives the goods or services and when it pays for them is called __________________.
trade credit
Purchases for which a buyer has not yet paid the seller are ____________.
accounts payable
An agreement between a bank and a business that specifies the maximum amount of unsecured short-term borrowing the bank will allow the firm over a given period, typically one year, is a(n) _______________.
line of credit
A guaranteed line of credit whereby a bank agrees that a certain amount of funds will be available for a business to borrow over a given period, typically two to five years, is a(n) _______________.
revolving credit agreement
Loans for which the borrower is required to pledge specific assets as collateral or security are ________________.
secured loans
___________ is a form of short-term financing in which a firm sells its accounts receivable outright at a discount to a factor.
factoring
______________ is the chance that a firm will be unable to make scheduled interest and principal payments on its debt.
financial risk
An unsecured or secured business loan with a maturity of more than one year is called a(n) ___________.
term loan
_________ are Long-term debt obligations (liabilities) issued by corporations and governments.
bonds
A fixed amount of money paid by the issuer of a bond to the bondholder on a regular schedule, typically every six months is called ___________ and stated as the coupon rate.
interest
The par value, or ______________, is the amount borrowed by the issuer of a bond.
principal
