Chapter 17 Financial Management Flashcards Preview

BUS 100 > Chapter 17 Financial Management > Flashcards

Flashcards in Chapter 17 Financial Management Deck (39):
1

Financial Management

The job of managing a firm resources to meet its goals and objectives

2

Financial Managers

Managers who examine the financial data prepared by accountants and recommended strategies for improving the financial performance of the firm

3

Short-Term Forcast

Forecast that predicts revenues, costs and expenses for a period of one year or less

4

Cash Flow Forecast

Forecast that predicts the cash inflows and outflows in future periods, usually months or quarters

5

Long-Term Forecast

Forecast that predicts revenues, costs, and expenses for a period longer than one year and as far as five or ten years in the future

6

Budget

A financial plan that sets forth managements expectations and allocates the use of specific resources throughout the firm

7

Operating Budget

The budget that ties together all of a firms other budgets and summarizes the businesses proposed financial activites

8

Capital Budget

A budget that highlights a firms spending plans for major asset purchases that often require large sums of money

9

Cash Budget

A budget that estimates a firms cash inflows and outflows during a particular period

10

Financial Control

A process in which a firm periodically compares its actual revenues, costs and expenses with projected ones

11

Capital Expenditures

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

12

Debt Financing

Funds are raised through various forms of borrowing that must be repaid

13

Equity Financing

Funds are raised from operations within the firm or through sole ownership in the firm

14

Short-term Financing

Borrowed funds that are needed for one year or less

15

Long-term Financing

Borrowed funds needed for a period longer than one year

16

Trade Credit

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

17

Promissory Note

A written contract with a promise to pay

18

Secured Loan

A loan backed by collateral, something valuable such as property

19

Unsecured Loan

A loan that does not require collateral

20

Line of Credit

A given amount of unsecured funds a bank will lend to a business

21

Revolving Credit Agreement

A line of credit that is guaranteed but usually comes with a fee

22

Commercial Finance Companies

Organizations that make short-term loans to borrowers who offer tangible assets of selling accounts

23

Factoring

The process of selling accounts receivable for cash

24

Commercial Paper

Unsecured promissory notes of $100,000 and up that mature in 365 days or less

25

Term-loan Agreement

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

26

Risk/Return Tradeoff

The principle that the greater the risk a lender takes in making a loan the higher the interest rate required

27

Bond

A long-term legal obligation of a corporation or government to make regular interest payments during the term of the bond and to repay the entire bond principle at the prescribed date

28

Maturity Date

The exact date the issuer of a bond must pay the principle to the bond holder

29

Debenture Bonds

Bonds that are unsecured (no collateral)

30

Sinking Fund

A reserve account in which the issuer of a bond periodically sets aside some part of the bond principle prior to the maturity date so that enough capital will be accumulated by the maturity date to pay-off the bond

31

Stocks

Shares of ownership in a company

32

Initial Public Offer (IPO)

The first public offering of a corporations stock

33

Stock Certificate

Evidence of stock ownership that specifies the name of the company, number of share and type of stock being issued

34

Dividends

Part of a firms profits that may be distributed to shareholders as either cash payments or additional shares of stock

35

Common Shares

The most basic form of ownership in a firm; its confers voting rights and the right to share in the firms profits through dividends, if offered by the firms board of directors

36

Preferred Shares

Stock that gives its owners preference in the payment of the dividends and the earlier claim on assets than common shareholders if the company is forced out of business and its assets are sold

37

Venture Capitalists

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

38

Leverage

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

39

Finance

The function in a business that acquires funds for the firm and manages them within the firm