Chapter 9

Question 1

Accounts receivable

Answer 1

Money is owed to an organization for products or services purchased on credit

Question 2

Bond indenture

Answer 2

A contract that specifies the terms of an agreement between bondholders and bond issues

Question 3

Bond

Answer 3

A debt certificate issued by federal state, local and foreign governments, utilities, incorporations, both non-and for-profit

Question 4

Budget

Answer 4

An internal financial plan to forecast income and expenses over a set period of time.

Question 5

Capital budget

Answer 5

A financial plan for the purchase and depreciation of an organizations, major assets that include property plant and equipment

Question 6

Capital expenditures

Answer 6

Major investments in tangible or intangible, long-term assets.

Question 7

What is the role of a financial manager?

Answer 7

They are responsible for developing financial plans, predicting trends, preparing monitoring and allocating budgets creating an interpreting financial reports, analyzing project, cash flows, managing accounts, receivable and payable directing financing and investment activities, conducting financial audits and analyzing tax implications, and collaborate with a chief financial officer or top management

Question 8

Cash budget

Answer 8

A financial plan of the cash in flows of an organization over a period of time to help managers anticipate borrowing needs operating cost in a debt repayment plan

Question 9

Commercial paper

Answer 9

And unsecure promissory note of 100,000 or more that matures in 270 days or less

Question 10

Credit sales

Answer 10

Sales that allow goods and services to be received by a purchaser right away and payment to be made by specified time in the future.

Question 11

Debt financing

Answer 11

Money borrowed from outside the organization from a bank investment firm or commercial lender that must be repaid

Question 12

Equity financing

Answer 12

Money raised from within the organization from operations or through the sale of ownership

Question 13

Financial controls

Answer 13

The policies and procedures put in place to manage an organizations financial plans and achieve its financial objectives

Question 14

Finance

Answer 14

The science of managing money

Question 15

Financial management

Answer 15

The effective management of money to accomplish organizational objectives

Question 16

Financial planning

Answer 16

The process of determining an organization‘s future needs, and how to achieve them

Question 17

First in first out method

Answer 17

An inventory accounting method that uses the first inventory purchase hypothetically at a lower cost and result in a lower cost of good sold and higher net income

Question 18

Forecasting

Answer 18

The process of making predictions about the future based on the past data and current trends

Question 19

Intangible assets

Answer 19

Investments and patent trademarks and copyrights

Question 20

Inventory

Answer 20

The wrong materials were in process and finish goods that are part of an organization assets, and or will be offered for sale

Question 21

Last in first out method

Answer 21

An inventory accounting method that uses the last inventory purchased first and results in a higher cost of good

Question 22

Line of credit

Answer 22

An arrangement where an organization is preapproved to receive a fixed amount of funds upon request, but funding is not guaranteed if the bank does not have the money available to lend

Question 23

Long-term forecast

Answer 23

A forecast that predicts revenues and expenses for a period of more than one year and as long as 10 years

Question 24

Marketable securities

Answer 24

Low risk securities with durations that range from one day to one year, and that can easily be bought and sold on the market

Question 25

Master budget

Answer 25

A detailed financial plan for the entire organization, that ties together the budgets for individual divisions, departments, and projects to address and organization goals

Question 26

Retained earnings

Answer 26

The profit a company keeps and reinvest internally in the organization

Question 27

Revolving credit agreement

Answer 27

A related type of bank financing to a line of credit that guarantees the availability of funds for a fee

Question 28

Risk return trade-off

Answer 28

A business principle that states that the greater the risk to the lender, the higher, the interest rate to the borrower

Question 29

Secured loan

Answer 29

A type of financing back by collateral something with value such as property equipment or inventory

Question 30

Short term forecast

Answer 30

A forecast that predicts revenues and expenses for a period of one year or less

Question 31

Tangible assets

Answer 31

Investments in land, buildings plants, equipment, and vehicles

Question 32

Term loan agreement

Answer 32

A long-term loan that requires a promissory note to be signed by the bar were promising to repeat the long principle with interest in monthly installments

Question 33

Time value of money

Answer 33

A principle of finance that states that money is worth more today than in the future due to its potential to earn interest

Question 34

Trade credit

Answer 34

Credit extended by suppliers for the purchase of their products and services

Question 35

Unsecured loan

Answer 35

A type of financing that is not back by any collateral

Question 36

How can managers maximize the use of operating funds through four areas?

Answer 36

By daily operations, credit sales, inventory acquisition, and capital expenditures

Question 37

What is the goal of managing money flow?

Answer 37

To maximize the cash on hand to make current obligations and avoid excessive cash buildup in an account that does not make money

Question 38

Why is inventory management essential?

Answer 38

To maximize profitability and boost cash flow

Question 39

How can capital expenditures be vital to an organization?

Answer 39

It helps to support and research new innovations, expand production capabilities, and grow current levels of output

Question 40

What are the two major sources of long-term funding?

Answer 40

Debt borrowing and equity ownership

Question 41

What are three sources of equity?

Answer 41

Sale of ownership or stock, the reinvestment of organizational earnings or retained earnings, and the utilization of venture capital funds from investors

Question 42

What are some traits of venture capitalist?

Answer 42

They are wealthy and risk, tolerant investors they enjoy part ownership in the company and expect higher than average return on their investment. They tend to invest in industries they are familiar with it. It’s usually reserved for financing new emerging high risk high return businesses.