Business Quizz/test ch18
Card Set Information
Business Quizz/test ch18
Business Quizz/test ch18 financial management
what is finance?
the function in a business that aquires funds for the firm and manages those funds within the firm
what is financial management?
the job of managing a firms resources so it can meet its goals and objectives
what is the financial managers?
mangers who make recommentations to top executives regarding straregies for improving the financial strength of a firm.
what is a short-term forecast?
forecast that predicts revenues, costs, and expenses for a period of one year or less
what is the cash flow forecast?
forecast that predicts the cash inflows and outflows in future periods, usually months or quarters.
what is a long-term forecast?
forecast that predicts revenues, costs, and expenses for a period longer than 1 year, and sometimes as far as 5 or 10 years into the future.
what is a budget?
a financial plan that sets forth managements expectations, and on the basis of those expectations, allocates the use of specific resources throughout the firm.
what is capital budget?
a budget that highlights a firms spending plans for major asset purchases that often require large sums of money.
what is cash budget?
a budget that estimates a firms projected cash inflows and outflows that the firm can use to plan for any cash shortages or surpluses during a given period
what is the operating budget(master Budget)?
the budget that ties together all of a firms other budgets; it is the projection of dollar allocations to various costs and expenses needed to run or operate the business, given projected revenues.
what is financial control?
a process in which a firm periodically compares its actual revenues, costs, and expenses with its budget.
what are capital expenditures?
major investments in either tangible long-term assets such as land, buildings, and wquipment or intangible assets such as patents, trademarnks, and copyrights
what is debt financing?
funds raised through various forms of borrowing that must be repaid.
what is equity financing?
funds raised from operations within the firm or through the sale of ownership in the firm.
what is short-term financing?
borroewd capital that will be repaid within one year
what is long-term financing?
borrowed capital that will be repaid over a specific period longer than one year.
what is trade credit?
the practice of buying goods and services now and paying for them later.
what is promissory note?
a written contract with a promise to pay a suplier a specific sum of money at a definite time.
what is a secured loan?
a loan backed by something valuable, such as property.
what is a unsecured loan?
a loan thats not backed by any specific assets.
what is a line of credit?
a given amount of unsecured short-term funds a bank will lend to a business, provided the funds are readily available.
what is a revolving credit agreement?
a line of credit that is guaranteed by the bank
what is the commercial finance companie?
organization that make short-term loasn to borrowers who offer tangivle assets as collateral.
what is factoring?
the process of selling accounts receivable for cash.
what is commercial paper?
unesecured promissory notes of $100,000 and up that mature in 270 days or less.
what is term-loan agreement?
a promissory note that requires the borrower to repay the loan in specified installments.
what is rish/return trade-off?
the principle that the greater the risk a lender takes in making a loan, the higher the interest rate required.
what is indenture terms?
the terms of agreement in a bond issue?
what is a secured bond?
a bond issued with some form of collateral
what is a unsecured bond?
a bond backed only by the reputation of the issuer; also called a debenture bond.
what is venture capital?
money that is invested in new or emerging companies that are perceived as having great profit potential.
what is leverage?
raising needed funds through borrowing to increase a firms rate of return.
what is cost of capital?
the rate of return a company must earn in order to meet the demands of its lenders and expectations of its equity holders.