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2012-04-18 16:53:28

key terms from chapter eighteen - Nickels, W.G., 2010. Understanding Business. McGraw-Hill Companies, Inc: New York. ed9, p. 484-511.
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  1. Define: finance
    the function in a business that acquires funds for the firm and manages those funds within the firm (p. 486)
  2. Define: financial management
    the job of managing a firm's resources so it canmeet its goals and objectives (p. 486)
  3. Define: financial managers
    managers who examine financial data prepared by accountants and recommend strategies for improving the financial performance of the firm (p. 486)
  4. Define: short-term forecast
    forecast that predicts revenues, costs, and expenses for a period of one year or less (p. 489)
  5. Define: cash flow forecast
    forecast that predicts the cash inflows and outflows in future periods, usually months or quarters (p. 489)
  6. Define: long-term forecast
    forecast that predicts revenues, costs, and expenses for a period longer than 1 year, and sometimes as far as 5 to 10 years into the future (p. 490)
  7. Define: budget
    a financial plan that sets forth management's expectations, and on the basis of those expectations, allocates the use of specific resources throughout the firm (p. 490)
  8. Define: capital budget
    a budget that highlights a firm's spending plans for major asset purchases that often require large sums of money (p. 490)
  9. Define: cash budget
    a budget that estimates cash inflows and outflows during a prticular period like a month or a quarter (p. 490)
  10. Define: operating (or master) budget
    the budget that ties together the firm's other budgets and summarizes its proposed financial activities (p. 490)
  11. Define: financial control
    a process in which a firm periodically compares its actual revenues, costs. and expenses with its budget (p. 491)
  12. Define: capital expenditures
    major investments in either tangibles long-term assets such as land, buildings, and equipment or intangible assets such as patents, trademarks, and copyrights (p. 495)
  13. Define: debt financing
    funds raised through various forms of borrowing that must be repaid (p. 495)
  14. Define: equity financing
    money raised from within the firm, from operations or throught the sale of ownership in the firm (stock) (p. 495)
  15. Define: short-term financing
    funds needed for a year or less (p. 496)
  16. Define: long-term financing
    funds needed for more than a year (usually 2 to 10 years) (p. 496)
  17. Define: trade credit
    the practice of buying goods and services now and paying for them later (p. 496)
  18. Define: promissory note
    a written contract with a promise to pay a supplier a specific sum of money at a definite time (p. 497)
  19. Define: secured loan
    a loan backed by collateral, something valuable susch as property (p. 498)
  20. Define: unsecured loan
    a loan that doesn't require any collateral (p. 498)
  21. Define: line of credit
    a given amount of unsecured short-term funds a bank will lend to a business, provided the funds are readily available (p. 498)
  22. Define: revolving credit agreement
    a line of credir that's guaranteed but usually comes with a fee (p. 498)
  23. Define: commercial finance companies
    organizations that make short-term loans to borrowers who offer tangible assets as collateral (p. 499)
  24. Define: factoring
    the process of selling accounts receivable for cash (p. 499)
  25. Define: commercial paper
    unsecured promissory notes of $100,000 and up that mature (come due) in 270 days or less (p. 500)
  26. Define: term-loan agreement
    a promissory note that requires the borrower to repay the loan in specified installments (p. 502)
  27. Define: risk/return trade-off
    the principle that the greater the risk a lender takes in making a loan, the higher the interest rate required (p. 502)
  28. Define: indenture terms
    the terms of agreement in a bond issue (p. 503)
  29. Define: secured bond
    a bond issued with some form of collateral (p. 503)
  30. Define: unsecured bond
    a bond backed only by the reutation of the issuer; also called a debenture bond (p. 503)
  31. Define: venture capital
    money that is invested in new or emerging companies that are perceived as having great profit potential (p. 505)
  32. Define: leverage
    raising needed funds through borrowing to increase a firm's rate of return (p. 505)
  33. Define: cost of capital
    the rate of return a company must earn in order to meet the demands of its lenders and expectantions of its equity holders (p. 505)