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Questions and Answers
Which of the following is NOT considered a part of the financial planning process?
What is the primary goal of financial management?
In financial management, who is directly responsible for overseeing a company's financial operations?
What type of instruments can financial instruments be categorized into?
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To raise funds for a long-term project, where would a company most likely go to issue new securities?
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Which step comes first in the financial planning process?
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What is the primary objective of credit cooperatives?
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What type of financing should business owners consider for purchasing new machinery?
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Why might entrepreneurs prefer loans from credit cooperatives over commercial banks?
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According to the Simple Cash Flow Statement, what was the total cash inflow for Tech Solutions in fiscal year 2024?
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What was the net cash flow for Tech Solutions in fiscal year 2024?
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What is the primary purpose of a sales budget?
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Which of the following is an example of determining contingency plans in the financial planning process?
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What is the most significant factor contributing to the change in ending cash balance if there is a 25% increase in collections and all expenses remain the same?
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If XYZ Merchandising expects a 10% increase in unit sales per quarter, and the 1st quarter forecasted sales are 400 bags, what is the expected number of bags to be sold in the 2nd quarter?
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Which of the following is NOT a key purpose of the Cash Budget in financial planning?
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Which of the following is a correct statement about a budget in financial planning?
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Study Notes
Financial Management
- The primary goal of financial management is to maximize shareholder wealth.
- The Financial Manager is responsible for overseeing a company's financial operations.
- Shareholders play a role in financial management by electing the Board of Directors and influencing company policies.
Financial Decisions
- Issuing new equity to raise funds is a financing decision.
- Evaluating a potential investment with high risk is an investing decision.
Financial Instruments and Markets
- Financial instruments can be categorized as Debt Instruments and Equity Instruments.
- The role of financial markets is to facilitate the buying and selling of financial instruments.
- To raise funds for a long-term project, a company would go to the capital market to issue new securities.
Financial Planning
- There are six steps in the financial planning process.
- The first step in the financial planning process is to set goals or objectives.
- Establishing responsibility centers for accountability and timeline assigns specific tasks to departments or teams.
- An evaluation system in the financial planning process allows plans to be monitored through quantified plans such as budgets.
Financing Options
- Business owners looking to finance the purchase of new machinery for expansion should consider a long-term loan from a bank or credit cooperative.
- Entrepreneurs may prefer loans from credit cooperatives over commercial banks due to more favorable terms, such as lower interest rates based on membership and community involvement.
Cash Flow Statement
- A cash flow statement provides a summary of a company's inflows and outflows of cash over a particular period.
- Cash inflows include operating revenues, investment income, equity financing, and debt financing.
- Cash outflows include operating expenses, purchase of equipment, repayment of loans, and dividends paid.
Budgeting
- A budget in financial planning is a detailed plan of operations for a future period.
- The purpose of a sales budget is to estimate future sales revenue based on external and internal information.
- The Cash Budget is important for a firm because it forecasts the timing of cash inflows and outflows.
Case Studies
- Setting a higher sales target in the sales budget directly supports the goal of increasing sales.
- Identifying resources aligns with the requirement for increased production capacity to meet projected sales.
- Analyzing the variance between projected and actual sales falls under establishing an evaluation system for monitoring and controlling.
- Creating a contingency plan in anticipation of a potential economic downturn exemplifies determining contingency plans.
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Description
Prepare for your business finance exam with this reviewer covering key concepts such as shareholder wealth maximization, financial manager roles, financing decisions, and risk assessment in investments.
