Business Finance Third Quarterly Exam Reviewer
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Business Finance Third Quarterly Exam Reviewer

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.

Created by
@SnazzyHexagon

Questions and Answers

Which of the following is NOT considered a part of the financial planning process?

Evaluating market trends

What is the primary goal of financial management?

Maximize shareholder wealth

In financial management, who is directly responsible for overseeing a company's financial operations?

Financial Manager

What type of instruments can financial instruments be categorized into?

<p>Debt Instruments and Equity Instruments</p> Signup and view all the answers

To raise funds for a long-term project, where would a company most likely go to issue new securities?

<p>Capital market</p> Signup and view all the answers

Which step comes first in the financial planning process?

<p>Setting goals or objectives</p> Signup and view all the answers

What is the primary objective of credit cooperatives?

<p>To help improve the quality of life of its members through financial services</p> Signup and view all the answers

What type of financing should business owners consider for purchasing new machinery?

<p>Long-term loans from banks or credit cooperatives</p> Signup and view all the answers

Why might entrepreneurs prefer loans from credit cooperatives over commercial banks?

<p>Credit cooperatives offer more favorable terms, such as lower interest rates based on membership and community involvement</p> Signup and view all the answers

According to the Simple Cash Flow Statement, what was the total cash inflow for Tech Solutions in fiscal year 2024?

<p>$285,000</p> Signup and view all the answers

What was the net cash flow for Tech Solutions in fiscal year 2024?

<p>$90,000</p> Signup and view all the answers

What is the primary purpose of a sales budget?

<p>To estimate future sales revenue based on external and internal information</p> Signup and view all the answers

Which of the following is an example of determining contingency plans in the financial planning process?

<p>Creating a contingency plan in anticipation of a potential economic downturn</p> Signup and view all the answers

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?

<p>Increase in collections from sales</p> Signup and view all the answers

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?

<p>440</p> Signup and view all the answers

Which of the following is NOT a key purpose of the Cash Budget in financial planning?

<p>To estimate future sales revenue</p> Signup and view all the answers

Which of the following is a correct statement about a budget in financial planning?

<p>It is a detailed plan of operations for a future period</p> Signup and view all the answers

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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