Podcast
Questions and Answers
Which concept explains why receiving cash sooner is more valuable?
Which concept explains why receiving cash sooner is more valuable?
What is a primary goal of effective cash management?
What is a primary goal of effective cash management?
In inventory management, what is a consequence of understocking?
In inventory management, what is a consequence of understocking?
Which of the following is NOT a component of funds management?
Which of the following is NOT a component of funds management?
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What type of asset includes life insurance?
What type of asset includes life insurance?
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Which of the following best describes a firm’s decision in managerial finance?
Which of the following best describes a firm’s decision in managerial finance?
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What characterizes riskier assets in financial management?
What characterizes riskier assets in financial management?
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What is typically a significant cost of overstocking inventory?
What is typically a significant cost of overstocking inventory?
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Study Notes
Funds and Resources
- Focuses on funds management and cash flow
- System includes circulation of money, credit, investment, and banking
- Universal Interest: 0.125% (per deposit)
- Interest Spread: Difference in total interest earned from banks based on deposits
Concepts (Everything Else Being Equal)
- More value is preferred to less (makes money grow even more)
- Sooner cash is received, the higher value (more money grows)
- Less risky assets are more valuable than riskier assets
General Areas
- Financial Markets and Institutions: Banks, insurance, savings, loans, and credit unions. Requires understanding of factors causing interest and returns in financial markets
- Capital Market: Long-term securities (stocks) traded
- Money Market: Short-term securities
- Derivative Market: Requires underlying assets (crops, options) to grow; includes contracts
Investment
- Focuses on decisions of businesses and individuals choosing securities for portfolios
- Functions
- Determining the value, risks, and returns associated with stocks and bonds
- Determining the optimal mix of holdings in portfolios (retirement funds)
- Higher returns, higher risk
Financial Services
- Functions provided by organizations dealing with money management (e.g., banks, insurance companies)
- Aids in investing
Managerial (Business) Finance
- Deals with decisions of firms concerning cash flow, plant expansion, and security issuance
Notes
- Allocation or Utilization of Funds
- Financial resources such as cash, inventories, etc. used by a firm
Goals
- Acquire funds from appropriate sources at the right time
- Make connections for cost-effective advantage
- Effective cash management
- Detailed cash flow budget
- Plan for its use
- Inventory management
- Effective management for adequate levels (reorder point)
- Avoid overstocking (costly, money not circulating)
- Avoid understocking (losses to customers)
- Investment decisions
- Investment excess funds to match investment to expenses
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Description
This quiz covers essential concepts of funds management, cash flow, and financial markets including banks, loans, and investments. Test your understanding of different market types such as capital, money, and derivative markets, as well as the value of assets and interest calculations.
