Financial Management Overview Quiz

The function of finance in a business is to acquire funds for the firm and manage those funds within the firm.

The job of financial management is to manage a firm's resources so it can meet its goals and objectives.

Financial managers examine financial data prepared by accountants and recommend strategies for improving the financial performance of the firm.

<p>Inadequate expense control (B), Poor control over cash flow (C), Undercapitalization (E)</p> Signup and view all the answers

<p>Establishing financial controls to see whether the company is achieving its goals (A), Developing budgets to meet those needs (B), Forecasting the firm's short-term and long-term financial needs (C)</p> Signup and view all the answers

<p>A short-term forecast predicts revenues, costs, and expenses for a period of one year or less.</p> Signup and view all the answers

<p>A cash flow forecast predicts the cash inflows and outflows in the future periods, usually months or quarters.</p> Signup and view all the answers

<p>A budget is 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> Signup and view all the answers

<p>Capital Budget (A), Cash Budget (C), Operating or Master Budget (E)</p> Signup and view all the answers

<p>A capital budget highlights a firm's spending plans for major asset purchases that often require large sums of money.</p> Signup and view all the answers

<p>A cash budget estimates cash inflows and outflows during a particular period like a month or a quarter.</p> Signup and view all the answers

<p>The operating (or master) budget ties together the firm's other budgets and summarizes its proposed financial activities.</p> Signup and view all the answers

<p>Financial control is a process in which a firm periodically compares its actual revenues, costs, and expenses with its budget.</p> Signup and view all the answers

<p>Managing day-by-day needs of the business (A), Making capital expenditures (B), Controlling credit operations (C), Acquiring needed inventory (D)</p> Signup and view all the answers

<p>Capital expenditures are major investments in either tangible long-term assets such as land, buildings, and equipment, or intangible assets such as patents, trademarks, and copyrights.</p> Signup and view all the answers

<p>Equity financing is money raised from within the firm, from operations or through the sale of ownership in the firm (stock or venture capital).</p> Signup and view all the answers

<p>Short-term financing refers to funds needed for a year or less.</p> Signup and view all the answers

<p>Trade credit is the practice of buying goods and services now and paying for them later.</p> Signup and view all the answers

<p>A secured loan is a loan backed by collateral (something valuable, such as property).</p> Signup and view all the answers

<p>A line of credit is a given amount of unsecured short-term funds a bank will lend to a business, provided the funds are readily available.</p> Signup and view all the answers

<p>Factoring is the process of selling accounts receivable for cash.</p> Signup and view all the answers

<p>The NSBA estimates that one-third of all small firms now use credit cards to finance their businesses.</p> Signup and view all the answers

<p>What are our organization's long-term goals and objectives? (A), What sources of long-term funding (capital) are available, and which will best fit our needs? (B), What funds do we need to achieve the firm's long-term goals and objectives? (C)</p> Signup and view all the answers

<p>A term-loan agreement is a promissory note that requires the borrower to repay the loan in specified installments and pay interest on a loan.</p> Signup and view all the answers

<p>The risk/return trade-off is the principle that the greater the risk a lender takes in making a loan, the higher the interest rate required.</p> Signup and view all the answers

<p>A debenture bond is a bond that is unsecured (i.e. not backed by any collateral such as equipment) a.k.a unsecured bond.</p> Signup and view all the answers

<p>Stocks are shares of ownership in a company.</p> Signup and view all the answers

<p>The initial public offering (IPO) is the first public offering of a corporation's stock.</p> Signup and view all the answers

<p>Retained earnings are the profits the company keeps and reinvests in the firm.</p> Signup and view all the answers

<p>Venture capital is money that is invested in new or emerging companies that are perceived as having great profit potential.</p> Signup and view all the answers

<p>Leverage is raising needed funds through borrowing to increase a firm's rate of return.</p> Signup and view all the answers

<p>The cost of capital is the rate of return a company must earn in order to meet the demands of its lenders and expectations of its equity holders.</p> Signup and view all the answers

<p>Operational funds are typically needed to manage day-to-day needs of a business as well as acquiring needed inventory.</p> Signup and view all the answers

<p>A credit card is a form of financing where the merchant accepts payment immediately from the bank and the customer agrees to repay the bank.</p> Signup and view all the answers

<p>Just-in-time inventory control can reduce the funds a firm must tie up in inventory.</p> Signup and view all the answers

<p>Collateral is the asset that backs a secured loan.</p> Signup and view all the answers

<p>Seasonal environment of the business (A), Cash flow forecasts (B), Speed with which they can turn the borrowed funds into cash (C), The kind of business it is (D), How quickly it can resell the merchandise it purchases with a bank loan or use it to generate funds (E)</p> Signup and view all the answers

<p>Stockholders are the owners of a public corporation.</p> Signup and view all the answers

<p>To issues stock, a public corporation must meet the requirements of various State Agencies and the SEC.</p> Signup and view all the answers

<p>Venture capitalists invest in a company in return for part ownership of the business.</p> Signup and view all the answers

The function in a business that acquires funds for the firm and manages those funds within the firm.

The job of managing a firm's resources so it can meet its goals and objectives.

Managers who examine financial data prepared by accountants and recommend strategies for improving the financial performance of the firm.

Undercapitalization (insufficient funds to start the business), Poor control over cash flow, Inadequate expense control.

Forecasting the firm's short-term and long-term financial needs, Developing budgets to meet those needs, Establishing financial controls to see whether the company is achieving its goals.

Predicts revenues, costs, and expenses for a period of one year or less.

Forecast that predicts the cash inflows and outflows in the future periods, usually months or quarters.

Predicts revenues, costs, and expense for a period longer than 1 year, sometimes as long as 5 or 10 years.

A financial plant that sets forth management's expectations and, on the basis of those expectations, allocates the use of specific resources throughout the firm.

Capital Budget, Cash Budget, Operating or Master Budget

A burger that highlights a firm's spending plans for major asset purchases that often require large sums of money.

A budget that estimates cash inflows and outflows during a particular period like a month or a quarter.

The budget that ties together the firm's other budgets and summarizes its proposed financial activities.

A process in which a firm periodically compares its actual revenues, costs, and expenses with its budget.

Managing day-by-day needs of the business, Controlling credit operations, Acquiring needed inventory, Makin capital expenditures.

Major investments in either tangible long-term assets such as land, buildings, and equipment, or intangible assets such as patents, trademarks, and copyrights

Money raised from within the firm, from operations or through the sale of ownership in the firm (stock or venture capital)

Refers to funds needed for a year or less.

Covers funds needed for more than a year (usually 2 to 10 years)

The practice of buying goods and services now and paying for them later.

A loan backed by a collateral (something valuable, such as property)

A loan that doesn't require any collateral

A given amount of unsecured short-term funds a bank will lend to a business, provided the funds are readily available

The process of selling accounts receivable for cash

Estimates that one-third of all small firms now use credit cards to finance their businesses.

What are our organization's long-term goals and objectives? What funds do we need to achieve the firm's long-term goals and objectives? What sources of long-term funding (capital) are available, and which will best fit our needs?

Borrowing money the company has a legal obligation to repay

A promissory note that requires the borrower to repay the loan in specified installments and pay interests on a loan

The principle that the greater the risk a lender takes in making a loan, the higher the interest rate required

A corporate certificate indicating that a person has lent money to a firm (or a government)

Bond that is unsecured (i.e. not backed by any collateral such as equipment) a.k.a unsecured bond

Issued with some form of collateral, such as real estate, equipment, or other pledged assets

Shares of ownership in a company

The first public offering of a corporation's stock

The profits the company keeps and reinvests in the firm

Money that is invested in new or emerging companies that are perceived as having great profit potential

Raising needed funds through borrowing to increase a firm's rate of return

The rate of return a company must earn in order to meet the demands of its lenders and expectations of its equity holders

Typically needed to manage day to day needs of a business as well as acquiring needed inventory

A form of financing where the merchant accepts payment immediately from the bank and the customer agrees to repay the bank

Can reduce the funds a firm must tie up in inventory

The asset that backs a secured loan

A market intermediary (usually a financial institution or a factoring company) that agrees to buy the firm's accounts receivable, at a discount, for cash

Depends on the kind of business it is, How quickly it can resell the merchandise it purchases with a bank loan or use it to generate funds, Cash flow forecasts, Seasonal environment of the business, Speed with which they can turn the borrowed funds into cash

The owners of a public corporation

To issues stock, a public corporation must meet the requirements of

Invest in a company in return for part ownership of the business