Financial Management Exam Review PDF

**Financial Management -** bout preparing, directing, and managing **Personal finance -** Deals with an individuals' decisions **Business finance -** Involves same type of decisions **Financial planning -** This link in with the financial decision **Financial control -** Identifies if the manage...

**Financial Management -** bout preparing, directing, and managing **Personal finance -** Deals with an individuals' decisions **Business finance -** Involves same type of decisions **Financial planning -** This link in with the financial decision **Financial control -** Identifies if the management act **Financial decision making -** The key aspect of financial decision **Anticipation -** financial needs of the company are being estimated. **Acquisition** -- collect finance for the company from different sources. **Allocation --** uses this collected or acquired finance to purchase fixed **Appropriation -** distribute part of the company profits **Assessment --** means controlling all the financial activities **FINANCIAL SERVICES -** one concerned with design and delivery of advice and financial products **MANAGERIAL FINANCES --**concerned with the duties of the financial manager working **Sole proprietorship -** is a business owned by a single person who has complete control **PARTNERSHIP** - is a legal arrangement in which two or more persons agree to contribute capital **CORPORATION -** is an artificial being created by law and is a legal entity **Economics** -- study of choice. It is a social science **Finance** -- study of financial allocation **Microeconomics** - deals with economics decisions of individuals **Macroeconomics -** looks at the economy as a whole in which a particular business **Marginal cos**t -- benefit analysis is the primary economic principle **Strategic financial management -** A long range in scope and has its focus on the organization as a whole **Decision rule for managers -** Only take actions that are expected to increase the share price! **SHORT AND MEDIUM -- TERM** \- Maximization of return on capital employed \- Growth in earning per share and price earning ratio \- Minimization of finance charges. \- Efficient procurement and utilization of short term **LONG TERM** **-** Growth in the market value of the equity \- Survival and sustained growth of the firma **INVESTING -** The finance managers is responsible for determining how scarce resources **Financing -** The finance manager is concerned with the ways in which the firm **Operating -** The third responsibility area of the finance **Corporate governance -** is a system of organizational control **Manufacturing** - deals with the design and production of a products **Marketing** - involves the selling , promotions **Business ethic**s - are the standard of conduct or moral judgements **Shareholders** - are the owners of the corporation, **Agency cost** - are the cost are borne by shareholders wealth **Incentive plan** -- could tie in management performance to share price. **Performance plan** -- compensation is based on performance measure, **Financial ratio -** is a comparison in fraction, proportion, decimal or percentage of two significant figures **Liquidity Ratio -** A ratios that measure the ability of a company **Current Ratio -** also termed as working capital ratio **Quick Ratio -** more stringent measurement of the ability of the company **Cash ratio -** most stringent and conservative among the liquidity Ratios **Working capital to Total asset ratio -** Sometimes called net working capital **LEVERAGE RATIOS** - ratios that shows the capacity of the company **Debt ratio -** ratio that shows the percentage of the total debt **Equity ratio -** indicates the proportion of the total equity **Debt to Equity ratio -** shows the proportion of company's funds financed **Times interest earned ratio (TIER) -** which is sometimes referred as interest coverage ratio **Cash coverage ratio -** ratio that indicates the extent to which interest are Covered **ACTIVITY RATIOS-** means sure how efficiency the company produces revenue through the management of its assets. These ratios give us an idea of how efficiently the firm is using its assets. **Asset turnover ratio -** referred as sale to asset ratio **Account receivable turnover ratio -** indicates how many times the company collects **Days sales receivable -** also known as average collection period. **Inventory turnover ratio -** measure the number of times the company **Days sale inventory -** also known as average inventory period, **Account payable turnover ratio** - indicates the number of times the company pays **Days payables outstanding** -- also known as account payable period **Profitability Ratio -** measures the overall financial performance of the company **Gross profit margin** -- indicates the proportion of gross profit **Operating profit margin**- shows the percentage of operating profit or the EBIT **Net profit margin** -- reveal the percentage of the net income after tax **Return on sales** -- shows the proportion of profit, **Return on asset**- measure the relationship of the peso value of the income **Return on equity** - illustrate the relationship of the peso value **Earning per share** - indicates the ratio of the annual income **Price earning ratio** - reflects the ratio of the market price per share **Payout ratio** - shows the proportion of earning **Plow back ratio** - also referred as retention ratio **Dividend yield** -- indicate the return on investment