Business 101 exam 2
Finance - ANS-The function in a business that acquire funds for the firm and manages
those funds within the firm
Financial management - ANS-The job of managing a firm's resources so it can meet its
goals and objectives
Financial managers - ANS-Managers who examine financial data prepared by
accountants and recommend strategies for improving the financial performance of the
firm
Short-term forecast - ANS-Forecast that predicts revenues, costs, and expenses for a
period of time of one year or less
Cash flow forecast - ANS-Forecast that predicts the cash inflows and outflows in future
periodsm usually months or quarters
Long-term forecast - ANS-Forecast that predicts revenues, costs, and expenses for a
period longer than one year
Budget - ANS-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
Capital budget - ANS-A budget that highlights a firm's spending plans for major asset
purchases that often require large sums of money
Cash budget - ANS-A budget that estimates cash inflows and outflows during a
particular period like a month or a quarter
Operating (or master) budget - ANS-The budget that ties together the firm's other
budgets and summarizes its proposed financial activities
Financial control - ANS-A process in which a firm periodically compares its actual
revenues, costs, and expenses with its budget
Capital expenditures - ANS-Major investments in either tangible long-term assets (ex.
land) or intangible assets (ex. patents)
, Debt financing - ANS-Funds raised through various forms of borrowing that must be
paid
Equity financing - ANS-Money raised from within the firm, from operations or through
the sale of ownership in the firm (stock)
Short-term financing - ANS-Funds needed for a year or less
Long-term financing - ANS-Funds needed for more than a year (usually 2-10 years)
Trade credit - ANS-The practice of buying good and services now and paying for them
later
Promissory note - ANS-A written contract with a promise to pay a supplier a specific
sum of money at a definite time
Secured loan - ANS-A loam backed by collateral (something valuable like property)
Unsecured loan - ANS-A loan that doesn't require any collateral
Line of credit - ANS-A given amount of unsecured short-term funds a bank will lend to a
business, provided the funds ar readily available
Revolving credit agreement - ANS-A line of credit that's guaranteed but usually comes
with a fee
Commercial finance companies - ANS-Organiztions that make short-term loans to
borrowers who offer tangible assets as collateral
Factoring - ANS-The process of selling accounts receivable for cash
Commercial paper - ANS-Unsecured promissory notes of $100,000 that matur (come
due) in 270 days or less
Term-loan agreement - ANS-A promissory note that requires the borrower to repay the
loan in specified installments
Risk/return trade-off - ANS-The principle that the get the risk a lender takes in making a
loank the higher the interest rate required
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