Business Management- Financial Management

Front 1

Define: Financial Management

Back 1

The art and science of managing a firm's money so that it can meet its goals.

Front 2

Define: cash flows

Back 2

The inflow and outflow of cash for a firm.

Front 3

Define: Return

Back 3

The opportunity for profit

Front 4

Define: Risk

Back 4

The potential for loss or the chance that an investment will not achieve the expected level of return.

Front 5

Define: Risk-return trade-off

Back 5

A Basic principle in finance that holds the higher the risk, the greater the return that is required.

Front 6

Define: Short-term forecasts

Back 6

Projectors of revenues, costs of goods, and operating expenses over a one-year period.

Front 7

Define: Long-term forecasts

Back 7

Projections of a firm's activities and the funding for those activities over a period that is longer than one year, typically 2 to 10 years.

Front 8

Define: Budgets

Back 8

Formal written forecasts of revenues and expenses that set spending limits based on operational forecasts; include cash budgets, capital budgets, and operating budgets.

Front 9

Define: Cash budgets

Back 9

Budgets that forecast a firm's cash inflows and outflow and help the firm plan for cash surpluses and shortages.

Front 10

Define: Capital budgets

Back 10

Budgets that forecast a firm's outlays for fixed assets (plan and equipment), typically for a period of several years.

Front 11

Define: Operating budgets

Back 11

Budgets that combine the sales forecasts with estimates of production costs and operating expenses in order to forecast profits.

Front 12

Define: Cash management

Back 12

The process of making sure that a firm as enough cash on hand to pay bills as they come due and to meet unexpected expenses.

Front 13

Define: Marketable securities

Back 13

Short-term investments that are easily converted into cash.

Front 14

Define: Commercial paper

Back 14

Unsecured short-term debt (an IOU) issued by a financially strong corporation.

Front 15

Define: Accounts receivable

Back 15

Sales for which a firm as not yet been paid.

Front 16

Define: Capital expenditures

Back 16

Investments in long-lived assets, such as land, buildings, machinery, and equipment, that are expected to provide benefits over a period longer than one year.

Front 17

Define: Capital budgeting

Back 17

The process of analyzing long-term projects and selecting those that offer the best returns while maximizing the firm's value.

Front 18

Define: Unsecured loans

Back 18

Short-term loans for which the borrower does not have to pledge specific assets as security.

Front 19

Define: trade credit

Back 19

The extension of credit by the seller to the buyer between the time the buyer receives the goods or services and when it pays for them.

Front 20

Define: Accounts payable

Back 20

Purchase for which a buyer has not yet paid the seller.

Front 21

Define: Line of credit

Back 21

An agreement between a bank and a business that specifies the maximum amount of unsecured short-term borrowing the bank will allow the firm over a given period, typically one year.

Front 22

Define: Revolving credit agreement

Back 22

A guaranteed line of credit whereby a bank agrees that a certain amount of funds will be available for a business to borrow over a given period.

Front 23

Define: Secured loans

Back 23

Loans for which the borrower is required to pledge specific assets as collateral, or security.

Front 24

Define: Factoring

Back 24

A form of short-term financing in which a firm sells its accounts receivable outright at a discount to a factor.

Front 25

Define: Financial risk

Back 25

The chance that a firm will be unable to make scheduled interest and principal payments on its debt

Front 26

Define: Term Loan

Back 26

A business loan with a maturity of more than one year; can be secured or unsecured

Front 27

Define: Bonds

Back 27

Long-term debt obligations (liabilities) issued by corporations and governments.

Front 28

Define: Mortgage loan

Back 28

A long-term loan made against real estate as collateral.

Front 29

Define: Common stock

Back 29

A security that represents an ownership interest in a corporation

Front 30

Define: Stock dividends

Back 30

Payments to stockholders in the form of more stock; may replace or supplement cash dividends.

Front 31

Define: Retained earnings

Back 31

Profits that have been reinvested in a firm.

Front 32

Define: Preferred stock

Back 32

An equity security for which the dividend amount is set at the time the stock is issued.

Front 33

Define: Risk management

Back 33

The process of identifying and evaluating risks and selecting and managing techniques to adapt to risk exposures.