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BUSN 11 Chapter 9 EXAM PREP ALREADY
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BUSN 11 Chapter 9 EXAM PREP ALREADYPASSED
Finance - =Functional area of business that is concerned with finding the best sources and uses of
financial capital. Goal of financial management is to maximize the value of the firm to its
owners.
Financial Capital - =Funds that a firm uses to acquire assets and finance its operations
Shareholder Value and Social Responsibility - =A socially responsible firm has an obligation to
respect the needs of all stakeholders. Being socially responsible requires a long-term
commitment to the needs of different stakeholders.
Fiduciary Duty of Financial Managers - =Managers should make decisions that are most
consistent with the interests of ownership when conflicts arise
Risk - =degree of uncertainty regarding the outcome of a decision
Risk-Return Tradeoff - =observation that financial opportunities that offer high rates of return
are riskier than those offering lower rates of return
Financial Ratio Analysis - =Computing ratios that compare values of key accounts listed on
financial statements.
Liquidity Ratios - =measure the ability of a firm to obtain the cash it needs to pay its short-term
debt as they come due
Liquid Asset - =can quickly be converted into cash with little risk of loss
Asset Management Ratios - =measure how effectively a firm uses its assets to generate revenue
, Leverage Ratios - =measure the extent to which a firm relies on debt financing in its capital
structure
Profitability Ratios - =measure the rate of return a firm earns on various measures of investment
Budgeted Income Statement - =shows how a firm's budgeted sales and costs will affect expected
net income
Budgeted Balance Sheet - =Forecasts the types and amounts of assets of a firm will need to
implement its future plans and how the firm will finance the assets.
Cash Budget - =Detailed forecast of future cash flows. Helps financial managers identify when
their firm is likely to experience temporary shortages or surpluses of cash.
Trade Credit - =Granted by sellers when they deliver goods and services to customers without
requiring immediate payment. Form of spontaneous financing.
Factor - =Company that provides short-term financing to firms by purchasing their accounts
receivables at a discount
Short-Term Bank Loans - =line of credit and revolving credit agreement
Line of Credit - =Arrangement between a firm and bank in which bank pre-approves credit up to
a specified limit, provided that the firm maintains an acceptable credit rating
Revolving Credit Agreement - =Bank makes a binding commitment to provide funds up to a
specified credit limit at any time during the term of the agreement. Guaranteed line of credit.
Commercial Paper - =short-term promissory notes issued by large corporations
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