Intro to Business Chapter 18
capital expenditure
A firm that purchases a long-term asset such as a manufacturing facility is making a(n)
cost of capital
A firm's _______ is the rate of return it must earn in order to meet the demands of its lenders and expectations of its equity holders.
capital
A firm's spending plans for major purchases, such as manufacturing equipment or buildings, is detailed in the _______ budget.
secured loan
A loan backed by collateral is called a(n)
cash flow forecast
A(n) _______ is an estimate of the timing and amounts of cash inflows and outflows over a period of time so that financial managers can determine if the firm needs to borrow funds, how much it needs to borrow, and when—and how—it can repay the loan.
operating budget
Although Naomi's business is small, she knows that she still needs to develop an accurate estimate of the costs and expenses needed to run the business. In order to do this, Naomi develops a(n)
retained earnings
Even while the economy experienced a relatively harsh recession, TEVECOM reported $130 million in net income. At the company's board of directors meeting it was decided that TEVECOM would distribute $50 million in dividends to its stockholders. The remaining $80 million became
line of credit
If a firm is financially sound and has a long-standing relationship with a bank, the bank may extend unsecured short-term loans to the firm. This type of arrangement is called a(n)
cash budget
Most of the customers in Maleki's printing business pay him at the end of the month. However, his paper supplier demands payment upon delivery. In order to make sure that he has funds available to pay his supplier, Maleki should develop a
factoring
Patrick's lawn care business needs quick cash to purchase a new commercial lawn mower. Instead of getting a loan, he sells his accounts receivable for cash. This type of financing is known as
equity financing
Peter wants to open a new manufacturing facility in Western Canada. Instead of securing bank loans to finance this venture, he sells shares of stock in his company. This is known as
a bond
The "IOU" that is issued by a corporation or government to raise needed funds, promising to repay the principal amount by a certain date along with a certain rate of interest, is called
finance
The business function that is responsible for acquiring funds for the firm and managing funds within the firm is called
excessive cash reserves
The most common financial problems faced by organizations include all of the following EXCEPT
debt financing and equity financing.
The two primary types of long-term financing are
cash flow problem
Tristan is the financial manager of a small company. While sales are steady, customers are taking longer to pay, and he has had increasing difficulty obtaining short-term loans to finance the day-to-day operations of the company. Tristan's company is facing a(n)
debt financing
Two primary forms of financing are equity financing and
commercial paper
Unsecured promissory notes of $100,000 and up that mature in 270 days or less are called
long-term forecast
Used as a basis for a company's strategic plans, a(n) _______ allows top management to envision where income is coming from as well as its future profit potential.
partial ownership
Venture capitalists provide financing to new or emerging companies with high profit potential, but in exchange for this financing, venture capitalists expect
trade credit
When a company has a long-standing relationship with its suppliers and purchases large quantities, it usually has 30-45 days to pay for the purchase. This arrangement is called
Financial managers are proactive; they budget where funds are supposed to be ahead of time.
Which of the following best describes the role of financial managers?
Madeleine's Fashions plans to add inventory in its retail store just before the holiday season
Which situation most likely requires short-term financing?
money earning interest increases in value over time.
when financial managers refer to the "time value of money," they mean that