Final

Discount, Premium

A ___ bond sells below par value, while ___ bond sells above it.

Quarter, Year, Financial, Physical, Obligations, Capital

A balance sheet indicates an organization's financial position at a particular date, usually at the end of a ___ or ___. Assets are the ___ and ___ items owned by the bank. Liabilities are the financial debts and ___ owed by the bank. Owners' equity is the financial ___ supplied by the bank's owners.

Investment-Grade, High-Yield, Credit

A bond's security or collateral positions (either ___ or ___ bonds) affect its ___ rating.

Market, Inventory, Securities, Securities Exchange Commission

A broker assists the trading process by buying or selling securities in the ___ for an investor. A dealer satisfies investors' trades by buying and selling securities from his or her own ___. Attempts to manipulate ___ prices are illegal, and both must register with the ___.

Cash Flows, Short, Monthly, Weekly, Daily

A cash budget is a tool the treasurer uses to forecast future ___ and estimate future ___-term borrowing needs. Small and medium-sized firms may prepare ___ cash budgets, while larger firms may forecast ___ or ___.

Lower, Higher, Financing, Predictability, Management

A cash buffer is needed to protect against ___-than-expected cash inflows or ___-than-expected cash outflows. It size depends on the firm's ability to acquire ___ easily on short notice, the ___ of cash flows, and ___'s preferences.

Marginal, Economic, Production

A credit applicant can fall into a ___ category. Whether they should receive credit depends on factors such as the prevailing ___ conditions and the extent to which the firm has excess ___ capacity.

Raw Materials, Manufacturing, Finished Goods

A firm usually categorizes its inventories in terms of ___, goods in the ___ process, and ___.

Assets, Investments, Variance, Deviation

A portfolio is any combination of financial ___ and ___. Its total risk can be measured by its ___ or the standard ___ of its returns.

Inventory, Trade, Direct

Accounts payable arising from the purchase of ___ on credit terms represent ___ credit financing as opposed to ___ short-term borrowing from banks and other lenders.

Deposit, Credit

Accounts receivable is a cash and marketable security on ___ with banks. They generally arise from the sale of products, merchandise, or services on ___.

Quality, Creditworthiness, Quality, Credit

After a firm has established its credit ___ standards, credit analysis involves appraising the ___ or ___ of a potential customer. It determines if and how much ___ should be granted.

Securities Exchange Commission, Qualified

After registering with the ___, investors can trade bonds in the public market. Bonds can be sold in a private market to ___ investors.

Current, Short, Debt, Equity, Lower, Profitable, Liquidity, Equal, 0, Less, Negative

Aggressive financing is financing all ___ assets with ___-term financing. Only long-term assets are financed with long-term ___ and ___ funds. It has ___ financing costs and may be more ___, but could result in ___ problems if sales decline. The current ratio is either ___ to 1 (net working capital of ___) or ___ than 1 (___ net working capital).

Financial, Operations, Cash Flows, 5, 10

An annual report provides three financial statements: balance sheet (statement of ___ position), income statement (statement of ___), and statement of ___. They typically provide a ___ to ___-year summary of the selected financial data for that term.

Sales, COG, Accounts Payable, Net Working Capital

An increase in ___ and ___s should result in an increase in the investment of the accounts receivable and inventories. This increase will be partially offset by an increase in ___. The financial manager has to plan ahead to obtain the necessary funds to support this expected increase in ___ from short or long-term sources.

Volatile, Systematic

Assets that are more ___ or have greater ___ risk than the market have betas greater than 1 and vice-versa.

Cash, First, Current, Long-Term

Assets that are most liquid (the time it usually takes to convert the assets into ___) are usually listed ___ in a balance sheet. The two groups of assets are ___ and ___.

Income, Clipped, Bondholder

Bearer bonds have regulations preventing their issuance in the US mostly because investors may evade ___. They have coupons that are "___" from the side of the bond certificate and presented to a bank for payment, so the bond issuer does not know who the ___ is.

Creditors, Cash Flows, Assets, Interest, Dividends, Funds, Securities

Bondholders have the legal status as ___, not owners of the firm, but they have priority claims on the firm's ___ and ___. Therefore, they must receive their ___ payments before the owners receive their ___. In debt situations, they must receive their ___ before the owners. They have separate ___ for each bond owned.

Ability, Liquidity

Capacity is the ___ to pay bills and often involves an examination of ___ ratios.

Owners' Equity, Liabilities

Capital indicates the adequacy of ___ relative to existing ___ as the underlying support for creditworthiness.

More, Corporate, Equity, Mortgage, Funds, Individuals, Funds

Capital markets are where debt instruments or securities of one year or ___, ___ stocks, or ___ securities are issued and traded. They are important for those who want to ___ their homes as well as corporations who raise ___ to finance their operations. ___ and corporations with excess ___ also invest in this.

Hand, Deposit, Commercial Paper, Bills, Notes, Bonds

Cash and marketable securities include cash on ___ and on ___ with banks, marketable securities (such as ___ issued by other firms), and US government securities (Treasury ___, ___, and ___).

Ethical, Willingness, History

Character is the ___ quality of the applicant on which one can base a judgment about his or her ___ to pay bills. It is best judged by reviewing his or her credit ___.

Assets, Security

Collateral reflects whether ___ are available to provide ___ for the potential credit.

Prime, Line, Revolving

Commercial bank lending is at the ___ rate, as well as has a ___ of credit and ___ credit agreement.

Ownership, Class, Expenditures, Investments, Larger

Common stocks are ___ shares in corporations. They often issue new, various ___ shares to raise funds for capital ___ and inventory ___. Active secondary markets exist for trading the common stocks of ___ corporations after the stocks are initially issued.

Use, Fee

Compensating balance is having a specific amount of money that you can't ___. It is a ___.

Economic, Business

Conditions refer to the current ___ climate and state of the ___ cycle.

Unit, Fixed

Contribution margin is the contribution of each ___ sold that goes towards paying ___ costs.

Capital, Owners, Investors, Liability, Risk, Ownership, Sale, Purchase

Corporations can get a large amount of capital because they are allowed to sell capital stock to existing owners or new investors. There is a limit on liability, but they may not protect owners from personal risk beyond their investment. It is easy to transfer ownership, and the form has no power to interfere with the sale or purchase of its stocks.

Statistical, Returns

Correlation is a ___ concept that relates movements in one set of ___ to movements in another set over time.

Operating, 0

Cost-volume-profit analysis is used by managers for financial planning to estimate the firm's ___ profits at different levels of unit sales. One of its variations, break-even analysis, can be used to estimate how many units of a product must be sold for the firm to "break even" or have a ___ profit.

Default, Corporate, Government, Maturity

Credit or ___ risk is the chance of nonpayment or delayed payment of interest or principal. They compensate, as the rates of return on ___ bonds are higher than those on ___ securities (which are free of it) with the same terms to ___.

Operating, Budgeting, Structure

Current assets and liabilities are ___ decisions. Long-term assets are capital ___ decisions. Long-term liabilities and equity are capital ___ decisions.

Accounts, Notes, Accrued, Receivables, Inventory

Current liabilities include ___ payable (like trade credit), ___ payable (like short-term loans), and ___ liabilities that are to be met out of current funds and operations. Normal business operations convert ___ and ___ into cash when these are due.

Automatic, Long, Equity, Higher, Liquidity, Marketable, Positive, Higher

Except for ___ or "spontaneous" financing provided by accounts payable and accrued liabilities, all of conservative financing is done through ___-term debt and ___ funds. It has a ___ financing cost. The firm will have excess ___ when available funds exceed necessary current asset levels, in which they may invest in ___ securities. The net working capital is ___ and the current ratio is ___ than 1.

Dollar, Cash Flows

Exchange rate risk is when fluctuating exchange rates lead to varying levels of US ___-denominated ___.

Selling, Factor

Factoring is the firm ___ its accounts receivable to a firm (___).

Accounts Payable, Liquidity, Balance Sheet, Income Statement

Firms are interested in how trade credit from suppliers (___) is being paid and used for while accessing another firm's ___ position. This analysis requires taking data from their ___ and ___ to figure out their average payment period.

Proprietorships, Partnerships, Tax, Corporations, Annual

Firms organized as ___ or ___ are not required to prepare financial reports or statements except for ___ purposes. Corporations have to provide one for their owners' benefit via the ___ report.

Efficiency, Raw Materials, Finished Goods

For better production ___, some firms with seasonal sales use a level production plan. The same amount of ___ are purchased and ___ are manufactured every month.

Electronic, Currencies

Foreign exchange (FOREX) markets are ___ markets in which banks and institutional traders buy and sell various ___ on behalf of businesses and other clients.

Junk, Unsystematic

High-yield or ___ bonds have more risk but offer higher expected returns. They have benefits in lowering ___ risk in market portfolios.

Positive, Higher

In maturity matching, the amount of current assets is greater than that of the current liabilities, so the net working capital is ___ - current ratio is ___ than 1.

Manufactured, Laid-Off, Bottlenecks, Inventory, Cash, Accounts Receivable, Selling

In seasonal production, goods are ___ before they are sold. However, this production may lead to idle plant and ___ workers during the slower months and production ___ during the busy times. ___ is higher, while ___ and ___ are lower. The opposite is true during the ___ season.

Bid, Ask

In security transactions, buyers offer a ___ price to see if the sellers will agree to sell for a lower price, and sellers have their ___ prices.

Current, Growth, Seasonal, Cyclical, Life Cycle, Flexibility, Lenders, Rollover, Interest

Influences on the short-term/long-term financing decision are ___ assets/total assets relationship, ___, ___ and ___ variations, firm ___/sales trends, ___, relationship with short-term ___, and concern over constant debt ___ and exposure to ___ rate spikes.

Cash Flows, Capital

Inputs are ___ as well as the required rate of return or the "cost of ___," which is the amount of money investors must have.

Asset, Bond, Premium

Interest rate risk is when fluctuating interest rates lead to varying ___ prices. Rising interest rates result in rising ___ prices and vice-versa. Investors demand a larger risk ___ because of this.

Classes, Industries, Country, Global

Investors should consider investing in a way that cuts across asset ___ (such as stocks and bonds), ___, and ___ borders (less stock market performance than the previous) to benefit from the opportunities in a ___ investment marketplace.

Direct, Credit, Obligations, Current, Long-Term

Liabilities come into existence through ___ borrowing, purchases of goods and services on ___, and the accrual of ___ (such as wages and income taxes). They are classified as ___ or ___.

Interest, Funds, Clean Up, Reapprovals, Balance, Fees

Line of credits are ___ charges or borrowed ___. They have ___ periods, periodic ___, and compensating ___ versus ___.

Stocks, Bonds, Life, Signed, Acceptances

Loans are secured by ___, ___, ___ insurance, co-___ loans, or ___.

Physical, More, Plant, Equipment, Land, Intangible

Long-term assets are the ___ facilities used in the production, storage, display, and distribution of the firm's products that provide services for a year or ___. The two categories are ___ and ___, and ___. ___ assets are also included on the balance sheet.

Secured, Unsecured, Outstanding

Long-term corporate debt securities fall into two categories: ___ and ___ obligations. A single firm can have many types of debt contracts ___.

Up, Capital Budget, Value, Net Present Value

Long-term financing occasionally goes ___. Identifying long-term financing (___) is using the time value of money. The time value concepts tell us the ___ and, after separating the initial upfront cost, the ___ (NPV).

Assets, Liabilities

Maturity matching is a financing strategy that attempts to match the maturities of ___ with those of the ___ in which they are financed.

Less, Liquidity, Returns, Risks, Bills, Certificates of Deposit, Commercial Paper, Banker, Repurchase, Funds

Money markets are where debt securities with maturities of one year or ___ are issued and traded. They are generally characterized by high ___. They have both low ___ and ___. It is where you trade Treasury ___, negotiable ___ (CD), ___, ___'s acceptances, ___ agreements, and federal ___.

1, Collateral, Ability, Public, Market

Most issuers purchase bond ratings for $___ from one or more agencies, which access both the ___ underlying the bonds as well as the ___ of the issuer to make timely payments of interest and principal. It makes it much easier to sell bonds to the ___, as it is a ___ symbol.

Mortgage, Corporate

One of the common methods for obtaining a long-term loan is to offer a ___ to a lender as collateral for a ___ bond.

Rates, Rolling, Long

Over-reliance on short-term debt may lead to exposure to increases in short-term ___, difficulties in ___ over debt, and being forced to acquire ___-term financing at inopportune times.

Outlay, Profits, Creditors, Preferred, Common, Retained

Owners' equity initially results from a cash ___ to purchase assets (sometimes their own) to operate the business. It may be increased by allowing ___ to remain in the business. It reflects the owners' claims on the assets of the business as opposed to the ___' claims. It is usually broken down into three different accounts: ___ and ___ stock, and ___ earnings.

Interest, Companies, Plus, Time

Prime rate is the ___ rate the bank charges its best customers on their loans. All of its customers are borrowing money for ___. Many of them do prime ___, or paying more than the prime rate, in order to ensure that they get money back. Prime ___ is the same thing, except the cash is multiplied, not added.

US, Names, Interest

Registered bonds are those that are currently issued in the ___. The issuer knows the bondholders' ___ and that ___ payments are sent directly to them.

Unused, Interest, Funds

Revolving credit is a commitment by the bank that charges on ___ funds in addition to ___ charge or borrowed ___ (i.e., line of credit).

Physical, Electronic, Bonds, Mortgages, Existing, New, Money, Capital, Gain, Lose

Secondary markets are ___ locations or ___ forums where debt (___ and ___) and equity securities are traded. They facilitate the transfer of previously issued securities from ___ to ___ investors. It is divided into short-term (___) or long-term (___) market categories. Security issuers don't ___ or ___ money.

Suppliers, Up and Down

Short-term financing in companies usually comes from ___. It tends to go ___.

Banks, Papers, Companies, Accounts Payable, Accounts Receivable, Inventory, Loans

Sources of short-term financing are commercial ___, ___, and finance ___; trade credit (___); ___ financing; ___ finance; and ___.

Market, Portfolio, Asset, Company, Returns

Systematic (___) risk affects all stocks and securities. No ___ can diversify it away, but it can with unsystematic (___-specific or ___-specific) risk. Assets with higher levels of systematic risk should have higher expected ___ and vice-versa.

Seasonal, Investment

Temporary current assets rise and fall because of ___ sales fluctuations. Permanent current assets reflect the minimum ___ level in cash, accounts receivables, and inventories needed to support sales.

Ba, B, Caa, C

The ___ high-yield bond has speculative issues, putting it at greater credit risk. ___ is very speculative and has a likelihood of future default. ___-___ are highly speculative and are in default or have a high likelihood of it.

Aaa, Aa, A, Baa

The ___ investment-grade bond is of the best quality with the least amount of credit risk. ___ is of high quality with slightly more risk. ___ is of upper-medium quality that may result in possible future credit quality differences. ___ is a medium-quality bond.

Accounts Payable, Financing, Inventory, Accounts Receivable, Accounts Payable

The ___ period is subtracted from the length of the operating cycle to get the cash conversion cycle. It measures a firm's ___ gap in terms of time. Its length is determined by the ___, ___, and ___ periods.

Unsecured, Line, Pledging, Factoring

The business that does not qualify for an ___ bank loan or that has emergency needs for funds in excess of its ___ of credit may decide to use its accounts receivable. There are two methods to use it as a form of asset-based lending: ___ accounts receivable or ___.

Accounts Receivable, Credit

The buyer's ___ is generally paid according to the ___ terms of the sale.

Accounts Receivable, Inventory, Less, 30, 50, Working Capital

The current assets of a business include cash/marketable securities, as well as other ___ and ___ that are expected to be converted into cash in one year or ___. They typically represent ___-___% of total assets. They represent the ___ needed to carry out the normal operations of a business.

Less, Funds, Operations, Credit

The current liabilities of a business may be defined as those obligations that must be paid in one year or ___. Therefore, accounts payable must be met out of current ___ and ___. They arise primarily from the purchase of goods and supplies on ___ terms.

Sales, Payment, Sales, Accounts Receivable

The estimates of cash inflows are driven by the ___ forecast and customer ___ patterns. The main sources of cash inflows are cash ___ and ___ collections.

Debt, Equity, Funds

The initial offering or origination of ___ and ___ securities takes place in the primary market. It is the only market where the security issuer directly benefits (receives ___) from the sale of its securities.

Analysis, Terms, Collection, Investment

The management of accounts receivables involves conducting credit ___, setting credit ___, and carrying out ___ efforts. These decision areas combined determine the level of ___ in accounts receivables.

Raw Materials, Accounts Receivables, Inventory, Accounts Receivable

The operating cycle measures the time between receiving ___ and collecting cash from ___. Its length is determined by the ___ and ___ periods.

Competitive, Terms, Standards, Collection

The selling of goods on credit is generally driven by industry norms and ___ pressures. The time it takes to collect accounts receivable depends on industry norms for credit ___ and the firm's policies for setting credit ___ and carrying out ___ efforts.

Maturity Matching, Aggressive, Conservative

The strategies to finance current and long-term assets are ___, as well as ___ and ___ financing.

Investment, Salvage, Cash Flows

The three ways to set a bid price are to use initial ___ outlay, ___ value, and estimate yearly operating ___.

Operating, Cash Conversion, Credit

The two concepts in managing short-term finances are the ___ and ___ cycles. They will be the same if no ___ is extended by suppliers.

Assets, Returns, Proxy, Broad

There is no identifiable "market" portfolio since there are too many ___ to attempt to measure ___. Investment professionals use a ___ or substitute instead. A popular measure is a ___ stock market index, such as the Standard and Poor's 500 or New York Stock Exchange index.

Cash Balance, Cash Flows

To construct a cash budget, you need to know the minimum desired ___ and estimated ___.

Twice, Rate, Payments

US bonds pay interest ___ a year, and most of them pay a fixed coupon ___. Others have coupon ___ that vary over time and are usually tied to an underlying market interest rate.

Capital Asset Pricing Model, Systematic, Relative, Volatility, Variability

Under the ___ (CAPM), beta is the measure of an asset's ___ and ___ risks. It measures the ___ and ___ of an asset's returns relative to the market portfolio.

Present, Cash Flows

Value is the ___ value of expected ___.

Interest, Par, Tax

Zero-coupon bonds pay no ___ over the life of the bond. The investor buys it at a steep discount from its ___ value. They are best suited for ___-exempt investment organizations.

Registered, Bearer, Public, Private

___ and ___ bonds can be sold in either the ___ or ___ market.

Lower, Assets, Opposite, Same

___ portfolio variability arises from the benefits of diversification, when we invest in several different ___. Its benefits are greatest when two sets of returns have negative correlations - moving in ___ directions. A positive correlation is when they are moving in the ___ direction.

Character, Capacity, Capital, Collateral, Conditions

the five Cs that are used in making a credit granting decision.

Working, Financial

the two types of capitals a firm can invest in.

Temporary, Permanent

usually the two components of the level of current assets.

Pledging Accounts Receivable

when the firm borrows against its accounts receivable balances.

Note, 5, 20, Default, Marketable, Receipts, Expenditures

A Treasury bond is sometimes referred to as a ___ for shorter securities. It is a debt instrument issued by the US federal government with a typical maturity of ___-___ years. They are sold to raise low ___ risk, easily ___ funds needed to reconcile longer-term imbalances between tax ___ and government ___.