Business whatever

Needs for operating funds include ______. (Select all that apply)

- acquiring needed inventory - making capital expenditures - controlling credit operations

As a function of financial management, financial managers must understand tax regulations because ______. (Select all that apply)

- businesses want to minimize taxes - they must consider the tax implications of major decisions

Which statements are true about factoring accounts?

-The firm that buys the accounts receivable collects the amount due. -It is the accounts receivable of a firm sold for a discount. -Small businesses often use it for financing in the short term.

It is better to go to banks instead of family and friends for business loans because:

-loans from family can hurt family relationships -banks can assist the business in analyzing problems

The idea that the greater the risk a lender assumes in making a loan, the higher the interest rate is called the ________/________ trade off.

Blank 1: risk Blank 2: return or reward

A firm that puts out an offer of an IOU with a promise to repay the amount borrowed, with interest, on a certain date has issued a(n) _____

Bond

Spending for major assets are listed on a(n) ____ budget.

Capital

To meet a firm's goals and objectives, ______ managers must focus on the management of a firm's resources.

Finance

Which of the following are true about commercial paper?

Only large, stable firms offer it. It is a short term source of funds.

Small business managers are more concerned with ______ funds

Short term

What happens if a secured loan is not repaid?

The lender may take the collateral.

The amount a business borrows and for how long depends on which of the following? (Select all that apply)

The type of business and industry it is in How quickly it can resell the merchandise it purchases with the funds

Which statements about commercial finance companies are true?

They want borrowers to offer tangible assets as collateral. They charge higher rates than banks. They make short-term loans.

A debenture bond—a bond that is not backed by collateral, is also known as a(n) _____ bond.

Unsecured

When a firm is not putting an asset up as collateral for a loan, the loan is considered to be ____.

Unsecured

Items to consider when setting a long-term interest rate include

a. a firm's credit rating b. adequacy of collateral c. general level of market conditions d. length of loan

In pledging, the firm uses its ______ as collateral for a loan.

accounts receivable

A secured loan is ______.

backed by collateral

Banks prefer to lend short-term money to larger, established businesses because _____.

banks are very sensitive to risk

It is better to go to banks instead of family and friends for business loans because: (Select all that apply)

banks can assist the business in analyzing problems loans from family can hurt family relationships

Why might loans obtained from families and friends be problematic?

because all parties may not understand cash flow

A(n) _____ is a financial plan that sets forth management's expectations and, on the basis of those expectations, allocates the use of specific resources throughout the system.

budget

When a company allocates the use of specific resources throughout the firm based on a financial plan indicating management's expectations, then the company is using a(n) ____ as the basis for making decisions.

budget

Capital, cash, and operating are three types of _____.

budgets

A(n) ______ budget summarizes a firm's spending plans for major asset purchases that often require large sums of money.

capital

Major investments in either tangible long-term assets such as land, or intangible assets such as patents are considered to be ______ expenditures.

capital

During tough economic times, customers are happy when firms extend ______ for purchases.

credit

A firm raising funds through various forms of borrowing with the intent to pay it back is using ____ financing.

debt

________ financing is funding raised through various forms of borrowing that must be repaid.

debt

A firm selling ownership in the company in the form of stock is using ______ financing.

equity

A firm that does not want to pay back a loan will use ______ financing. A firm that does not want to give up ownership will use ______ financing.

equity and debt

The three steps in the financial planning process are to forecast the firm's short- and long-term needs, develop budgets, and ______.

establish financial controls

Finance is the function of acquiring and management of ______.

funds

Careful control of a firm's _____ allows it to maintain correct levels of stock and product.

inventory

Which are forms of debt financing?

issuing bonds getting a loan from a bank

Unsecured, short-term funds a bank will lend to a business, provided the funds are readily available, is called a(n) ______.

line of credit

Compared to a bank, the interest on commercial paper is ______.

lower

A term-loan agreement is a promissory note that requires the borrower to ______. (Select all that apply)

pay specified amount in installments pay interest on a loan

When borrowing against accounts receivable so when the account receivable is paid, the money is forwarded to the lender is the process of _____.

pledging

A firm that puts something of value, like a piece of property, up for collateral is applying for a(n) _____ loan.

secured

In factoring, the discount given depends on ______. (Select all that apply)

the condition of the economy the age of the accounts receivable the nature of the business

What are the three most common reasons firms fail financially?

undercapitalization inadequate expense control poor control over cash flow

A line of credit loan is ______.

unsecured

A loan that does not require collateral is called a(n) _____.

unsecured loan

A loan that does not require collateral is called a(n) ______.

unsecured loan

__ financing does not involve borrowing money

Equity

A financial institution or commercial bank that purchases a business' accounts receivable at a discount and then keeps what they collect is a(n) ______.

Factor

The ____ department is responsible for preparing budgets, preparing cash flow analysis, and planning expenditures

Finance

Careful control of a firm's _____ allows it to maintain correct levels of stock and product.

Inventory

Select those items that are considered to be a capital expenditure

buildings and equipment land patents and copyrights

What are the three most common types of budgets in a firm's financial plan?

capital budget master budget cash budget

A company that takes out a loan from a bank is using which type of financing?

debt financing

Functions of financial management do NOT include ______.

ensuring employees are paid fairly

A firm selling ownership in the company in the form of stock is using ____ financing.

equity

Commercial ______ companies are different from banks because they do not accept deposits, but they do make short-term secured loans at higher interest rates

finance

In any business, funds come into and go out of a business. What business function acquires funds for the firm and then manages those funds on a day-to-day basis?

finance

Financial management primarily involves managing a firm's ______.

financial resources

A capital budget is ______.

for spending plans on major purchases

Select the steps in financial planning. (Select all that apply)

forecasting short term needs develop budgets establish financial controls

Money is considered to have a time value because ______.

money has more value in your possession today than at a later point in the future

______ funds are typically needed to manage day to day needs of a business as well as acquiring needed inventory.

operating

A firm that has placed an asset into a loan contract, agreeing to give the bank possession if the loan is defaulted, has applied for a _____ loan by offering _______.

secured; collateral

A(n) ______ forecast predicts revenues, costs, and expenses for a period of one year or less.

short term

Short-term financing is more important to a small business than long-term financing because ______.

small businesses are more concerned with funding day to day operations

A firm that has a promissory note that requires the borrower to repay the loan with interest in specified monthly or annual installments has a(n) _____ -loan agreement.

term

In factoring, the discount given depends on

the condition of the economy the nature of the business the age of the accounts receivable

The risk/return trade-off principle means that ______.

the greater the risk a lender makes in making a loan, the higher the interest rate

Because a majority of small business are rejected for traditional business loans, many ______ for short-term financing.

use credit cards

What are three questions financial managers ask when considering long-term financing?

What are the organization's long-term goals and objectives? What funds do we need to achieve the firm's long-term goals and objectives? What sources of long-term funding (capital) are available, and which will best fit our needs?

Which are factors in setting a long term interest rate?

collateral firm's credit rating market interest rates

What form of financing takes place when the merchant accepts payment immediately from the bank and the customer agrees to repay the bank?

credit cards

The ______ department is responsible for preparing budgets, preparing cash flow analysis, and planning expenditures.

finance

In financial planning, what is the process in which a firm periodically compares its actual revenues, costs, and expenses, with its budget?

financial control

What inventory management procedure helps a firm to control inventory costs?

implementing a just-in-time inventory control method

Which statements are true regarding trade credit? (Select all that apply)

it is the most widely used source of short-term funds; it is used by large and small businesses; it is usually more convenient than bank loans

When considering ___________ - __________ financing options a financial manager must consider the organization's financial goals and objectives.

long term

Dimitri owns stock in a U.S. publicly traded company. As a stockholder, Dimitri is a(n) ______ of the corporation.

owner

A term-loan agreement is a promissory note that requires the borrower to ______.

pay specified amount in installments pay interest on a loan

Finance activities include preparing budgets, doing cash flow analysis, and ______

planning for the expenditure of funds

Finance activities include preparing budgets, doing cash flow analysis, and ______.

planning for the expenditure of funds

Is it more common for a firm to fail due to lack of sales or poor financial management?

poor financial management

Items that may back a secured bond include ______.

real estate machinery and equipment

Financial control is a process through which a firm periodically compares its budget to which of the following?

revenues, costs, and expenses

Bonds that are backed by specific collateral that must be forfeited in the event that the issuing firm defaults are called ______.

secured bonds

A loan backed by collateral, something valuable like property, is called a(n) ______.

secured loan

What are two criteria a business should use to determine how much money it should borrow?

the kind of business it is in how quickly it can generate funds using the borrowed cash

Advantages of using a credit card in small business financing include that:

they save time cards are accepted in many places

The ____ value of money is the idea that money in your possession today is worth more than money that will be in your possession in the future.

time

What three promises are included in the issuance of a bond?

to repay on a certain date; to pay a certain interest rate; to repay the amount owed;

A firm that buys goods and services on a given day, but pays for them later is using a(n) ____ credit.

trade

Which statements are correct about loans?

unsecured loans are usually only for the very stable customers; secured loans are backed by collateral