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53 Cards in this Set
- Front
- Back
Equity |
Are the financial rosources provided by owners of the business, including initial, additional investments and earnings retained in the business. |
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Borrowed capital |
Are those loans extended by financial intermediaries or investors, in the issuance of credit instruments. |
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Authorized capital stock Issued stock Reacquired stocks Outstanding stock |
Forms of Capital Stock |
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Authorized capital stock |
Is the maximum number of shares that the business owners are allowed to issue. |
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Issued stock |
Is the amount of authorized stock subscribed to and paid for in cash, property or services. |
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Reacquired stocks |
These stocks can be reacquired in two ways: (1) is gift from stockholders; (2) is buying back some of the company's issued stock. |
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Outstanding stock |
Is the portion of issued stock nor reacquired. |
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Common shares |
Are units of ownership registered in the names of proprietors.
*has the right to vote or elect bod *share in profits and dividends *pre-emptive common law right *right to assets in liquidation |
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Preffered shares issuance |
Is indicated in the articles of incorporation. *no right to vote or elect *right to share in profits and dividends |
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Current or short term |
Debt due to repayment within a period of twelve months |
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Non-current or long-term |
A debt with a maturity term of more than twelve months |
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Debt is Secured |
The creditor has claims against the borrower and against assets of the borrower. |
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Unsecured |
Debt is ________ the lender has a claim against the borrower but no additional claim to any particular property owned by the borrower. |
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Marketable debt |
Takes the form of securities such as notes, bonds or debentures which ate issued to investors and can be traded in a secondary market. |
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Non-marketable debt |
Takes the form of loans arranged privately between two parties where the lender is usually a bank or other financial intermediary. |
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Financial leverage |
Is the use of borrowed capital. |
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Interest |
Is the cost of borrowed capital |
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Liquidity |
The most important policy consideration of most businesses considering short-term financing is ________ |
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Solvency risk factor |
Another primary risk of short-term financing is default on payment of the principal and the interest called _________ |
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Solvency risk |
________ increase as the total volume of short term financing increases. |
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Profitability |
The third factor is _________,which os measured in terms of opportunity cost, and financial expenses such as service charges, interest charges and carrying charges. |
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Trade credit market Customer loan market Receivables sales market |
Major sources of funds |
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Trade credit market |
Is any place where raw materials or finished inventories may be purchased on credit. |
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Customer loan market |
Is any place where cash funds can be negotiated. |
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Receivables sales market |
Factoring companies buy outright from manufacturers that their open accounts receivables. |
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Pure discount loans Interest-only loans Amortized loans |
Basic type of loans |
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Pure discount loan |
Is the simplest form of loan. The debtor receives money today and repays a single lump sum at some other time in the future. |
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Interest-only loans |
Allows the debtor to pay interest in each period and to repay the principal at some point in time. |
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Amortized loans |
Requires the debtor to repay parts of the loan amount over time. The debtor pays the interest for each period plus fixed amount. |
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Working capital |
Is a portion of the firm's capital continuously converted into cash fund, from its inventories, to accounts receivables and to cash. |
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Inventory replenishment |
In order to have sufficient stocks to attain the sales goal, and to serve the customer's demand. |
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Provision for operating expenses |
For day-to-day transactions. This is intended for salaries and wages, interest payments, insurance premiums, taxes and licenses or advertising budget. |
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Back up for credit sales |
Working capital is a __________ where the firm needs to maintain its operations until receivables are converted into cash. |
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Safety margin |
For unexpected expenses, possible delays in cash flow, or decline in revenue. |
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Cash management |
Adheres to the principle that idle cash earns nothing and even if it is deposited in banks, it earns minimal interest. |
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Liquidity management |
Activities geared towards achieving liquidity objectives of the firm is called __________ |
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Financial planning |
Refers to the process of determining the best uses of financial resources of an organization to attain its predetermined objectives of the procurement of the required funds at the least cost. |
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Financial plan |
Is thus a statement of what is to be done in the future. |
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Cash plans |
Can be for a day, week, or month of operation. |
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Cash budget |
Shows estimated cash receipts and disbursements and the ending cash balance. |
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Cash flow |
Is the continual movement of money throughout the enterprise during any period of time. |
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Accounts receivables |
Are money owned to a business from the sale, on credit, of goods or services in the normal course of business. |
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Trade credit |
Refers to credit sales made to other businesses |
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Consumer credit |
Refers to a credit sales made to individuals |
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Open account |
Is an arrangement under which goods or services are sold to a customer on credit, but no formal debt or contract. |
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Delinquent accounts |
Are those where payments have not been made on due dates |
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Bad debts |
Are those accounts which have proven to be uncollectible and are written off. |
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Credit period |
Is the period between the date that a buyer is invoiced and the date when payment is due. |
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Discount period |
Is an expression of the price reduction a buyer will receive if payment is made within the discount period |
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Collection policy |
The company's effort to collect delinquent accounts either informally or by a debt collection agency is called ____________ |
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Break-even point |
Is the point where the difference between the sales income and the variable expenses equals fixed expenses for the period. |
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Variable expenses |
Are directly proportional to sales income |
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Fixed expenses |
Remain constant whatever the sales activity maybe |