Business - Chapter 16

Responsible for planning and overseeing the financial resources of a firm

The business function involving decisions about firm's long-term investments and obtaining the funds to pay for those investments

Managing the pattern in which cash flows into the firm in the form of revenue and out of the firm in the form of debt payments.

The process of checking actual performance against plans to ensure that the desired financial status is achieved.

A description of how a business will reach some financial position it seeks for the future.

• Account Payable
• Account Receivable
• Inventoreries

• Raw material Inventory
• Work in Process
• Finished goods inventory

Rules governing a firm's extension of credit to customer

Materials and goods currently held by the company that will be sold within a year.

• Trade Credit
• Secured Short-Term Loan
• Unsecured Short-Term Loan

The granting of credit by a selling firm to a buying firm

Form of trade credit in which sellers ship merchandise on faith that payment will be forthcoming.

Form of trade credit in which buyers sign promise to pay agreements before merchandise is shipped.

Form of trade credit in which buyers must sign statements of payment terms attached to merchandise by sellers.

A short-term loan in which the borrower is required to put up collateral.

Short-term loan in which

The short-term loan in which the borrower is not required to put up collateral.

A method od short-run fund-raising in which a firm sells unsecured notes for less than the face value and then repurchases them at the face value within 270 days.

A standing agreement between a bank and a firm.

Raising $ to meet long-term expeditures by borrowing from the outside of the company.

A promise by the issuing company to pay the holder a certain amount of money on a specified date

Raising $ to meet long-term expenditures by issuing common shares or by retaining earning.

• Required fixed payments as do bonds
• unlike bonds they dont have a maturity date
• shareholders receive a dividend if the firm can afford it.
• preferred shareholders get paid first

No voting rights

External equity funding provided in return for part ownership in the borrowing firm.

• Identify Risks
• Measure impact on firm
• Evaluate Alternatives
• Implement Program
• Monitor Results

uncertaintly about future events

The chance for gain or loss

only chance of loss (fire in the warehouse)

Refusing to participate in risky ventures

Techniques to prevent losses or minimize their impact

covering a firm's unavoidable losses with its own funds

transferring risk to another firm, individual , often by contract.

Relative mix of a firm's dept and equity financing

Shwos the amount of risk and the likely rate of return on various financial instruments