D076- Finance Skills for Manager
finance - ANSWER: forward-looking
management and allocation of capital with the objective of investing, forecasting,
budgeting, lending, saving, and borrowing
accounting - ANSWER: backward-looking
recording, reporting, and summarizing past financial information and systems
managing working capital - ANSWER: day to day cash management
money market - ANSWER: a type of financial market used for short-term assets that are
held for less than one year
secondary market - ANSWER: the financial market where securities are traded after the
initial issuance
efficient market - ANSWER: a market in which prices fully reflect all the available
information about a specific security
primary market - ANSWER: the market in which new securities are originally sold to
investors
coincident indicator - ANSWER: change at the same time as a change in the economy
leading indicator - ANSWER: change before the economy changes
lagging indicator - ANSWER: change after the economy changes and include
unemployment and CPI
mutual fund - ANSWER: fund that pools the savings of many individuals and invests this
money in a variety of stocks, bonds, and other financial assets
compounding interest - ANSWER: the interest on the principal plus the interest on
earned interest
hurdle rate - ANSWER: required rate of return... the minimum rate that a firm must
surpass to accept a project
standard deviation - ANSWER: a measure of dispersion of possible outcomes about the
mean
, risk transfer - ANSWER: a risk management technique that involves reducing the
amount of risk you are exposed to by transferring that risk to another entity
risk avoidance - ANSWER: a way to manage risk by not performing an activity that may
carry risk
risk separation - ANSWER: risk management technique that involves dispersing assets
geographically instead of concentrating them in one location
risk diversification - ANSWER: The process by which risks are shared across many
different assets or people, reducing the impact of any particular risk or any one
individual
risk retention - ANSWER: a decision to take responsibility for a particular risk
liquidity ratio - ANSWER: a category of ratios that measure a firm's ability to meet short-
term obligations
profitability ratio - ANSWER: a category of ratios that are commonly used to directly
judge how well management is doing as they strive to maximize owner wealth
efficiency ratio - ANSWER: Ratio of the net area to the the gross area. (Aka net-to-gross
ratio)
market ratio - ANSWER: used to evaluate the current share price of a public firm's stock
benchmarking - ANSWER: the process of analyzing financial fata with ratios to compare
a firm's performance to competitors
return of equity - ANSWER: a profitability ratio found by net income/owners equity.
ROE=net income/owners' equity
AR Turnover - ANSWER: an activity ratio found by credit sales divided by accounts
recievable
AR collection period - ANSWER: acp=365/ar turnover (ar turnover=credit
sales/accounts recievable)
leverage - ANSWER: another name for debt or liability
cross-sectional analysis - ANSWER: the way that ratios are used to compare a
company's financial activities to competitors and to the industry
liquidity - ANSWER: the ability to turn financial securities into cash easily without losing
significant value
finance - ANSWER: forward-looking
management and allocation of capital with the objective of investing, forecasting,
budgeting, lending, saving, and borrowing
accounting - ANSWER: backward-looking
recording, reporting, and summarizing past financial information and systems
managing working capital - ANSWER: day to day cash management
money market - ANSWER: a type of financial market used for short-term assets that are
held for less than one year
secondary market - ANSWER: the financial market where securities are traded after the
initial issuance
efficient market - ANSWER: a market in which prices fully reflect all the available
information about a specific security
primary market - ANSWER: the market in which new securities are originally sold to
investors
coincident indicator - ANSWER: change at the same time as a change in the economy
leading indicator - ANSWER: change before the economy changes
lagging indicator - ANSWER: change after the economy changes and include
unemployment and CPI
mutual fund - ANSWER: fund that pools the savings of many individuals and invests this
money in a variety of stocks, bonds, and other financial assets
compounding interest - ANSWER: the interest on the principal plus the interest on
earned interest
hurdle rate - ANSWER: required rate of return... the minimum rate that a firm must
surpass to accept a project
standard deviation - ANSWER: a measure of dispersion of possible outcomes about the
mean
, risk transfer - ANSWER: a risk management technique that involves reducing the
amount of risk you are exposed to by transferring that risk to another entity
risk avoidance - ANSWER: a way to manage risk by not performing an activity that may
carry risk
risk separation - ANSWER: risk management technique that involves dispersing assets
geographically instead of concentrating them in one location
risk diversification - ANSWER: The process by which risks are shared across many
different assets or people, reducing the impact of any particular risk or any one
individual
risk retention - ANSWER: a decision to take responsibility for a particular risk
liquidity ratio - ANSWER: a category of ratios that measure a firm's ability to meet short-
term obligations
profitability ratio - ANSWER: a category of ratios that are commonly used to directly
judge how well management is doing as they strive to maximize owner wealth
efficiency ratio - ANSWER: Ratio of the net area to the the gross area. (Aka net-to-gross
ratio)
market ratio - ANSWER: used to evaluate the current share price of a public firm's stock
benchmarking - ANSWER: the process of analyzing financial fata with ratios to compare
a firm's performance to competitors
return of equity - ANSWER: a profitability ratio found by net income/owners equity.
ROE=net income/owners' equity
AR Turnover - ANSWER: an activity ratio found by credit sales divided by accounts
recievable
AR collection period - ANSWER: acp=365/ar turnover (ar turnover=credit
sales/accounts recievable)
leverage - ANSWER: another name for debt or liability
cross-sectional analysis - ANSWER: the way that ratios are used to compare a
company's financial activities to competitors and to the industry
liquidity - ANSWER: the ability to turn financial securities into cash easily without losing
significant value
