AFM 131 FINAL EXAM QUESTIONS AND ANSWERS WITH
COMPLETE SOLUTIONS GRADED A++
Finance
Acquiring/managing funds within the company
Financial management
managing resources to meet goals or objectives (bugdgeting, spending appropriately,
manage cash flow)
financial manager
examine financial data prepared by accountants and recommend strategies to improve
performance of the firm
3 steps of financial planning
Forecast short and long-term financial needs
Develop budget
Establish financial controls
Short-term forecast
Predicting revenues, costs and expenses for a period of one year or less (Ex: cash flow
forecast), more accurate
Long-term forecast
Predicting revenues, costs, and expenses for period longer than a year (ex: when
expecting to make large asset purchase)
Budget
,management's expectations for revenues and allocation of resources throughout
company based on expectations
based very heavily on financial statements
Operating (master budget)
Ties together company's other budgets
Capital budget
Plans for major asset purchases
Cash budget
projected cash outflows/inflows (plan for minimum cash balance (safety net)
Financial control
process in which a firm periodicaly compares actual revenues, costs and expenses with
its budget
Time value of money
have as much cash as possible on hand so you can invest ($1 today worht more than
1$ in a year)
Need for funds
Manage day-t-day activities of business
Control credit operations
Acquiring needed invntory
Making capital expenditures
short-term financing
borrowing funds needed for one year or less
long-term financing
, borrowing funds needed for more than one year
debt financing
borrowed funds that must be repaid
equity financing
funds raised from sale of ownership in the company or earnings from operations
retained in the company (stock, retained earnings)
Trade credit
buying goods/services now and paying later
secured loan
loan backed by collatoral
unsecured loan
no collator (only to companies with excellent credit ratings)
line of credit
unsecured funds a bank will lend to a business (always have access to it, don't need to
apply for loan)
Only if funds are available, need good relationship with bank
revolving line of credit
guaranteed line of credit but usually comes with a fee
credit worthiness (4 Cs)
Character (size, employees, image)
Capacity (ability to pay bills, structure of debt)
capital (if enough resources to repay creditors
conditions (external factors ie. market, industry growth)
COMPLETE SOLUTIONS GRADED A++
Finance
Acquiring/managing funds within the company
Financial management
managing resources to meet goals or objectives (bugdgeting, spending appropriately,
manage cash flow)
financial manager
examine financial data prepared by accountants and recommend strategies to improve
performance of the firm
3 steps of financial planning
Forecast short and long-term financial needs
Develop budget
Establish financial controls
Short-term forecast
Predicting revenues, costs and expenses for a period of one year or less (Ex: cash flow
forecast), more accurate
Long-term forecast
Predicting revenues, costs, and expenses for period longer than a year (ex: when
expecting to make large asset purchase)
Budget
,management's expectations for revenues and allocation of resources throughout
company based on expectations
based very heavily on financial statements
Operating (master budget)
Ties together company's other budgets
Capital budget
Plans for major asset purchases
Cash budget
projected cash outflows/inflows (plan for minimum cash balance (safety net)
Financial control
process in which a firm periodicaly compares actual revenues, costs and expenses with
its budget
Time value of money
have as much cash as possible on hand so you can invest ($1 today worht more than
1$ in a year)
Need for funds
Manage day-t-day activities of business
Control credit operations
Acquiring needed invntory
Making capital expenditures
short-term financing
borrowing funds needed for one year or less
long-term financing
, borrowing funds needed for more than one year
debt financing
borrowed funds that must be repaid
equity financing
funds raised from sale of ownership in the company or earnings from operations
retained in the company (stock, retained earnings)
Trade credit
buying goods/services now and paying later
secured loan
loan backed by collatoral
unsecured loan
no collator (only to companies with excellent credit ratings)
line of credit
unsecured funds a bank will lend to a business (always have access to it, don't need to
apply for loan)
Only if funds are available, need good relationship with bank
revolving line of credit
guaranteed line of credit but usually comes with a fee
credit worthiness (4 Cs)
Character (size, employees, image)
Capacity (ability to pay bills, structure of debt)
capital (if enough resources to repay creditors
conditions (external factors ie. market, industry growth)
