SOM 122 FINANCE ACCURATE STUDY GUIDE
Finance - Answers - the function in a business that acquires funds for the firm and
manages those funds within the firm
financial management* - Answers - the job of managing a firm's resources so it can
meet its goals and objectives
financial managers - Answers - managers who examine financial data prepared by
accountants and recommend strategies for improving the financial performance of the
firm
3 reasons firms fail financially* - Answers - 1. undercapitalization
2. poor control over cash flow
3. inadequate expense control
financial planning - Answers - analyzing short-term and long-term money flow
short-term forcasting - Answers - predicits revenues, cost, and expenses for a period of
one year or less
cash-flow forecasting - Answers - predicts the cash inflows and outflows in future
periods, usually months or quarters
long-term forecast - Answers - predicts revenues, costs, and expenses for a period
longer than one year and sometimes as long as five or ten years
budget - Answers - set forth management's expectations for revenues and allocates the
use of specific resources throughout the firm
capital budget - Answers - highlights a firm's spending plans for major asset purchases
that often require large sums of money
cash budget - Answers - estimates cash inflows and outflows during a particular period
like a month or quarter
operating (master) budget - Answers - ties together all the firm's other budgets and
summarizes its proposed financial activities
financial control - Answers - a process in which a firm periodically compares its actual
revenues, costs, and expenses with its with budget
debt financing* - Answers - funds raised through various forms of borrowing that must
be repaid
Finance - Answers - the function in a business that acquires funds for the firm and
manages those funds within the firm
financial management* - Answers - the job of managing a firm's resources so it can
meet its goals and objectives
financial managers - Answers - managers who examine financial data prepared by
accountants and recommend strategies for improving the financial performance of the
firm
3 reasons firms fail financially* - Answers - 1. undercapitalization
2. poor control over cash flow
3. inadequate expense control
financial planning - Answers - analyzing short-term and long-term money flow
short-term forcasting - Answers - predicits revenues, cost, and expenses for a period of
one year or less
cash-flow forecasting - Answers - predicts the cash inflows and outflows in future
periods, usually months or quarters
long-term forecast - Answers - predicts revenues, costs, and expenses for a period
longer than one year and sometimes as long as five or ten years
budget - Answers - set forth management's expectations for revenues and allocates the
use of specific resources throughout the firm
capital budget - Answers - highlights a firm's spending plans for major asset purchases
that often require large sums of money
cash budget - Answers - estimates cash inflows and outflows during a particular period
like a month or quarter
operating (master) budget - Answers - ties together all the firm's other budgets and
summarizes its proposed financial activities
financial control - Answers - a process in which a firm periodically compares its actual
revenues, costs, and expenses with its with budget
debt financing* - Answers - funds raised through various forms of borrowing that must
be repaid
