BUS 101 EXAM #3 CH. 10-13 COMPLETE
ASSESSMENT AND VERIFIED CORRECT
ANSWERS
individuals prefer more certain financial earnings than less certain outcomes; riskier a decision, the
higher possible return - answer ✔✔-risk return trade-off
individuals prefer to have good things sooner & put off bad things until later - answer ✔✔-time value of
money
Financial managers recognize that "cash pays the bills, not profits." While a given transaction may
generate positive profits, the timing of cash inflows and outflows may be such that the bills need to be
paid before the sales revenue has been collected from customers. - answer ✔✔-cash flow not profits
value of an asset in an organization is its ability to generate positive cash flow over time. - answer ✔✔-
valuation of assets
spreading out investments to reduce risk - answer ✔✔-diversification
the responsibilities of financial management fall to this person - answer ✔✔-chief financial officer (CFO)
forecast, budget, control - answer ✔✔-3 step planning process
prediction of money coming in & out of company
short-term = within 12/mo
long-term = 1+ year - answer ✔✔-cash flow forecast
, focused on the expected revenue and expenses related to the firm's predicted sales forecasts. - answer
✔✔-operating budgets
aid in decisions related to the purchase of long-term assets that usually involve high $$ expenditures -
answer ✔✔-capital budgets
highlights periods where financial manager may need to borrow $$/invest surplus cash - answer ✔✔-
cash flow budgets
brings together all of the budgets to represent the overall plan; 'master financial plan' - answer ✔✔-
master budget
funds firms use to meet their day to day operational cash flow - answer ✔✔-working capital
$ owed to a firm - answer ✔✔-accounts receivable
$ firms need to pay others - answer ✔✔-accounts payable
seller allows purchaser to pay for product in future but take/use product or service immediately -
answer ✔✔-trade credit
guarantees that banks issue on behalf of the customer wherein if the buyer doesn't pay on time, the
bank will pay and then collect from the buyer. - answer ✔✔-letters of credit
initial amount borrowed, & some amount of interest - answer ✔✔-principal
asset/property borrower offers to a lender as security for a loan - answer ✔✔-collateral
backed by collateral - answer ✔✔-secured loans
ASSESSMENT AND VERIFIED CORRECT
ANSWERS
individuals prefer more certain financial earnings than less certain outcomes; riskier a decision, the
higher possible return - answer ✔✔-risk return trade-off
individuals prefer to have good things sooner & put off bad things until later - answer ✔✔-time value of
money
Financial managers recognize that "cash pays the bills, not profits." While a given transaction may
generate positive profits, the timing of cash inflows and outflows may be such that the bills need to be
paid before the sales revenue has been collected from customers. - answer ✔✔-cash flow not profits
value of an asset in an organization is its ability to generate positive cash flow over time. - answer ✔✔-
valuation of assets
spreading out investments to reduce risk - answer ✔✔-diversification
the responsibilities of financial management fall to this person - answer ✔✔-chief financial officer (CFO)
forecast, budget, control - answer ✔✔-3 step planning process
prediction of money coming in & out of company
short-term = within 12/mo
long-term = 1+ year - answer ✔✔-cash flow forecast
, focused on the expected revenue and expenses related to the firm's predicted sales forecasts. - answer
✔✔-operating budgets
aid in decisions related to the purchase of long-term assets that usually involve high $$ expenditures -
answer ✔✔-capital budgets
highlights periods where financial manager may need to borrow $$/invest surplus cash - answer ✔✔-
cash flow budgets
brings together all of the budgets to represent the overall plan; 'master financial plan' - answer ✔✔-
master budget
funds firms use to meet their day to day operational cash flow - answer ✔✔-working capital
$ owed to a firm - answer ✔✔-accounts receivable
$ firms need to pay others - answer ✔✔-accounts payable
seller allows purchaser to pay for product in future but take/use product or service immediately -
answer ✔✔-trade credit
guarantees that banks issue on behalf of the customer wherein if the buyer doesn't pay on time, the
bank will pay and then collect from the buyer. - answer ✔✔-letters of credit
initial amount borrowed, & some amount of interest - answer ✔✔-principal
asset/property borrower offers to a lender as security for a loan - answer ✔✔-collateral
backed by collateral - answer ✔✔-secured loans
