Bus 101- Ch. 10 questions with verified answers
*Firms need funds to support both their short-term operating needs and
long-term capital needs.
*A primary task of a CFO is to acquire a sufficient quantity of financial
capital and continually evaluate the relative attractiveness of the
financing alternatives available to the firm. Ans✓✓✓-Primary Sources
of Funds Include Debt and Equity
-the acquisition of a firm's assets is funded by either liabilities (i.e., debt)
payable to non-owners of the firm or by the equity of the firm's owners
*Timing of the inflows and outflows of funds is a key element to
receivables and payables management Ans✓✓✓
*Typically what constitutes "substantial deviations" are limits set by
someone within the company. For example, a company may only look
into financial deviations if the numbers deviate more than a set amount
or percentage. If the set percentage is 5 percent, then the financial
manager will only research further into a category that deviates more
than 5 percent. If it is less than that set amount, it is considered a normal
variation. Ans✓✓✓
Budgets Ans✓✓✓a roadmap to guide the activities of the firm
-reflects the financial manager's solutions to any predicted cash flow
shortfalls that were identified during the forecasting process.
, capital budgets Ans✓✓✓-aid in decisions related to the purchase of
long-term assets that usually involve high-dollar expenditures
-can be considered investments of financial capital in the long-term
profitability of the firm
-Financial managers can use capital budgeting techniques to analyze the
relative wisdom of the various options available to the firm
cash flow budget Ans✓✓✓-show cash flow surpluses and shortfalls
over shorter time periods such as one to three months into the future
based on the current planned operating and financing activities of the
firm
-correspond to the cash flow forecasts
-highlight periods where the financial manager may need to borrow
money (or transfer from other accounts) to cover shortfalls or when there
will be periods of surplus cash that could be invested elsewhere to
generate higher returns.
Cash flow forecast Ans✓✓✓a prediction of the amount of money that is
expected to be coming into the company and the amount of money that
the company expects to have to pay out
-impacted by elements such as proposed significant financial outlays,
sales forecasts and predictions of future changes in materials and other
costs of business.
*Firms need funds to support both their short-term operating needs and
long-term capital needs.
*A primary task of a CFO is to acquire a sufficient quantity of financial
capital and continually evaluate the relative attractiveness of the
financing alternatives available to the firm. Ans✓✓✓-Primary Sources
of Funds Include Debt and Equity
-the acquisition of a firm's assets is funded by either liabilities (i.e., debt)
payable to non-owners of the firm or by the equity of the firm's owners
*Timing of the inflows and outflows of funds is a key element to
receivables and payables management Ans✓✓✓
*Typically what constitutes "substantial deviations" are limits set by
someone within the company. For example, a company may only look
into financial deviations if the numbers deviate more than a set amount
or percentage. If the set percentage is 5 percent, then the financial
manager will only research further into a category that deviates more
than 5 percent. If it is less than that set amount, it is considered a normal
variation. Ans✓✓✓
Budgets Ans✓✓✓a roadmap to guide the activities of the firm
-reflects the financial manager's solutions to any predicted cash flow
shortfalls that were identified during the forecasting process.
, capital budgets Ans✓✓✓-aid in decisions related to the purchase of
long-term assets that usually involve high-dollar expenditures
-can be considered investments of financial capital in the long-term
profitability of the firm
-Financial managers can use capital budgeting techniques to analyze the
relative wisdom of the various options available to the firm
cash flow budget Ans✓✓✓-show cash flow surpluses and shortfalls
over shorter time periods such as one to three months into the future
based on the current planned operating and financing activities of the
firm
-correspond to the cash flow forecasts
-highlight periods where the financial manager may need to borrow
money (or transfer from other accounts) to cover shortfalls or when there
will be periods of surplus cash that could be invested elsewhere to
generate higher returns.
Cash flow forecast Ans✓✓✓a prediction of the amount of money that is
expected to be coming into the company and the amount of money that
the company expects to have to pay out
-impacted by elements such as proposed significant financial outlays,
sales forecasts and predictions of future changes in materials and other
costs of business.
