Chapter 19
Financial Management
By Boundless
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Finance involves the evaluation, disclosure, and management of economic activity and is crucial to the successful operation of firms and markets.
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Financial managers ensure the financial health of an organization through investment activities and long-term financing strategies.
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Operating cash flow refers to the daily cash inflows and outflows generated from business revenues earned, excluding certain costs.
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Capital costs are incurred for the purchase of land, buildings, construction of assets, and equipment, etc., used during business operations.
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Funds typically originate from company sales and earning revenue; other cash sources include the sale of non-current assets and company stock.
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Business operations can require the use of credit, or the transfer of money or property on promise of repayment, to meet operating needs.
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Inventory management is primarily about specifying the quantity and placement of stocked goods.
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Commercial paper is a money-market security issued (sold) by large corporations to get money to meet short term debt obligations.
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Factoring makes it possible for a business to readily convert a substantial portion of its accounts receivable into cash.
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Credit cards allow users to pay for goods and services based on the promise to pay for them later and the immediate provision of cash by the card provider.
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A commercial bank lends money, accepts time deposits, and provides transactional, savings, and money market accounts.
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Trade credit is the largest use of capital for a majority of B2B sellers; Accounts Payable is money owed by a firm to its suppliers.
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Asking friends and families to invest is one way that start-ups are funded.
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A secured loan is a loan in which the borrower pledges an asset (e.g. a car or property) as collateral, while an unsecured loan is not secured by an asset.
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Short-term loans offer individuals and businesses borrowing options to meet financial obligations.
Financial leverage is a technique used to multiply gains and losses by obtaining funds through debt instead of equity.
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Debt is a way for firms to access capital for operations or investment with various terms and agreements for future repayment .
Companies can use equity financing to raise money and/or increase shareholder liquidity (through an IPO).
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Three common examples of long term loans are government debt, mortgages, and debentures (bonds).
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A corporate bond is issued by a corporation seeking to raise money in order to expand its business.