BUSCORE MIDTERM

63問 • 1年前

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Typically means the firms holding of current or short term assets such as cash, receivables, inventory, and marketable securities. these items are also referred to as circulating capital

Working Capital

Who devote a considerable amount of attention to the management of working capital

corporate executives

It is concerned with the problems that arise in attempting to manage the current assets the current liabilities and the interrelations that exist between them

working capital management

Assets which in the ordinary course of business can be or will be converted into cash within one year without undergoing a diminution in value and without disrupting the operations of the firm

current assets

Which are intended, at their inception, to be paid in the ordinary course of business, within a year, out of the current assets or the earnings of the concern

current liabilities

It refers to the firm's total investment in current assets

gross working capital (GWC)

Refers to the difference between current assets and current liabilities

net working capital (NWC)

Is the time duration required to convert sales, after the conversion of resources into inventories, into cash. it involves three phases

Operating Cycle

Holds cash to take advantage of unexpected opportunities

speculative motive

Hold cash in case of emergencies

precautionary motive

Hold cash to pay the day to day bills

transaction motives

Is defined as the state of being flowing or the ability to easily turn assets or investment into cash it is something that are (assets and securities) that can be easily converted into cash

liquidity

What are the two concepts of working capital

balance sheet concept operating cycle concept

What are the two balance sheet concept

excess of current assets over current liabilities gross or total current assets

what are the three operating cycle?

Acquisition of resources Manufacture of the product Sale of the Product

Deals with the demand for supply of short term funds which may either be secured or unsecured

Short term financing

What are the advantages of short term credits

*they are easier to obtain *short term financing is less costly *short term financing offers flexibility to the borrower

What are the disadvantages of short term credits

*short term credits mature more frequently *short term debt may at times be more costly than long term

Credit extended by suppliers to buyers for use in manufacturing processing or reselling goods for profit from firm to another firm it is usually unsecured

trade creditors

Constitutes a bulk of trade credit unsecured and permits payment for goods delivered in specified number of days

Open book credit

A time draft drawn by a seller to purchaser, payable to the seller as payee, and accepted by the purchaser as evidence that goods shipped are satisfactory and that the price is due and payable

trade acceptance

Institutions which individuals or firms may tap as a source of short term financing

Commerical banks

It is a loan with maturity periods of a year or less and is generally offered by commercial banks

Short term loan

does not require a collateral

unsecured loan or clean loan

Requires a collateral backup usually for accounts receivable financing or inventory financing

secured loans

Short term promissory note generally unsecured which is sold through commercial paper dealers or directly to investors

commerical paoer

Firms that buy commercial papers it also finance short term fund requirements of borrowing firms

commercial paper houses

Engage in making short and intermediate term installment loans to consumers, factor or finance business receivables and finance the sale of business and farm equipment

finance companies

Firms specializing in the purchase of retailers of the installment receivables arising out of retail sales of automobiles, household appliances, industrial equipment, farm equipment, and other durable goods sold on the installment payment plan

sales finance companies

Lend directly to a wide variety of businesses mainly of small and medium size

business or commercial finance companies

The debtors of the borrowing firm are not aware that their accounts have been pledged as collateral for a loan from a finance company

non-notification plan

Debtors are informed that their accounts have been pledged as collateral for a loan from a finance company

notification plan

Engage principally in personal loans it may include miscellaneous business loans and commercial accounts receivable loans

personal finance companies

Purchase of accounts receivables out right without records the seller for credit losses

factoring

Provide a stable source of short term funds -invest on short term commercial papers and promissory notes

insurance companies

It focuses on optimation investment in current asset -financing of current assets

Gross Working Capital (GWC)

It focus in liquidity position of the firm -judicious mix of short term and long term financing

Net Working Capital (NTC)

Also known as trade credit, commercial credit, Mercantile credit, or accounts receivable credit -usually unsecured

Trade creditors

Corporation which accept or create deposits subjects to withdrawal by check

commercial banks

Use to finance companies and business firms that borrow funds in the money market

Commercial Paper

Finance short term fund requirements of borrowing firms

Commercial Paper Houses (CPH)

Short term loans are granted by this type of finance companies against the security of assign accounts receivable, inventory, and equipment

business or financial finance companies

When shares of stock are sold to raise funds for the long-term financing requirements of the firm. The object of this is to increase equity capital.

stock financing

interest of the owners of a corporation

capital stock

maximum number of shares that a corporation is legally permitted to issue, as specified in its articles of incorporation

authorized stock

portion of the authorized stock issued and sold

Issued stock

A share of the after-tax profit of a company, distributed to its shareholders according to the number and class of shares held by them.

dividends

The percentage of net earnings not paid out as dividends, but retained by the company to be reinvested in its core business, or to pay debt

retained earnings

Class of stock issued by all corporations and which represents the real equity capital. It has a residual claim to earnings and assets and which carries the risk of business success or failure.

common stock

Class of stock which has a claim on assets before common stock, in the event that the firm is dissolved; and it also has a prior claim to dividends up to a specified amount or rate.

preferred stock

does not accumulate dividends. When dividends are not declared for a given year, the holders of non-cumulative preferred stocks may not claim them later.

non cumulative

accumulates dividends even if it is not paid for years. When dividends are declared, the accumulated dividends are paid first before common stockholders

cumulative

Some preferred stock holders have the right to subscribe while others do not have the same rights

Pre-emptive right

Is a debt instrument and have a priority over stockholders when payments are made by the company

Bonds

general credit bonds not secured by specific property

debentures

secured by a lien on specifically named property such as land, buildings, equipment and other fixed assets

mortgage bonds

those having prior claim to fixed assets pledged as security

senior lens

those having subsequent liens to fixed assets pledged as security

junior lens

these are bonds having attachments of a series of postdated certificates payable to the bearer for the interest over the life of the bond.

coupon bonds

A bond whose owner is registered with the bond's issuer. The owner's name and contact information is recorded and kept on file with the company, allowing it to pay the bond's coupon payment to the appropriate person.

registered bond

debt security in which only the face value of the bond is promised to be paid to the investor, with any coupon payments being paid only if the issuing company has enough earnings to pay for the coupon payment.

income bond

stipulates a fixed coupon rate but which also provide a method of receiving additional income over and above this minimum sum

participating bond

Are those which may be bought back by the issuing company at its option at a stated call price

callable preferred stock

Reed finals

Leah Jean Better · 28問 · 2年前

Reed finals