6.02 Foundations of Finance

Finance is the business function that involves managing

• Information
• Money
• Marketing
• Production

The goals of the finance function are to ensure profitability and to

• Advertise products
• Manufacture raw materials
• Give out information
• Reduce risks

Accounting is distinct from finance because its main focus is on

• Recordkeeping activities
• Money management decisions
• Administration of assets
• Acquisition of funds

The administration of assets refers to decisions about

• Accounting
• Spending
• Investments
• Financing

Decisions about financing refer to the

• Accounts receivable
• Acquisition of funds
• Administration of assets
• Accounting department

The finance function ensures that the company’s financial goals are

• Acceptable to the marketing department
• Related to product development
• In line with organizational priorities
• Easy to accomplish

How does the finance function relate to company spending?

• It plans and controls spending
• It produces reports about spending
• It spends on investments only
• It does not relate to spending

Money the business owes is known as

• Equity
• Assets
• Accounts payable
• Accounts receivable

Money owed to the business is known as

• Equity
• Assets
• Accounts payable
• Accounts receivable

To keep communication flowing with other departments, the finance function depends on

• Accounts receivable
• Information systems
• Marketing
• Production