Concerned with individuals’ decision about how much of their earnings they spend, how much they save, and how they invest their savings.

involves the same types of decisions; how firms invest money in an attempt to earn profit; and how they decide whether to reinvest profits in the business or distribute them back to investors

concerned with the acquisition, financing, and management of assets with some overall goal in mind

Most important of the firm’s three major decisions when it comes to value creation. It begins with a determination of the total amount of assets needed to be held by the firm.

Concerned with the makeup of the right-hand side of the balance sheet; mechanics of getting a short-term loan, entering into a long-term lease arrangement, or negotiating a sale of bonds or stock must be understood.

The financial manager is charged with varying degrees of operating responsibility over existing assets.

Concerned with the design and delivery of advice and financial products to individuals, businesses, and governments. It involves a variety of interesting career opportunities within the areas of banking, personal financial planning, investments, real estate, and insurance.

Concerned with the duties of the financial manager working in a business. They administer the financial affairs of all types of businesses: private and public, large and small, profit seeking and not for profit.

A business owned by one person who operates it for his or her own profit.

Consists of two or more owners doing business together for profit.

An entity created by law, and has the legal power of an individual in that it can sue and be sued, make and be party to contracts, and acquire property in its own name.

Statement I: People in all areas of responsibility—accounting, information systems, management, marketing, operations, and so forth—need a general awareness of finance.

Statement II: Managers in the firm, regardless of their job descriptions, usually have to provide financial justification for the resources they need to do their job.

Statement I: The firm’s level of business risk does not strongly affects the type of financing that should be used.

Statement II: Equity financing is safer in that there is no contractual obligation to pay interest and principal, as there is with debt.

Statement I: Stakeholders are groups such as government regulators, competitors, and unrelated communities who have no direct economic link to the firm.

Statement II: Profits and cash flows are identical.

Stakeholders are groups such as employees, customers, suppliers, creditors, owners, and others who have a direct economic link to the firm.

Statement I: The simplest and best measure of stockholder wealth is the firm’s share price.

Statement II: Dividends that stockholders receive ultimately come from the firm’s profits.

Statement I: Corporations commonly measure profits in terms of gross revenue.

Statement II: Corporations commonly measure profits in terms of earnings per share.

Statement I: The greater the funds requirements, the greater the total financing that will be necessary.

Statement II: If there is a seasonal component to the business, this component lends itself to short-term financing.

Statement I: The higher the inventory turnover, the more efficient the inventory management of the firm and the “fresher,” more liquid, the inventory.

Statement II: Sometimes a low inventory turnover indicates a hand-to mouth existence. It therefore might actually be a symptom of maintaining too low a level of inventory and incurring frequent stock outs.

Prepares the firm’s financial plans and budgets. Other duties include financial forecasting, performing financial comparisons, and working closely with accounting.

Evaluates and recommends proposed long-term investments. May be involved in the financial aspects of implementing approved investments.

Arranges financing for approved long-term investments. Coordinates consultants, investment bankers, and legal counsel.

Maintains and controls the firm’s daily cash balances. Frequently manages the firm’s cash collection and disbursement activities and short-term investments and coordinates short-term borrowing and banking relationships.

An investment that provides a lower profit overall may be preferable to one that earns a lower profit in the short run.

Return and risk are the key determinants of share price, which represents the wealth of the owners in the firm.

The art of transforming data from financial statements into information that is useful for informed decision making.

Highly liquid, short term marketable securities that are readily convertible to known amounts of cash and generally have remaining maturities of three months or less at the time of acquisition.

To evaluate a firm’s financial condition and performance, the financial analyst needs to perform “checkups” on various aspects of a firm’s financial health.

Designed to relate the financial charges of a firm to its ability to service, or cover, them.

One of the most general and frequently used of these liquidity ratios

Also known as efficiency or turnover ratios, measure how effectively the firm is using its assets.

Serves as a supplement to the current ratio in analyzing liquidity.

Assess the extent to which the firm is using borrowed money

Highlights the relative importance of debt financing to the firm by showing the percentage of the firm’s assets that is supported by debt financing.

The length of time from the commitment of cash for purchases until the collection of receivables resulting from the sale of goods or services.

The length of time from the actual outlay of cash for purchases until the collection of receivables resulting from the sale of goods or services.

It is a measure of the efficiency of the firm’s operations, as well as an indication of how products are priced.

Measures the overall effectiveness of management in generating profits with its available assets.

This ratio tells us the earning power on shareholders’ book value investment, and is frequently used in comparing two or more firms in an industry.

An analysis of percentage financial statements where all balance sheet items are divided by total assets and all income statement items are divided by net sales or revenues.

An analysis of percentage financial statements where all balance sheet or income statement figures for a base year equal 100% and subsequent financial statement items are expressed as percentages of their values in the base year.

What is the current ratio for year-end 20X2?

Use 2 decimal places.

ACID TEST RATIO

What is the ratio for year-end 20X2?

Round off to 2 decimal places.

Debt-to-Equity Ratio

Round off to 2 decimal places.

Debt-to-Total-Assets Ratio

Round off to 2 decimal places.

Coverage Ratio

Round off to 2 decimal places.

Inventory Activity

Round off to 2 decimal places.

Earnings before interest and taxes / Interest expense

Net Profit After Taxes / Net Sales