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Finman3 Terms

The document outlines various financial planning concepts, including long-term strategic financial plans, cash budgets, and sales forecasts, emphasizing their importance for a firm's financial health. It discusses methods for depreciation, liquidity, and cash flow management, along with tools like pro forma statements and common-size statements for financial analysis. Additionally, it highlights the significance of accurate forecasting and planning in achieving a firm's financial objectives.

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ABMAYALADANO ,Ervin
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2 views

Finman3 Terms

The document outlines various financial planning concepts, including long-term strategic financial plans, cash budgets, and sales forecasts, emphasizing their importance for a firm's financial health. It discusses methods for depreciation, liquidity, and cash flow management, along with tools like pro forma statements and common-size statements for financial analysis. Additionally, it highlights the significance of accurate forecasting and planning in achieving a firm's financial objectives.

Uploaded by

ABMAYALADANO ,Ervin
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

FINMAN 3 FINALS

Study online at https://quizlet.com/_g8rokg


lay out a company's planned financial actions and the anticipated
impact of those actions over periods ranging from 2 to 10 years.
Five-year strategic plans, which are revised as significant new
LONG-TERM (STRATEGIC) FINANCIAL PLANS information becomes available, are common.
Generally, firms that are subject to high degrees of operating
uncertainty, relatively short production cycles, or both, tend to use
shorter planning horizons.
MODIFIED ACCELERATED COST RECOVERY SYSTEM A system used to determine the depreciation of assets for tax
(MACRS) purposes.
MODIFIED ACCELERATED COST RECOVERY SYSTEM All depreciation methods require you to know an asset's deprecia-
(MACRS) ble value and its depreciable life.
measured by its ability to satisfy its short-term obligations as they
LIQUIDITY
come due.
refers to the solvency of the firm's overall financial position—the
LIQUIDITY
ease with which it can pay its bills.
PRO FORMA STATEMENTS Projected, or forecast, income statements and balance sheets.
Two inputs are required for preparing _____________: (1)
PRO FORMA STATEMENTS financial statements for the preceding year and (2) the sales
forecast for the coming year.
A statement of the firm's planned inflows and outflows of cash that
CASH BUDGET/ CASH FORECAST
is used to estimate its short-term cash requirements
It is used by the firm to estimate its short-term cash requirements,
CASH BUDGET/ CASH FORECAST with particular attention being paid to planning for surplus cash
and for cash shortages.
designed to cover a 1-year period, divided into smaller time inter-
vals. The number and type of intervals depend
CASH BUDGET/ CASH FORECAST
on the nature of the business. The more seasonal and uncertain
a firm's cash flows, the greater the number of intervals.
Because many firms are confronted with a seasonal cash flow
pattern, the __________ is quite often presented on a monthly
CASH BUDGET
basis. Firms with stable patterns of cash flow may use quarterly
or annual time intervals.
The mathematical difference between the firm's cash receipts and
NET CASH FLOW
its cash disbursements in each period.
The sum of the firm's beginning cash and its net cash flow for the
ENDING CASH
period.
Amount of funds needed by the firm if the ending cash for the
REQUIRED TOTAL FINANCING period is less than the desired minimum cash balance; typically
represented by notes payable.
The (excess) amount available for investment by the firm if the
EXCESS CASH BALANCE period's ending cash is greater than the desired minimum cash
balance; assumed to be invested in marketable securities.
is the concept of recording revenues when earned and expenses
ACCRUAL BASIS
as incurred
CASH PLANNING involves preparation of the firm's cash budget.
PROFIT PLANNING involves preparation of pro forma statements.
is an important aspect of the firm's operations because it
FINANCIAL PLANNING provides road maps for guiding, coordinating, and controlling the
firm's actions to achieve its objectives.
The time period over which an asset is depreciated
can significantly affect the pattern of cash flows. The shorter the
DEPRECIABLE LIFE
______________, the more quickly the cash flow created by the
depreciation write-off will be received.

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FINMAN 3 FINALS
Study online at https://quizlet.com/_g8rokg
The prediction of the firm's sales over a given period, based on
SALES FORECAST external and/or internal data; used as the key input to the
short-term financial planning process.
This prediction of the firm's sales over a given period is ordinarily
SALES FORECAST
prepared by the marketing department.
On the basis of the _________________, the financial manager
SALES FORECAST estimates the monthly cash flows that will result from projected
sales and from outlays related to production, inventory, and sales.
The manager also determines the level of fixed assets required
SALES FORECAST and the amount of financing, if any, needed to support the forecast
level of sales and production.
or average age of accounts payable, the average amount of time
AVERAGE PAYMENT PERIOD
needed to pay accounts payable
also known as Horizontal Analysis
TREND ANALYSIS which requires several years of data and comparing them to each
other as a growth rate.
is a financial analysis technique used to evaluate a company's
HORIZONTAL ANALYSIS
performance over multiple periods.
include all of a firm's inflows of cash during a given financial period.
CASH RECEIPTS The most common components of _____________ are cash
sales, collections of accounts receivable, and other cash receipts.
COMMON-SIZE STATEMENT A popular tool for evaluating profitability in relation to sales
are especially useful in comparing performance across years.
Three frequently cited ratios of profitability that can be read
COMMON-SIZE STATEMENT directly from the common-size income statement are (1) the gross
profit margin, (2) the operating profit margin, and (3) the net profit
margin.
the systematic charging of a portion of the costs of fixed
DEPRECIATION
assets against annual revenues over time.

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