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BUSINESS FINANCE
Midterm Reviewer

ABC Analysis - is an inventory management tool that identifies and groups items in terms of useful
they are for achieving business goals
Asset utilization ratios, Efficiency ratios and Asset turnover ratios indicate of how efficiently the firm
utilizes its assets
Average collection period - this ratio gives an indication of how many days of sales are uncollected
Budgeting - is the process of creating formal plan and translating goals into monetary amounts
Cash budget – refers to the amount of cash that is to be reported in the projected balance sheet
Cash management - is the practice of managing and spending cash. From a business perspective,
cash management is an integral part of a company’s financial stability
Cash management – refers to as the process of collecting and managing cash flows
Corporate Financial Planning - involves deciding what investments and activities would be most
appropriate under both the company’s individual and broader economic circumstances
Finance manager - He is the one responsible in making investment, financial, and dividend policy-
making decisions of a firm. He is responsible in maximizing the value of the utility owned by investors
Financial Management - is concerned with allocating, raising, and controlling of the funds of the firm
Financial Planning - deals with preparing budgets. It is the process of estimating the capital
requirements and determining their sources including their efficient utilization.
Float - is a major factor that affects cash inflow and cash outflow, also known as delay
In horizontal analysis, each item is expressed as a percentage of the base year figure
Income Statement – this includes sales, expenses and profits
Interest - refers to the cost of the loan or cost of borrowing money
Inventory budget – refers to the quantity of ending inventory that is expected to be held by end of
budget period
Inventory management - is the practice overseeing and controlling of the ordering, storage, and use of
components that a company uses in the production of the items it sells
Investing - is an efficient allocation of funds to specific assets
Leverage ratios - are used to measure a company’s ability to sustain operations indefinitely by
comparing debt levels with equity, assets, and earnings.
Loan agreement – it is an agreement between two parties whereby one party agrees to provide a loan
to the other party
Long term financial planning - is a strategy encompassing more than one year that involves the
planning for future operations
Materials requirements planning – this type of inventory method schedules material deliveries based
on sales forecasts
Maximize Profit - is one of the ultimate goals of the finance manager
Preparing the projected financial statement generally begins with projection of sales
Production budget – refers to the quantity of units to be produced or manufactured
Profit increase – the main aim of financial management
Projected financial statements – are representation of the financial picture of a firm through
summarized current trends and expectations as of a future date.
Purchases budget – refers to the quantity of raw materials to be purchased
Receivable management - is defined as the collection of steps and procedure required to properly
weigh the costs and benefits attached with the credit policies.
Receivable management - it matches the cost of increasing sales with the benefits arising out of
increased sales with the objective of maximizing the return on investment of the firm
Receivable turnover ratio - indicates the number of times the receivables have been rotated in a given
financial period
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Sales budget - refers to the sales target (amount and/or quantity) set by management. The main
computation made in this budget is: Sales Target set by management divided by sales price per unit
Short term financing – refers to loans mostly offered on terms of up to 12 months.
Solvency - both investors and creditors are usually most interested in assessing the company’s
Solvency and Profitability - are used to measure a company’s ability to sustain operations indefinitely
by comparing debt levels with equity, assets, and earnings

Three activities in the Statement of Cash Flow include:

1. Operating activities,
2. Investing activities,
3. Financing activities

The steps of the financial planning process are:

1. Make assumptions about sales, costs, etc.
2. Prepare projected financial statements
3. Calculate projected financial ratios,
4. Reexamine the plan and revise as needed