Financial Management
Chapter 20
Terms
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- Registered Bond
- a bond registered in the owner's name by the issuing company
- Equity Capital
- money received from the owners or from the sale of shares of ownership in a business
- Prime Interest Rate
- the lowest rate charged by a bank for a short-term loan
- Par Value
- an assigned (and often arbitrary) dollar value printed on a stock certificate
- Investment Banking Firm
- an organization that assists corporations in raising funds, usually by helping sell new issues of stocks, bonds, or other financial securities
- Lease
- an agreement by which the right to use real estate, equipment, or other assets is temporarily transferred from the owner to the user
- Unsecured Financing
- financing that is not backed by collateral
- Trustee
- an individual or an independent firm that acts as a bond owner's representative
- Cash Flow
- the movement of money into and out of an organization
- Commercial Paper
- a short-term promissory note issued by a large corporation
- Financial Plan
- a plan for obtaining and using the money needed to implement an organization's goals
- Budget
- a financial statement that projects income and/or expenditures over a specified future period
- Trade Credit
- a type of short-term financing extended by a seller who does not require immediate payment after delivery of merchandise
- Serial Bonds
- bonds of a single issue that mature on different dates
- Initial Public Offering (IPO)
- when a corporation sells common stock to the general public for the first time
- Mortgage Bond
- a corporate bond secured by various assets of the issuing firm
- Financial Management
- all the activities concerned with obtaining money and using it effectively
- Maturity Date
- the date on which a corporation is to repay borrowed money
- Promissory Note
- a written pledge by a borrower to pay a certain sum of money to a creditor at a specified future date
- Financial Leverage
- the use of borrowed funds to increase the return on owners' equity
- Sinking Fund
- a sum of money to which deposits are made each year for the purpose of redeeming a bond issue
- Term-Loan Agreement
- a promissory note that requires a borrower to repay a loan in monthly, quarterly, semiannual, or annual installments
- Bond Indenture
- a legal document that details all the conditions relating to a bond issue
- Long-Term Financing
- money that will be used for longer than one year
- Short-Term Financing
- money that will be used for one year or less
- Convertible Bond
- a bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common stock
- Retained Earnings
- the portion of a business's profits not distributed to stockholders
- Cash Budget
- a financial statement that projects cash receipts and expenditures over a specified period
- Corporate Bond
- a corporation's written pledge that it will repay a specified amount of money with interest
- Debt Capital
- borrowed money obtained through loans of various types
- Preferred Stock
- stock whose owners usually do not have voting rights but whose claims on dividends and assets are paid before those of common-stock owners
- Common Stock
- stock whose owners may vote on corporate matters but whose claims on profits and assets are subordinate to the claims of others
- Speculative Production
- the time lag between the actual production of goods and when the goods are sold
- Debenture Bond
- a bond backed only by the reputation of the issuing corporation
- Risk-Return Ratio
- a ratio based on the principle that a high-risk decision should generate higher financial returns for a business and more conservative decisions often generate lesser returns
- Convertible Preferred Stock
- preferred stock that the owner may exchange for a specified number of shares of common stock
- Revolving Credit Agreement
- a guaranteed line of credit
- Private Placement
- occurs when stock and other corporate securities are sold directly to insurance companies, pension funds, or large institutional investors
- Capital Budget
- a financial statement that estimates a firm's expenditures for major assets and its long-term financing needs
- Floor Planning
- method of financing in which title to merchandise is given to lenders in return for short-term financing
- Factor
- a firm that specializes in buying other firms' accounts receivable