Please enable JavaScript.
Coggle requires JavaScript to display documents.
Financial Management and Securities Markets (Managing Fixed Assets (Long…
Financial Management and Securities Markets
Current assets
include cash, investments, accounts receivable, and inventory.
Managing Current Assets
Transaction balances
are cash kept on hand by a business to pay normal daily business expenses.
The eurodollar market
is a market for trading U.S. dollars in foreign countries.
The
goal
of financial managers who manage current assets is to maximize the returns on those assets.
Current liabilities
are short-term debt obligations—accounts payable, wages payable, taxes payable, and notes (loans) payable.
Managing Current Liabilities
A line of credit
is an arrangement by which a bank agrees to lend a specified amount of money to the organization upon request—provided that the bank has the required funds to make the loan.
Secured loans
are backed by collateral that the bank can claim if the borrower does not repay the loan.
Unsecured loans
are backed only by the borrower’s good reputation and previous credit rating.
Trade credit
, the most widely used and important source of short-term financing, is credit extended by suppliers for the purchase of their goods and services.
Managing Fixed Assets
Long-term (fixed) assets
are those assets expected to last for many years, such as plants and equipment.
Capital budgeting
is the process of analyzing the needs of business and selecting the assets that will maximize its value.
Financing with Long-term Liabilities
Long-term liabilities
are debts that will be repaid over a number of years, such as long-term loans and bond issues.
A
bond
is a debt instrument that a company sells to raise long-term funds.
Types of Bonds
Unsecured bonds
Secured bonds
Serial bonds
Floating-rate bonds
Junk bond
Investment banking
is the sale of stocks and bonds for corporations.
Secondary markets
are stock exchanges where investors trade their securities with
other investors rather than the company that issued the stock or bonds.
Securities markets provide:
The
mechanism
for buying and selling securities.
Liquidity
—the ability to turn securities into cash.
Secondary markets
permit the trading of previously issued securities.