Unit 27 – 30

1. What are some factors resulting in a country’s efficient production ?

2. What are some benefits of exports to an exportin country and how does the
government do to encourage exports ?

3. How does the government restrict imports?/ what are some forms of protectionism ?

4. How can a trading nation benefit from international business ?

5. What is dumping ? Specific tax? Ad valorem tax ? Exchange rate ? Multinational

companies ? Subsidiary ? Balance of payments ? Balance of trade ? Trade deficit ? Trade
surplus ? Capital account ?

6. What are trade barriers ? Protectionism ? Embargo ? Subsidy ? Quota ?

7. What does theory of absolute advantage by Adam Smith indicate ?

8. What are some reasons for imposing trade barriers ?

1. what are main functions of corporate finance ?

=> main functions of corporate finance are make wise use of the financial resources
available to the company and manage the finance of the company.

2. what is corporate finance ?

=> corporate finance is a broad term that is used to collectively identify the various
financial dealings undertaken by a corporation.

3. what are the tasks of the finance managers in monitoring the finance?

=> the finance manager monitors the finance of the company have to minimize the cost
of the finance, the wastage and misuse of finance and the risk of investment of finance,
and get maximum the return on the finance

4. what is fixed capital ? working capital ?

=> fixed capital is used to purchase fixed assets like land, building, machinery, etc...
working capital is used to purchase raw materials and pay the day-to-day expense like
salaries, rent, taxes, electricity bill, etc...

5. what are some sources of capital ?

=> some sources of capital are owner’s capital, venture capital, listed security market,
unlisted security market, long-term loans.

6. what is gearing ?

=> gearing is the relationship between equity capital invested in the business and long-
term debt. The higher gearing, the more exposed the company is in times of economic
difficulty.

7. what are advantages and disadvantages of long-term debt ?

=> ad: if the company makes profit, high gearing will give owners much better return as
net profit will be much higher percentage of equity after interest payments for longterm
debt

dis: in the harder time, owner’s earning will be drop after interest payments for longterm
debt.

8. what are ad and disad of owner’s capital ?

=> ad: if the company makes a profit, the owner will get all the net profit

disad: if the company makes a loss, the owner can get profit only after satisfying other
calls on return such as employees, creditors

9. what are ad and disad of venture capital ?

=> ad: venture company provides capital, sometimes technology or advisory services for
the company. It doesn’t interfere in the running of the business. disad: venture company
often requires higher and faster rate of return on their investment than an owner expect
from their own capital.

10. ad and disad of listed securities market

=> ad: it is the long term way of raising capital

Disad: it is for the large company. At least 25% of the share is in the public’s hand, it
reduces original control of owner.

11. how can a company raise capital?

=> a company can raise capital in 2 ways: debt financing (eg, issuing new bonds – note
that only the large company do this, trade credit, bank loan or bank overdraft) and equity
financing (eg, issuing new shares, reinvested earnings, sale of assets)

12. how is working capital classified ?

working capital can initially be classified into 2 types: permanent working capital is tied
up in keeping the bussiness flowing throughout the year, temporary working capital is
needed from time to time to take account of seasonal, cyclical or unexpected fluctuations.
working capital is also divided in to 3 types: inventories, debtors, cash. inventories can be
divided into: inventories of raw materials, woking in progress, finished goods.

13. what are the tasks of financial management in managing inventories?

=> manager has to minimize the cost of inventories (stocks of raw materials, level of
work in progress, the number of the finished goods). Management shouldn’t be over-
stringent because it can cause disruption in production, failure to meet customer order,
loss of customer goodwill, loss of sales.

14. what are the tasks of financial management in managing debtors ?

=> manager has to achive a balance between credit term with suppliers and customers
(negotiate generous credit with suppliers but minimal credit with customers), keep
positive relationship with both suppliers and customers, minimize cash outlay.

15. what are the tasks of financial management in managing cash ?

=> manager has to ensure that there is always adequate cash available for meeting the
day-to-day debts and small reserve to meet contingencies.

16. what is overdraft ?

=> overdraft is a draft or withdrawal of money in excess of the credit balance on a bank
or building-society cheque account

17. lean manufacturing ?

=> lean manufacturing is doing things as quickly and cheaply as possible, without waste.

18. what are differences between selling and marketing concept ?

=> the selling concept is that producers make goods and services and then persuade
customers to buy by vigorous hard-selling techniques, products are sold rather than
bought. The marketing concept is that producers make goods that customers want, the
key factor to know customer’s want is market research.

19. what are 4ps in mkt mix and their aspects ?

=> 4ps are product, price, place, promotion. Product includes variety, quality, design,
feature, brand name, packaging, services. Price includes list price, discount, allowances,
payment period, credit terms. Place includes distribution channels, location, coverage,
logistic, assortments, inventory, transportation. Promotion includes advertising, sales
promotion, public relations, direct marketing, personal selling
20. how does a company do to handle pricing well ?

=> companies avoid some mistakes: pricing is too cost oriented, price is not revised often
enough to capitalize on market changes, price is set independently of other factors in the
marketing mix, price is not varied enough for different product items and market
segments.

21. how is the price set in different types of company ?

=> in small companies, price is decided by top management. In large companies, price is
decided by divisional or product-line manager, top management set objective and policies
and approves proposed price by lower level of management. In industries where pricing
is a key factor, pricing department decides price or help other departments determine
price.

22. what is financial accouting information ?

=> financial accounting information is the means by which people measure and
communicate economic events. It is general purpose accounting information because it is
used for so many dif purposes.

23. what are 3 common forms of financial statements and what do they show ?

=> 3 common forms of financial statements are: income statement, the balance sheet, the
cash flow statement. The income statement shows earning and expenditure of the
business over a period of time. The balance sheet shows a company’s financial situation
on a particular date, generally the last day of financial year. The cash flow statement
shows the flow of cash in and out of the business in a period of time.

24. what is a ledger ? journal ?

=> the ledger is a book containing all accounts of a company, an account contains
information about a group of similar transaction. The journal is a book that bookkeeppers
records business transactions (sales, uses of raw materials, purchase) by date.
25. what is depreciation, amortization ?

=> depreciation is the loss in value of tangible asset

Amortization is the loss in value of intangible asset

26. what is royalty ?

=> royalty is payment to the holder of a patent or copyright or resources for the right to
use their property

27. what is financial analys and how is it important ?

=> financial analys is the selection, evaluation and interpretation of financial data, along
with pertinent information to assist in investment and financial decision-making.
Important for internal people: evaluate employee’s performance, efficiency of company
operations, credit policies. Important for external people: evaluate potential investments,
credit-worthiness of borrowers.

28. what are sources of information in FA?

=> sources of information in fa: annual reports and disclosures required (financial
statements such as balance sheet, income statement and footnotes to these statements and
disclosures required by securities law to add information), market data (information of
the market such as the price of stock on the stock market, it can be updated daily and
found in financial press, electronic media), economic data (information of the economy
such as gdp, cpi, it can be got from government or private source), company’s events (all
events happen in the company such as bankruptcy, product launching).

auditing is an accounting functionn that involves the review and evaluation of financial
records.
29. what is internal audit ? the job of internal auditor ?

=> internal audit is the examination, mornitoring and analys the activities related to a
company’s operations including its business structure, employee behavior, information
system.

The job of internal auditor: check against errors and reduce misappropriations,
continously review the operating procedures and financial records, check accouting
records in terms of the completeness and accuracy to make sure all irregularities are
corrected, report on manegement on the current state of the company’s fiscal affairs,
make suggestion to management for improvements in the standard operating procedures.

30.