1. Planning and Implementing

Question 1

FINANCIAL NEEDS

Answer 1

• business size
• current objectives
• stage of business cycle
• availability of finance
• skills of financial managers

Question 2

DEVELOP BUDGETS

Answer 2

forecast of plan of a business’ revenues and costs for a particular period.

assist in:
- strategic role
- monitoring and controlling
- measuring actual against 
   planned performance

forms:
- operating (day-to-day)
- project (specific job)
- financial (predicted financial 
   transactions)

Question 3

RECORD SYSTEMS

Answer 3

records the financial data of the business

can be:
- operational (day-to-day)
- longer-term (e.g. balance
sheet)

need to be:

1. RELIABLE
2. EFFICIENT
3. ACCESSIBLE

Question 4

FINANCIAL RISKS

Answer 4

main risk = not being able to meet financial obligations (liquidity/solvency)

all business decisions have risk:
- job of financial managers is to 
  make sure they are aware of 
  the risks 
- undertake actions to minimise 
  impact

Question 5

FINANCIAL CONTROLS

Answer 5

aimed at ensuring that a business will achieve its goals in the most efficient way

aim to:

• minimise losses
• maximise profits

examples:

• clear chain of command
• separation of duties
• protecting assets
• regulating cash

Question 6

What are the 5 elements of planning and implementing?

Answer 6

1. Financial Needs
2. Budgets
3. Record Systems
4. Financial Risks
5. Financial Controls

Question 7

Advantages of Debt Financing

Answer 7

• increased funds = increased sales and profit

- relatively simple to acquire

Question 8

Disadvantages of Debt Financing

Answer 8

• can be expensive
• repayments begin immediately and must be met
  regardless of cash flow

Question 9

Advantages of Equity Financing

Answer 9

• does not have to be paid back (more cash available)

- less risk for the business

Question 10

Disadvantages of Equity Financing

Answer 10

• exchange for ownership of the business

- proportion of profits go to new owners