1 The financial management function Flashcards
What is financial gearing made up of?
Debt and equity
What are the three types of financial management decisions?
Financial decision
Dividend decision
Investment decision
What is financing decision?
What sources should funds be raised?
What is dividend decision?
How should cash funds be allocated to shares holders? And how will the business be affected by this?
What is investment decision?
Both long term investment in non-current assets and short term investment in working capital
What is the assumed objective of financial management?
Maximise shareholder wealth
What is a stakeholder group?
One with a vested interest in the company
What are examples of internal stakeholders?
Company employees
Company managers and directors
What are examples of connected stakeholders?
Equity investors
Customers
Suppliers
Finance providers
What are examples of external stakeholders?
The government
The community at large
Pressure groups
Regulators
What is the agency theory?
Used to describe the relationship between the various interested parties in a firm
When do agency relationships occur?
When one party; the principal employs another party, the agent to perform a task on their behalf
What is meant by non executive directors?
Important presence on the board
Must give obligation to spend sufficient time
Should be independent
What are executive directors?
Separation of chairman and CEO
Submit for re-election
Clear disclosure of financial rewards
Outnumbered by the NEDs
Non executives sit on what committees?
Remuneration, audit and nomination and risk management
