2: Understanding financial objectives

Question 1

Cash-flow targets:

Answer 1

A financial objective focused on maintaining a healthy cash balance.

Question 2

Cost minimisation:

Answer 2

The process by which businesses attempt to maximise profits by keeping costs low.

Question 3

ROCE targets:

Answer 3

The minimum percentage return a business strives to achieve from the capital employed in business activities.

Question 4

Shareholders’ returns:

Answer 4

The financial rewards to a shareholder in return for their investment’ this can include dividends paid and increased share value.

Question 5

Satisficing:

Answer 5

Aiming to achieve a satisfactory level of profit.

Question 6

Executive director:

Answer 6

A member of the board of directors who also holds a position of responsibility in the business on a day-to-day basis, for example marketing director, finance director.

Question 7

Non-executive director:

Answer 7

A member of the board of directors who does not work for the business on a day-to-day basis but sits on the board in an advisory or consultative role.