3.5

Question 1

Financial objectives

Answer 1

ROI
Profit margins
Cash flow
Gearing

Question 2

Capital expenditure

Answer 2

Acquiring assets
Upgrading assets
Undertaking new projects

Question 3

Capital structure

Answer 3

Refers to composition of companies resources and funds

Equity
Debt

Gearing used to identify

Question 4

Break even analysis

Answer 4

Break even output

Margin of safety = actual units produced - break even

Contribution per unit = selling price-VCPU

Total contribution= difference in sales and variable costs

Question 5

Debt factoring

Answer 5

Selling unpaid invoices to a business at a discount

Cons
At a discount, hurt long term cash flow

Question 6

Difficulties of improving cash flow and profit

Answer 6

May be financed through borrowing (NCL)
Reducing costs takes time in some cases
Excess stock not easily sold

Question 7

Cash flow objectives

Answer 7

Minimise receivable days
Maximise payable days
Buffer balance of cash
Reduce borrowing

Question 8

Venture capital

Answer 8

Private financing by a source and in return take a % of return