3.5.1 - Financial Management Flashcards
What are financial objectives?
A specific goal or target relating to the financial performance, resources and structure of a business.
What are the key benefits of setting financial objectives?
- Provide target to help make investment decisions
- Reduced risk of business failure (cash flow objectives)
- A measure of success or failure for the business (allows performance to be judged).
What is profit?
The extent to which revenues, generated from selling a product, over a time period exceed the costs incurred in producing it.
What is cash flow?
The movement of cash into and out of a business over a period of time.
What is net cash flow?
The difference between the cash inflows and outflows during a specific time period.
What is gross profit?
The income received from sales revenue minus the cost of goods sold.
What is operating profit?
The financial surplus arising from a business’s normal trading activities, before taxes.
What is a profit of the year?
A measure of a business’s profits that factors in a range of expenditures and incomes including tax.
How do you calculate gross profit?
How do you calculate a gross profit margin?
What could a change in the gross margin indicate? (e.g rise or fall)
- A fall may indicate: higher costs from suppliers, prices of products lowered.
- An increase may indicate: lower costs from suppliers, selling price rises.
How do you calculate operating profit?
How do you calculate an operating profit margin?
