3.5.1- Setting financial objectives

Question 1

What are financial goals?

Answer 1

Financial goals that a business wants to achieve, usually with a time period

Question 2

What are the revenue objectives?

Answer 2

To increase the value or volume of sales

Question 3

What are the cost objectives?

Answer 3

Usually set to minimise costs, but doesnt reduce the quality or raise ethical questions.

Question 4

What are profit objectives?

Answer 4

Set a target figure for profit or to increase it from previous years

Question 5

What is difference between profit and cash flow?

Answer 5

Cash flow is the money flowing in and out of the business over a period of time, whereas profit includes all transactions that will lead to cash in or out now or in the future.

Question 6

What are the cash flow objectives?

Answer 6

• Minimise time taken by customers to pay their credits
• Reduce bank borrowings to a target level
• Extend time taken to pay suppliers
• Minimise amount paid out in interest charges
• Reduce seasonal swings in cash flow

Question 7

What internal factors influence financial objectives?

Answer 7

• The overall objectives of the business
• The status of the business
• Other function departments of the business

Question 8

What external factors influence financial objectives?

Answer 8

• The availability of finance
• Competitors
• The economy
• Shareholders
• Environmental/Ethical influence

Question 9

What are the different measures of profit?

Answer 9

• Gross profit
• Operating profit
• Profit for the year