3.5.1 - Setting Financial Objectives Flashcards
Define objectives
An objective is specific, and measurement must meet time, budget and quality constraints
Define Cash flow
The total amount of money being transferred into and out of a business
Define Gross Profit
The profit a company makes after deducting the costs associated with making and selling its products or the costs associated with providing its services.
Define Non Current ASSIST.
Are a company’s long-term investments for which the full value will not be realised within the accounting year. Egg Property, patents and equipment
Define Key performance indicators.
A quantifiable measure used to evaluate the success of an organisation, employee etc. in meeting objectives for performance.
Define a financial objective.
An objective set by a company in which the target state is measured in monetary terms such as a certain amount of profits or a certain percentage increase in profits over a period.
Define income statement
Companies core financial statements that shows their profit and loss over a period
Define Direct Costs
A direct cost is a price that can be directly tied to the production of specific goods or services
Define profit for the year.
The revenue that remains after expenses for the whole annual year
Define capital expenditure
Money spent by a business or organisation on acquiring or maintaining fixed assets such as land buildings and equipment
Define Profit
The revenue that remains after expenses
Define revenue
Income, especially when an organization and of a substantial nature
Define indirect costs
Costs that are derived from overhead charges
Define investment
The action or process of investing money for profit
Define capital structure
The distribution of debt and equity that makes up the finances of a company
Define Mission statements
A statement that explains the purpose of an organisation
Define Aims
The Long-term overall goal of an organisation
Define Objectives
The short-term steps set to help an organisation reach its long-term goals
What are some benefits of using financial objectives?
- Focus for the entire business
- Reduce risk
What are some difficulties in using financial objectives?
Can be difficult to set it realistically and there are external changes.
Name main types of financial objectives
- Revenue objectives
- Cost objectives
- Profit Objectives
Who also has an interest in financial objectives
Stakeholders
What is ROI
ROI is return on investment.
What is the formula for ROI.
(Return on Investment /
Cost of the investment) x 100
Formula for profit?
Revenue - total costs
What is a cash flow forecast?
A prediction of how much cash a business is expecting to be paid.
What is a cash flow statement?
Shows what comes in and out a business in the past.
What is gross profit formula?
Revenue - direct costs
What is operating profit formula?
Gross profit - indirect costs.
What is profit for the year?
It is what is left after interest and tax.
Name the two types of capital
Share capital and loan capital
What are the external factors of financial objectives?
PESTLE
What are the internal factors of financial objectives?
A strong brand reputation and HR
