5 - Financial Objectives Flashcards
What Are Financial Objectives?
Are the monetary targets a business wants to achieve within a set period of time.
What Are The 6 Financial Objectives?
~ Return on investment (ROI).
~ Capital structure (Gearing / Long term funding that is debt).
~ Revenue.
~ Costs.
~ Profit.
~ Cash flow.
What Is ROI?
Is a measure of a firms profitability and performance.
What Is The Formula For ROI?
Operating Profit / Capital Invested x 100
What Are ROI Targets Set As?
%.
What Does ROI Allow For Comparisons Between?
Alternative investment opportunities.
What Is Another Name For Gearing?
The proportion of long term funding that is debt.
What Is Long Term Funding?
Is the amount of capital that has been invested in a business and will stay in the business for over a year.
What Are The 2 Sources Long Term Funding Can Come From?
~ Equity.
~ Debt.
What Is Equity?
Capital invested from financial institutions.
What Is Debt?
Money borrowed from financial institutions.
What Is Capital Structure?
Relative ways in which the capital has been raised.
What Is A Compulsory Interest Bearing?
~ Regardless of profits, interest repayments have to be made to financial institutions.
~ This increases the degree of risk undertaken by the business especially if interest rates start to rise.
What Is The Formula For Gearing?
Debt / Total Long Term Funding x 100
What Are Revenue Objectives?
Targets set for the amount of money coming into a business from sales in a set period of time.
