Business Finance Flashcards
FINANCIAL MANAGEMENT
Management of the finances of a business/ organisation in order to achieve financial objectives.
KEY ELEMENTS OF FINANCIAL MANAGEMENT
Financial Planning.
Financial Control.
Financial Decision Making.
FINANCIAL ACCOUNTING
The process of recording financial information and reporting that information to external users.
ECONOMICS
A discipline involved with the production, distribution and consumption of good and services.
MANAGEMENT ACCOUNTING
Is the reporting of the reporting of financial information to internal users such as managers of the business.
TAXATION
Collection of funds by government or local authorities for the support of its mandatory activities to the nation.
AUDITING
Formal examination of an organisations financial situation where verification and vouching of amounts are done to give a true and fair view of what transpired in the business.
GOALS OF FINANCIAL MANAGEMENT
Profit Maximisation - short term goal
Maximising the Rate of Return- medium term goal
Maximising Shareholders Wealth-long term goal
FUNDAMENTAL PRINCIPLES OF FINANCIAL MANAGEMENT
The Cost Benefit Principle
Risk-Return Principle
Time Value of Money Principle
FINANCIAL ACCOUNTING IN RELATION TO FINANCIAL MANAGEMENT
To gather, analyse, record , report and interpret financial activities in a business by means of financial records in a historic perspective to help make the best financial decisions.
ECONOMICS IN RELATION TO FINANCIAL MANAGEMENT
Disciple involved in the production, distribution and consumption of goods and services linked to financial management in that rational decisions need to be made under constant changing economic conditions like inflation, interest rates and exchange rates.
DEF| PROFITABILITY RELATING TO SHORT TERM FINANCIAL MANAGEMENT GOALS.
Revenue must exceed expenses
DEF! LIQUIDITY RELATING TO SHORT TERM FINANCIAL MANAGEMENT GOALS.
Cash In-Flow Must Exceed Cash Out-Flow
DEF| SOLVENCY RELATING TO SHORT TERM FINANCIAL MANAGEMENT GOALS.
Assets must accede Liabilities
PROFIT MAXIMISATION
A short term goal of less then 12 months which ensures profitability, liquidity and solvency of the firm and can be achieved by increasing the firms turn over and decreasing operating and other expenses.
