CH8: Financial Management Flashcards
What is the core function of financial management according to Strutner (2020)?
Formulating a business plan and ensuring all departments stay on track. It enables the CFO or VP of finance to support long-term vision creation, investment decisions, and funding insights.
What key functionalities are combined in a financial management system?
Accounting, fixed-asset management, revenue recognition, and payment processing.
Name the four major areas encompassed by financial management.
Planning, Budgeting, Managing and Assessing Risk, and Procedures.
What are the responsibilities of the financial manager during the planning phase?
Projecting the financial needs to maintain cash flow, allocate funds for growth, and prepare for unexpected events.
What are the two types of budgeting documents typically used in financial management?
Master budgets and sub-documents for cash flow and operations; these may be static or flexible.
List the types of risks that financial managers assess.
Market risk, credit risk, liquidity risk, operational risk.
What does operational risk include?
Cyber-attacks, disaster recovery, business continuity plans, and crisis management due to misconduct or fraud.
What are financial procedures, and why are they important?
They define how financial data is processed, distributed, and who is authorized to make and sign off on financial decisions, ensuring security and accuracy.
What are the three broader types of financial management?
Capital budgeting, capital structure, and working capital management.
What does capital budgeting focus on?
Determining financial needs to achieve company goals and deciding where to allocate capital for growth.
Define capital structure in financial management.
It involves choosing how to fund operations or growth through debt, equity, or asset sales.
What is working capital management?
Ensuring there is sufficient cash flow for daily operations such as payroll and purchasing materials.
List general responsibilities of financial managers according to Oertogo.com (2019).
Adapting to industry-specific tasks, understanding relevant tax laws, and mastering budgeting and appropriation processes.
What does a Controller do?
Prepares financial reports, forecasts, special reports, and oversees accounting, audit, and budgeting departments.
What are the duties of Treasurers and Finance Officers?
Direct budgets, oversee fund investments, raise capital, and develop financial plans for mergers and acquisitions.
What is the role of a Credit Manager?
Set credit-rating criteria, determine credit ceilings, and manage collections of overdue accounts.
Explain the role of a Cash Manager.
Monitor cash inflows and outflows to meet business needs and determine if the company needs loans or has excess funds to invest.
What does a Risk Manager do?
Uses strategies like hedging to minimize financial loss or uncertainty due to factors such as price changes.
Describe the responsibilities of Insurance Managers.
Limit company losses through insurance policies for risks like workplace injuries or lawsuits.
How has the COVID-19 pandemic influenced financial management?
It introduced complexities like remote workforce management and expanded compliance and security requirements.
List the benefits of digital transformation in financial management.
Improved customer experience, data-based insights, cross-department collaboration, agility, innovation, and process consolidation.
Why is IT crucial in financial management today?
It improves speed, efficiency, and accuracy, reduces errors, and allows for real-time decision-making and performance analysis.
How does IT help with the accuracy of financial data?
It simplifies input and calculations, enabling easy handling and analysis of large data sets with minimal errors.
Why is speed important in financial management?
Quick, accurate reporting enables faster decision-making, crucial for seizing timely business opportunities.
What does performance mean in the context of IT and financial management?
It combines speed and accuracy with simplicity, improving data processing and decision-making efficiency.
How does IT benefit cross-functional departments like sales and marketing?
By providing accurate financial data to inform and optimize decision-making and campaign planning.
What are the ethical pressures faced by finance managers, and how does IT help?
Finance managers face pressure for accuracy and integrity; IT reduces errors and simplifies compliance tracking.
How has IT improved accessibility and affordability in financial management?
Through online tools and cloud storage that make data more accessible, affordable, and easier to share.
What role do ERP systems play in financial management?
They support planning, investment decisions, and improve productivity and reporting accuracy.
Why is knowledge of IT essential for modern finance managers?
IT skills are required to handle complex financial tasks, ensure accuracy, and utilize tools for better reporting and analysis.
What has been the impact of IT on the banking and finance sector?
Increased efficiency, better marketing, enhanced reporting, improved transparency, and expanded market reach.
What is one major challenge faced by IT in finance, and how is it being addressed?
Data safety is a challenge; it’s being addressed through innovations like secure cloud-based storage solutions.
What opportunities has IT created in the financial sector despite initial fears of job losses?
It created roles in data analysis, system management, and improved service delivery, increasing efficiency and accountability.
