Chapter 4 - What each level of the finance function does Flashcards
What are the components of finance operations?
- Reporting
- Management accounting
- Treasury management
- Internal audit
What are the normal sequence of steps in the accounting function?
- Transactions
- Day books
- Ledger accounts
- Financial statements
What is the formula for the earnings per share ratio (EPS)?
Profit after tax/Weighted average no. of ordinary shares in issue
What is the formula for the price/earnings ratio (P/E)?
Share price/EPS
What does a high P/E ratio mean?
Investors are paying more for today’s earnings in anticipation of future growth
What is the formula for dividend yield?
(Dividend per share/current share price) x 100
What is a cost schedule?
Shows standard cost card of products made
What decisions can cost schedules aid?
- Pricing
- BE
- Key factor analysis
- Investment appraisal
Why are budgets useful (CRUMPET)?
- Co-ordination
- Responsibility
- Utilisation
- Motivation
- Planning
- Evaluation
- Telling
What are the key roles of the treasury function?
- Working cap management
- Cash management
- Financing
- Foreign currency
- Tax
What are the 2 main types of external finance?
- Debt
- Equity
What is the formula for financial gearing?
(Long term debt/Shareholders funds) x 100
What does a high gearing ratio indicate?
High level of risk since debt obligations must be met, whereas returns to shareholders are voluntary
What is the scope of the internal audit?
- Review internal controls and financial reports
- Review risk management
- Carry out special assignments
- Conduct operational reviews
What are the specialist areas?
- FP&A
- Tax
- Project management
- Project appraisal
