Chapter 5 ii Flashcards
What is financial management?
It is the responsibility of getting financial resources in best way possible, and using them in the best way possible in an organization.
why is financial management important to any manager?
It assists in acquiring and managing funds.
how does financial management relate to the other functional activities in any enterprise?
The financial function does not work in isolation.
The financial function must collaborate and work together.
What are the managerial functions of financial management?
Financial Planning- budgeting and bookkeeping.
Financial Organising- delegation and drawing up quotations
Financial Leading- communicating and motivating.
Financial Control- Checking and Auditing.
What are the monomers of Financial Management?
Capital & Assets
What are assets?
Assets are anything that has current or future economic value to a business.
What are the types of assets out there?
Current, Fixed and Other assets.
What are fixed assets?
Assets that are required and owned by a business for over 12 months.
Examples are land, vehicles, and equipment.
What are Non-current Assets?
Assets that are used up within 12 months.
Examples are raw materials and cash.
What are other assets?
Assets not part of normal business activities.
Examples are shares in other businesses and investments.
What is Capital?
Own capital and outside Capital( Liabilities).
What is Own Capital?
the owner’s equity.
What are Liabilities?
Foreign or borrowed money.
What are the types of outside capital?
Short-term, Long-term, Medium-term, and permanent outside capital.
What is medium-term outside capital?
Liabilities that have a 1-7 year finance plan. They charge interest and finance charges. They have a higher purchase agreement.
An example of medium-term outside capital is a car.
What is short-term outside capital?
Liabilities shorter than 1 year. They have no interest or are short-term loans.
An example is a Membership card.
What are permanent outside capitals?
the number of assets,
funds, money
required by
business AT ALL
TIMES.
What is long-term outside capital?
Liabilities over 5 years. Have high-interest rates.
An example of long-term outside capital is a house bond/mortgage.
What are some factors to consider when choosing sources of capital? name 4…
Tax considerations.
Building Long-term relationships.
Considering Profitability and Liquidity
Independence vs Dependence and Control.
What are some typical problems in obtaining finance?
Own capital is too small. Outside capital should be used for growth, not development.
Lack of Financial Management.
Lack of Financial Expertise.
Lack of Planning
What are creditors?
a person or organization that provides credit.
What are debtors?
a company or individual who owes money.
What are the forms of credit?
Installment credit, Revolving credit, Open account & other forms of credit.
What are the advantages of granting credit?
It retains customers by building long-term relationships.
It increases market share.
It increases sales.
It increases profit in the long term.
What are the disadvantages of granting credit?
There is a slower cash inflow.
Bad debts. People who don’t pay their debts.
Late payments by debtors.
Increased need for capital.
Creditworthiness, what are the 7 C’s?
A
Credit History - using credit bureaus to identify black-listed individuals.
Capital - credit limits.
Conditions- negotiate interest rates etc.
Capacity- proof of regular income.
Character-customer worthy?
Collateral-
Common Sense
What is a financial structure?
It is the composition of assets and capital.
What is profitability?
Return on Investment, Return on Equity, and Equity.
What is Liquidity?
It is the ability of the business to pay its short-term financial commitments on time.
What is Liquidity?
It is the ability of the business to pay its short-term financial commitments on time.
