Finance Flashcards
What are the objectives of financial management?
profitability, growth, efficiency, liquidity, solvency
What are the internal sources of finance?
retained profits
What are the influences on financial management?
Internal sources of finance
External sources of finance
Financial institutions
Influence of government
Global market influences
What are the types of external sources of finance?
Debt
Equity
What are the types of short term borrowing (debt)?
overdraft, commercial bills, factoring
What are the types of long term borrowing (debt)?
mortgage, debentures, unsecured notes, leasing
What are the types of equity?
Ordinary shares
Private equity
What are the types of ordinary shares?
new issues, rights issues, placements, share purchase plans
What are the types of financial institutions?
banks, investment banks, finance companies, superannuation funds,
life insurance companies, unit trusts and the Australian Securities Exchange
What are the types of influence of government?
Australian Securities and Investments Commission,
company taxation
What are the types of global market influences?
economic outlook, availability of funds, interest rates
What are the processes of financial management?
Planning and implementing
Monitoring and controlling
Financial ratios
Limitations of financial reports
Ethical issues related to financial reports
What are the steps in planning and implementing?
financial needs, budgets, record systems, financial risks,
financial controls
What are the components of monitoring and controlling?
cash flow statement, income statement, balance sheet
What ratio measures liquidity?
The current ratio
What ratio measures gearing?
debt to equity ratio
What ratios measure profitability?
gross profit ratio
net profit ratio
return on equity ratio
What ratios measure efficiency?
Expense ratio
Accounts receivable turnover ratio
What are the limitations of financial reports?
normalised earnings, capitalising expenses, valuing
assets, timing issues, debt repayments, notes to the financial statements
What are the cash flow management strategies?
distribution of payments, discounts for early payment, factoring
What are the working capital management strategies?
control of current assets
control of current liabilities
leasing, sale and lease back
Profitability managment
cost controls – fixed and variable, cost centres, expense minimisation
revenue controls – marketing objectives
What are the methods of international payment?
payment in advance, letter of credit, clean
payment, bill of exchange
define financial management
The planning and monitoring of a business’ financial resources to enable the business to achieve its financial objectives.