Finance Flashcards
What are financial resources?
Financial resources are resources that have monetary value.
What is financial management?
Financial management is the planning and monitoring of a business’s financial resources to achieve objectives.
What is a strategic plan?
A strategic plan is a plan outlining the long-term objectives for a business and how it’s going to get there, enabling survival and growth.
What does a strategic plan enable businesses to do?
A strategic plan enables businesses to maximise profits, increase the wealth of the owner, and expand.
What is growth in financial management?
Growth is the ability to increase size in the long term.
What is essential for sustainable business growth?
It is vital to ensure that the business is sustainable in the future.
What are the two ways a business can grow?
A business can grow organically or acquisitively.
What does organic growth mean?
Organic growth means growth through re-investing profits into new marketing projects.
What does acquisitive growth mean?
Acquisitive growth means growth through acquiring other businesses.
What is liquidity?
Liquidity is the extent to which a business meets its financial commitments in the short term (<12 months).
What is necessary for a business to maintain liquidity?
A business must have sufficient cash flow or be able to convert current assets into cash quickly to meet financial obligations.
What is efficiency in financial management?
Efficiency is the ability of a business to minimise its costs and manage assets, enabling profit maximisation with minimal assets used.
What is solvency?
Solvency is the extent to which the business can meet its financial commitments in the long term.
How is solvency measured?
Solvency is measured using gearing, which is the percentage of the business’s assets that are funded by external sources.
What is profitability?
Profitability is the ability of the business to maximise profits.
What is the equation for profit?
Revenue – expenses = profit.
What are short-term financial objectives?
Short-term financial objectives are reviewed regularly and are more specific (e.g., liquidity and solvency).
What are long-term financial objectives?
Long-term financial objectives are the business’s strategic plans and are broad (profitability, efficiency, and growth).
How do long-term objectives relate to short-term goals?
Long-term objectives form the basis on which all short-term goals are established.
How does operations relate to financial management?
Operations uses funds to purchase inputs and resources to produce outputs.
How does marketing relate to financial management?
Marketing uses funds to devise and implement promotional activities.
How does HR relate to financial management?
HR uses funds to pay employees, as well as monetary benefits of retaining skilled staff.
