Finance

Question 1

List the Role of Finance Syllabus Points (3)

Answer 1

• Strategic Role
• Objectives (S/T and L/T)
  
  • -> Profitability
  • -> Growth
  • -> Efficiency
  • -> Liquidity
  • -> Solvency
• Interdependence

Question 2

List the Influences Syllabus Points (5)

Answer 2

• Internal Sources of Finance (Retained Profits)
• External Sources of Finance
  
  • ->Debt
• ———– –> S/T
• ————————> Overdraft
• ————————>Commericla Bills
• ————————>Factoring
• ————–>L/T
• ———————->Mortgage
• ———————->Debentures
• ———————->Unsecured Notes
• ————————>Leasing
• ——> Equity
• —————> Ordinary Shares
• ————————–> New Issues
• ————————–> Rights Issues
• ————————–> Placements
• —————————> Share purchase plans
• Financial Institutions
  
  • -> Financial Companies
  • -> Insurnace
  • -> Banks
  • -> Investment Banks
  • -> Superannuation
  • -> Unit Trusts
  • -> ASX
• Influence of Government
  
  • -> ASIC (Australian Security and Investments Commission)
  • -> Company Taxation
• Global Market Influences
  
  • -> Economic Outlook
  • -> Avalability of Funds
  • -> Interest rates

Question 3

List the Processes Syllabus Points (5)

Answer 3

• Planning and Implementing
  
  • -> Financial Needs
  • -> Budgets
  • -> Record systems
  • -> Financial Risks
  • -> Financial Controls
  • -> Debt and Equity Financing (Pros and Cons)
• Monitoring and Controlling
  
  • -> Cash Flow Statement
  • -> Income Statement
  • -> Balance Sheet
• Financial Ratios
  
  • -> Liquidity
• ———-> Current Ratio
  • -> Gearing
• ———>Debt to Equity Ratio
• -> Profitability
• ————–>Gross Profit Ratio
• ————–> Net Profit Ratio
• ————–>Return on Equity Ratio
  • -> Efficiency
• ———>Expensive Ratio
• ———->Accounts Receivable Turnover Ratio
  • -> Comparative Ratio Analysis
• ————> Over different time periods
• ————->Against standards
• ————–> With Similar businesses.
• Limitations of Financial Reports
  
  • -> Normalised earnings
  • -> Capitalising expenses
  • -> Valuing assets
  • -> Timing issues
  • -> Debt repayments
  • -> Notes to financial statements
• Ethical issues related to financial reports

Question 4

List the Strategy Syllabus Points (4)

Answer 4

• Cash Flow Management
  
  • -> Cash Flow Statements
  • -> Distribution of Payments
  • -> Discounts for early payment
  • -> Factoring
• Working Capital Management
  
  • -> Control of Current Assets
    
    • -> Cash
    • -> Receivable,
    • -> Inventories
  • -> Control of Current Liabilities
• ————-> Payables
• ————–> Loans
• ————–> Overdrafts
  • -> Stategies
• ————> Leasing
• ————> Sale and Lease back
• Profitability Manegement
  
  • -> Cost Controls
  • -> Revenue Controls
• Global Financial management
  
  • -> Exchange rates

–> Interest rates

• -> Methods of International payment
• ————-> Payment in Advanced
• —————> Letter of Credit
• —————–> Clean payment
• —————–> Bill of Exchange

–> Hedging

• -> Derivatives
• —————–> Forward Exchange Contracts
• —————–> Options Contracts
• —————–> Swap Contract