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okaychamp > Finance Notes > Flashcards

Finance Notes Flashcards

1
Q

Define Finance

A

Finance refering to money managment and the process of acquiring funds

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2
Q

What is the role of finance managment

A
  1. Strategic role of finance
  2. Objectives of finance managment
  3. Interdependence with key functions
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3
Q

What are the objective of finance managment

A
  1. Profitability, growth, effeicency, liquidity, solvency
  2. Short and long term goals
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4
Q

What are the influences of financial managment

A
  • Internal sources of finance
  • External sources of finance
  • finincial institutions
  • Influence of the government
  • Global market influences
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5
Q

what are the internal sources of finance

A

Retained profits

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6
Q

External sources of finance

A

Can be seperated into Debt and equity sources

Debt Short term
- Overdraft, commercial bills, factoring

Debt long term
- Mortgage, debentures, unsecured notes, leasing)

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7
Q

External sources of finance for equity

A

Ordinary share
- New issues
-Right issues
-placements
-share purchase
Private equity

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8
Q

Influence institutions

A
  • Banks
  • Investment banks
  • Finance companies
    -Superannuation funds
  • Life insurance compaines
  • Unit trusts
  • Australian Securities Exchange
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9
Q

Influence of the government

A
  • Australian Securities and Investments commission

company taxation

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10
Q

Global market influences

A
  • Economic Outlook
  • Availibility of funds
    -Intrests rates
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11
Q

Processes of financial managment

A
  • Planning and implementing
  • Monitoring and controlling
  • Financial ratios
  • Limitations of financial reports
    -Ethical issues related to financial reports.
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12
Q

In the Process of fincancial managment, what is the planning and implementing

A
  • Financial needs
  • Budgets
    -Record systems
  • Financial risks
    -Financial controls
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13
Q

Regarding the process of financial managment what is in monitoring and controlling

A

-Cash flow statements
- Income statements
-Balance sheets

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14
Q

Define Cash flow statements

A

Indicates the movement of cash reciepts and cash payments resulting from transactions over a period of time. It can identify trends. It mainly shows the business’s ability to meet its short term loans or account payable.

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15
Q

Define income statements

A

Summary of income earned, and the expenses incurred over a given time period. Helps to see how much money is coming in as revenue and how much is gone out as expensive.

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16
Q

Balance sheet

A

Represents the businesses assets and liabilities at a specific time period. Shows the financail stabability of the business

17
Q

Adv and Dis of Debt finance

A

Adv
- Funds are readily available
- Acquired on short notice
-Existing ownership

Dis
-Intrest rates
-Security is required by the buisness

18
Q

Adv and Dis equity Finance

A

adv
- Does not have to be repaid
- No intrest
- Less risk for business owner

Dis
- Ownership is diluted
- Long+ expensive process to obtain funds
-Expectations from shareholders ROI

19
Q

What financial ratio make reference Liquidity

A

Currnet ratio

20
Q

What financial ratio are used to determine the solvency

A

Debt to equity ratio

21
Q

What financial ratios are used to determine the effeciency of the business

A

Expense ratio
- Indicates amounts of sales that are allocated to expenses

  • Accounts Receivable Ratio
  • How quickly the business collects Debt, it measures how quickly debetors pay their accounts.
22
Q

Limitations of financial reports

A

Normilised earnings, capitalising expenses, valuing assests,

Timing issues
Debt repayments

23
Q

What are ethical issues related to financial reports

A
  1. Record keeping( Refering to how honest they are recording their data. E.g people may daim their profit with cash and therefore doesnt come up on the income statement
  2. Audited notes
24
Q

What are some Financial managment strategies

A

Cash flow Strategies
- Distribution of payments, Discounts for early payments, factoring

Working Capital managment
- Control of current assets
- Control of current liabilities

Profitability managment
- Cost of controls
- Revenue controls

Global financial managment

25
Q

Strategies to imrpove cash flow

A
  1. Distribution of payments
  2. Discounts for early payments
  3. Facotring
26
Q

Strategies to improve working capital

A
  • Control of current Assets
    • Receivables, Inventories

-Control of current liabilities
- Payables, loans, overdrafts

Main strategy is
- Leasing and lease back

27
Q

Strategies to imrpove profitability managment

A
  1. Cost Controls
    - Fixed and variable
    - Cost centres
    -Expensive minimisation
  2. Revenue controls
    - Marketing objectives
28
Q

Strategies to imrpove Global financial managment

A
  • Exhancge rates
  • Intrests rates
    Methods of international payments
  • Payments in advance, Letter of credit, clean payment, bill of exchange

-Hedging

  • Derivatives
29
Q

Define Hedging

A

Hedging is when two parties agree to exchange currency and finalise a deal immeadiatly, the transaction is reffered to as a spot exchange. The spot exchange is the value one currency to another at a specific time.

30
Q

What is Derivatives

A

Derivatives is a form of Hedging. This are simple financial instruments that may be used to lesson the exporting risk. e.g Forward exchange contract

okaychamp (11 decks)

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