Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business > Finance: Processes of Financial Management > Flashcards

Finance: Processes of Financial Management Flashcards

1
Q

what are financial needs

A

funds required to allow a business to operate and achieve its goals

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what four factors affect the financial needs of a business

A

size
stage of the life cycle it is in
its future plans- expand or downsize
its capacity to source finance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what do budgets illustrate

A

how financial resources will be used to achieve a business’s objectives

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what are the three types of budgets

A

operating budgets
project budgets
financial budgets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what is an operating budget

A

outlining the main activities of a business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

what is a project budget

A

outlines capital expenditure and research & development

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

what is a financial budget

A

the overall financial situation of a business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

what does a financial budget also include

A

predictions of operating and project budgets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what do budgets provide that makes them essential financial management tools

A

they co-ordinate departments
plan for the future
compare planned and actual performance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

what are record systems

A

cash flow and income statements, balance sheets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what is a way of maintaining accurate record systems

A

recording all transactions twice “double entry system”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

how long does the australian taxation office (ATO) require businesses to keep records for

A

5 yrs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what are some examples of financial risks businesses are susceptible to

A

theft, fraud, damage to assets, loss of assets, errors in record systems

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what are financial controls

A

policies and procedures aimed at reducing financial risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

when are financial controls particularly important

A

when managing current assets, as they can be stolen or go unpaid

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

what are 5 financial controls

A
  1. separating staff duties
  2. rotating staff duties
  3. regulating the use of cash
  4. regularly checking inventory levels
  5. using surveillance systems
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

should the term of a loan match the economic lifetime of the asset being purchased

A

yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

when should current assets be repaid

A

within 12 months

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

when should long term assets be repaid

A

over more than 12 months

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

why is not matching financing to the economic lifetime of an asset detrimental to the business
eg. non-current asset is paid within 12 months
or current asset repaid over more than 12 months

A

payment is due before the asset has generated revenue

the business continues make repayments after the asset has been used WITH INTEREST

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

why is monitoring and controlling important

A

inconsistent methods of review and systems control will have an immediate impact on the viability of the business and requires management to monitor internal and external factors that will have a financial impact.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

what do cash flow statements measure

A

Movement of cash receipts and payments over time. Measures inflows and outflows.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

what do income statements show

A

Shows how much money comes into the business as revenue, how much goes out as expenditure and how much profit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

what do balance sheets show and when are they prepared

A

Represents a business’s assets and liabilities at a particular point in time and represents the net worth of the business.
Prepared at the end of an accounting period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

what does the current ratio measure

A

liquidity

26
Q

what is the current ratio

A

current assets ➗current liabilities

27
Q

where is the current ratio found

A

balance sheet

28
Q

what does the gross profit ratio measure

A

profitability

29
Q

what is the gross profit ratio

A

gross profits ➗sales revenue x 100

30
Q

where is the gross profit ratio found

A

income statement

31
Q

what does the net profit ratio measure

A

profitability

32
Q

what is the net profit ratio

A

net profit ➗sales revenue x 100

33
Q

where is the net profit ratio found

A

income statemnet

34
Q

what does the return to owner equity ratio show

A

profitability

35
Q

what is the return to owner equity ratio

A

netprofit ➗owners equity x 100

36
Q

where is the return to owner equity ratio found

A

balance and income sheet

37
Q

what does the debt to equity ratio show

A

solvency and gearing

38
Q

what is the debt to equity ratio

A

total liabilities ➗owners equity x 100

39
Q

where is the debt to equity ratio found

A

balance sheet

40
Q

what does the expense ratio show

A

efficiency

41
Q

what is the expense ratio

A

total expense ➗sales revenue x 100

42
Q

where is the expense ratio found

A

income statement

43
Q

what is the accounts receivable turnover ratio

(2 steps)

A
  1. sales ➗accounts receivable = ___
  2. 365 ➗ _____
44
Q

where is the accounts receivable turnover ratio found

A

balance and income statement

45
Q

what are normalised earnings and how are they a limitation of financial reports

A

Earnings have been adjusted to consider changes in the economic cycle to remove abnormal items that affect profitability. This gives a more accurate description of the true earnings of a company.

46
Q

what are capitalising expenses and how are they a limitation of financial reports

A

Putting expenses on a balance sheet as assets to make the balances look better.

47
Q

what is valuing assets and how are they a limitation of financial reports

A

Value of assets may not be correct on balance sheets, as value often depreciated eg. a car bought 5 yrs ago was valued at $30 000, and it says that on the balance sheet but it doesn’t account for the depreciated price.

48
Q

what are timing issues and how are they a limitation of financial reports

A

Not accurately reporting when revenue or expenses were made or what direct expenses were made at the time to have the revenue.

49
Q

what are debt repayments and how are they a limitation of financial reports

A

Debt repayment information may not be included in the financial report, such as when the repayments are made, if the payments are being paid, how large the loan is, and at what interest.

50
Q

what are notes to financial reports and how are they a limitation of financial reports

A

Additional information normally at the end of financial reports
Notes provide additional information and details about items included in the balance sheet and income statement
They may not be clear, explicit or not detailed enough

51
Q

what are three common ethical issues related to financial reports

A
  1. misrepresentation of financial statements. eg. overstating profits
  2. misuse of funds eg. making up expenses that don’t exist
  3. tax minimisation eg. recording sales in countries with low tax rates or understating revenue to minimise company tax
52
Q

how is ethical financial reporting enforced?

A

through auditing, which the standards are set by Australian Auditing Standards (AAS)

53
Q

Who sets the code of ethics for professional accountants?

A

Australian Professional and Ethics Standards Board (APES)

54
Q

What can companies do to abide by accounting standards?

A

record keeping
internal audits
management audits
external audits

55
Q

why is record keeping important

A

it is a way for the ATO to regularly monitor businesses transactions, and penalise those evading tax

56
Q

what are internal audits

A

audits conducted internally-check accounting procedures and accuracy of records

57
Q

what is an audit

A

an independent check of the accuracy of financial records and accounting procedures

58
Q

what is a management audit

A

reviewing a firms financial plan and taking corrective action if needed

59
Q

what are external audits

A

independent and specialised audit accountants investigate a firms financial reports

60
Q

under what Act are external audits a requirement of

A

the Coporations Act 2001- commonwealth

Business (9 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions