finance role Flashcards
what is finance?
financial management is the analysis, interpretation and evaluation of all financial records of a business
what is a financial manager’s role
It is a financial manager’s responsibility to source finance that will enable the business to achieve its strategic goals.
what is the broad strategic role of finance
To ensure a business can operate, grow, and achieve their goals through the management of financial resources.
how can a financial strategic role be maintained (5)
- Set financial objectives
- Prepare budget/financial statements
- Maintain sufficient cash-flow
- Distribute funds to other KBF’s
what are the 5 financial objectives?
- profitability
- growth
- efficiency
- liquidity
- solvency
what is profitability and how is data collected?
Ability of a business to maximise their revenues and minimising costs
Gross profit , Net profit (income)
what is growth and how is data collected?
Ability of a business to increase their size and value over the long term.
–> Ensures business is thinking sustainability in terms of future.
data : Market share and number of outlets
what is efficiency and how is it collected?
Ability of a business to maximise the use of their assets in the most cost-effective way.
–> Maximises outputs whilst minimising inputs
Data : Expenses (income)
what is liquidity and how is it collected?
Ability of a business to meet their short-term financial commitments (within twelve months)
-balance sheet
what is solvency and how is it collected
Ability of a business to meet their long-term financial commitments (exceeds twelve months)
-balance sheet
what r short term goals? what do they priortise?
Tactical ( 1-2 years) and operational (day-day) plans
often priortise efficiency and profit goals
what r long term goals?
Relate to the strategic plans of a business. They’re built off short term goals.
are broad goals- e.g. - to increase profit or market share
what r the three main aspects of a financial strategic role
- Investment
- Financing deals : deals with items on the right side of balance sheet, liabilities and owner’s equity
- Asset management deals
External factors are responsible 4 making the strategic role of financial management more…. 3 d’s
dynamic, diverse and demanding
what r external factors that impact financial management
- Increased Corporate regulation and governance responsibilities. Financial management must ensure all records are correct, truthful and in the public domain.
- Tax laws : complex set of tax rates and regulations, which could save the company expenses
- Technological changes
- Ethical concerns
- Globalisation