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
whats a common issue that arises between short-long term goals as well as interdependence of kbfs
Conflicts can occur between short-term and long-term objectives e.g. Long-term maybe growth, which is costly, while a short-term goal may be to increase profits, and these contradict each other.
how does finance and operation depend on one another
The finance department provides the funds to manage the production process such as
* Purchasing inputs
finance relies on operations to balance their costs to provide necassary quality and make investments in order to increase efficiency
what does finance mainly rely upon other kbfs 4
efficiency n profitability
how do marketting n finance rely upon one another
more effective promotion/marketting strats are, higher profits. budgets and forecasts must be established
marketting generates the revenue through promotion and sellling of products 2 consumers. it also provides the info of market research and profit forecast/info
how does HR and finance rely upon one another
finance dep sets budgets as well as rewards scheme. the department sets aside funds 4 training of employees
HR manages employees, and provides ongoing rewards and incentives to enhance performance of employees
