finance - term 2 Flashcards
what is accounting
- the role
- what it consists of
- what it generates
the role of accounting is to assist stakeholders make informed business decisions
Accounting consists of reporting business activities, interpreting financial information, and communicating the results to be reviewed by management
Accounting generates a number of key documents including profit and loss statements, balance sheets, monthly reports, budgets and cash flow statements
what is financial management
financial management is the planning and monitoring of a business’s financial resources to enable the business to achieve its financial goals
it is crucial if a business is to achieve its financial goals
what is finance
- what it is responsible for
- what it is about
- what it is concerned for
Finance is responsible for acquiring funds for the business
These can be through debt or equity and used for commencement or continued explosion of the business
Finance is all about making sure money is available when it is needed
Finance is concerned with what will happen in the future
the mismanagement of finance would lead to
- insufficient cash to pay suppliers
- inadequate capital for expansion
- too many non-productive assets
- delays in accounts being paid
- possible business failure
- overstocking of materials
eventually this may lead to processes of cessation (administration,
liquidation, bankruptcy)
what are financial objectives
(PEGSL)
Profitability
Efficiency
Growth
Solvency
Liquidity
what is the aim of financial objectives
The aim of a business is to maximize these elements.
the financial manager must decide the best way to achieve them by identifying and evaluating various courses of action
