Financial Management Flashcards
financial management includes applying management principles to financial assets of an org, while also playing an important part in
fiscal management.
process of calculating amount of capital that is required by an org & then determining its allocation.
Financial planning
financial management department of any firm is handled by
financial manager.
financial management department fxns:
- calculating capital required
- formation of capital structure
- effective management of money
- financial control
- investing the capital
- allocation of profits
fxn of financial management:
➔ has to calculate amount of funds an organization requires.
➔ depends upon the policies of firm w/ regards to expected expenses & profits
➔ amount required has to be estimated in such way that earning capability of the organization increases
Calculating the Capital Required
fxn of financial management:
➔ once the amount of capital the firm requires has been estimated, capital structure needs to be formed
➔ involves debt equity analysis in short-term & long-term.
➔ depends upon the amount of capital firm owns, & amount that needs to be raised via external sources.
Formation of Capital Structure
fxn of financial management:
➔ every org/ firm needs to invest money in order to raise more capital & gain regular returns.
➔ hence, financial manager needs to invest the org’s funds in safe and profitable ventures.
Investing the Capital
fxn of financial management:
➔ once org has earned good amount of net profit, it’s the financial manager’s duty to efficiently allocate it.
➔ could involve keeping part of net profit for contingency, innovation, or expansion purposes, while another part of the profit can be used to provide dividends to the shareholders
allocation of profits
fxn of financial management:
- responsible for effectively managing the firm’s money.
➔ money is required for various purposes in the firm.
effective management of money
fxn of financial management:
➔ not only does financial manager have to plan, organize, and obtain funds, but he also has to control and analyze the firm’s finances in short-term & long-term.
➔ can be done using financial tools such as financial forecasting, ratio analysis, risk management, & profit-cost control.
financial control
in hospital institutional environment, lab usually operates as a division under
vice president/ director of operations
major differences of non-hospital environment to hospital management: p
-population served
- hours & scope of operation
- turnaround time requirements,
- need for ancillary functions
most of testing done by independent lab is for
outpatients of physicians and clinics.
most specimens are transported during ____ hours and arrive at lab in the _____
daylight; late evening or night.
type of budget that forecast of revenues & expense expected for one or more future periods.
OPERATIONAL BUDGET
OPERATIONAL BUDGET typically formulated by management team just prior to the ____, & shows expected activity levels for the ____
beginning of the year; entire year.
type of budget that process that business uses to determine which proposed fixed assets purchases it should accept, & declined.
CAPITAL BUDGET
type of budget that process that used to create quantitative view of each proposed fixed asset investment, thereby giving a rational basis for making a judgment
capital budget
Capital Budgeting Methods:
➔ identify net change in cash flows associated w/ fixed asset purchase, & discount them to their present value.
net present value analysis
Capital Budgeting Methods:
➔ identify bottleneck machine/ work center in production environment & invest in those fixed assets that maximize the utilization of the bottleneck operation.
➔ business is less likely to invest in areas downstream from the bottleneck operation (since they are constrained by the bottleneck operation) & more likely to invest upstream from the bottleneck (since additional capacity there makes it easier to keep the bottleneck fully supplied with inventory).
Constraint Analysis
Capital Budgeting Methods:
➔ determine period required to generate sufficient cash flow from a project to pay for initial investment in it
➔ essentially a risk measure, for the focus is on the period of time that investment is at risk of not being returned to the company
payback period
Capital Budgeting Methods:
➔ determine whether increased maintenance can be used to prolong the life of existing assets, rather than investing in replacement assets.
➔ can substantially reduce company’s total investment in fixed assets.
avoidance period
is mandatory activity for larger fixed asset proposals
capital budgeting
process by which company obtains estimates of costs of producing product, providing service, performing function, or operating department.
cost finding
TYPE OF COST FINDING:
- in this method, accountant first accumulates costs of each production operation/ process for a specified time frame.
- this sum is then restated as an average by dividing total costs of production by the total output in the period.
- can be used whenever the output of individual processes is uniform or homogenous, as in cement manufacturing, flour milling, and other relatively continuous production processes.
PROCESS COSTING
TYPE OF COST FINDING: used when individual production centres/ departments work on variety of products rather than just one during a typical time period
JOB-ORDER COSTING
2 CATEGORIES UNDER JOB-ORDER COSTING
PRIME COSTS
FACTORY OVERHEAD COSTS
2 CATEGORIES UNDER JOB-ORDER COSTING:
traced directly to specific batch/ job lot, of products (direct labor & direct materials costs of production)
PRIME COSTS
2 CATEGORIES UNDER JOB-ORDER COSTING: traced only to department operations/ factory as a whole & not to individual job orders (salary of departmental supervisor is an example of this)
FACTORY OVERHEAD
➔ involves accumulation of costs of materials, labor, and overhead for a specific job.
➔ excellent tool for tracing specific costs to individual jobs and examining them to see if the costs can be reduced in later jobs
➔ used to accumulate costs at a small-unit level.
JOB COSTING
job costing involves the following accounting activities:
1. _______: accumulates the cost of components and then assigns these costs to a product or project once the components are used.
2. _______: employees charge their time to specific jobs, which are then assigned to the jobs based on the labor cost of the employees.
3. ______: It accumulates overhead costs in cost pools, and then allocates these costs to jobs.
materials
labor
overhead
main role is to assess whether an
organization is meeting its objectives or not.
financial control
process of calculating the amount of capital that is required by an organization and then determining its allocation
FINANCIAL PLANNING
assets (often money) that are used for future expenditures or investments
CAPITAL
refers to intangible assets
Organizational capital
The balance between assets and liablities (debt)
CAPITAL STRUCTURE
something business owns:
something business owes:
ASSETS; LIABILITIES
Business make a profit by building more _____ than_____
assets; liabilities
are the rules or principles of your business’s accounting and financial practices. They should reflect your business’s values and culture.
Financial policies
The purpose of the ______ is to conserve time and material by reducing the duplication of supplies and effort.
Central Supply Room
is used to accumulate costs at a small-unit level.
Job costing
The hospital can classify overall treatment in the following jobs:
- REGULAR CHECK-UP
- LAB TESTS
- FEES FOR SPECIALISTS
- FEES FOR BED
