Financial Management Flashcards
What are financial resources?
Financial resources are those resources in a business that have monetary value.
What is financial management?
Financial management is the planning and monitoring of a business’ financial resources to enable businesses to achieve their financial objectives.
What is the overarching aim of financial management?
The overarching aim is to effectively provide adequate financial resources to all the business functions in order to achieve all the business’ goals.
List some strategic roles of financial management.
Setting financial objectives and ensuring the business achieves its goals
Sourcing finances
Preparing budgets and forecasting future finances
Maintaining sufficient cash flow
What is the main responsibility of financial management?
The main responsibility is to make decisions about the best way to achieve its goals and objectives by identifying and evaluating alternative courses of action and making recommendations.
Define profitability in the context of financial management.
Profitability is the earning performance of the business and indicates its capacity to use its resources to maximize profits.
Why is long-term sustainability important for profitability?
Long-term sustainability ensures that profits can be maintained over time, which is crucial for the ongoing success of the business.
Define growth in terms of financial management.
Growth is the ability of a business to increase its size in the longer term.
What factors are essential for business growth?
The ability of the business to develop and use its assets effectively to increase sales, profits, and market share.
What is efficiency in financial management?
Efficiency is the ability of a business to minimize its costs and manage its assets so that maximum profit is achieved with the lowest possible level of assets.
What is the main aim of efficiency in financial management?
The main aim is to monitor levels of inventory, cash, and the collection of receivables so businesses can pay their debts when they are due.
Define liquidity in financial management.
Liquidity is the extent to which a business can meet its financial obligations in the short-term.
Why is controlling the flow of cash important for liquidity?
Controlling the flow of cash in and out of the business ensures that businesses have adequate funds when needed to meet financial obligations.
