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Business Organisation Management > Financial Management > Flashcards

Financial Management Flashcards

1
Q

5 examples cash inflows

A

rent revenue, service revenue, interest revenue, sales revenue, capital

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2
Q

5 examples of cash outflows

A

wages, accounts payable, purchase of stock, dividend payments, loan repayments

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3
Q

Consequences of poor management of cash

A

bankruptcy, unable to pay staff wages, no liquidity, increased interest and bank charges

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4
Q

4 reasons why a business may fail

A

lack of fore planning, unpayable debts, no profit, poor risk management

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5
Q

how can cash flow be improved

A

increase inflow through increase in revenue streams, limit outflow by controlling expenses

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6
Q

over-capitalisation

A

where an owner may invest too much capital into a business, that the funds lay idle and are not used to their full potential to achieve the highest possible return.

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7
Q

under-capitalisation

A

not enough capital invested into the business the it cannot run efficiently on a day-to-day basis

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8
Q

Purpose of a cash-flow statement

A

are needed in order to keep an accurate record on the cash flowing in and out of the business which helps determine the amount of cash needed to maintain liquidity within the business.

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9
Q

Name an inflow and outflow for operating activities

A

receipts from sales, cash payments to suppliers

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10
Q

Name an inflow and outflow for investing activities

A

long term assets (shares), purchases of assets (e.g furniture)

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11
Q

Name an inflow and outflow for financing activities

A

adjustments to equity, adjustments to borrowings

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12
Q

Gross Profit Ratio

A

measures percentage of sales which is retained as Gross profit

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13
Q

Net Profit Ratio

A

measures percentage of sales which is retained as Net profit

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14
Q

Rate of Return on Owner’s Equity

A

measures the return on the owners investment into the business

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15
Q

Rate of Return on Total Assets

A

measures the ability of the assets in a business to generate net profit. Why the owner thought that the assets would generate money…

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16
Q

Equity Ratio

A

measures the extent to which the owner has financed the business by equity sources as opposed to debt sources. (external sources of finance)

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17
Q

Debt Ratio

A

measures the extent to which the owner has financed/funded the business by debt sources (loans).

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18
Q

Current Working Capital Ratio

A

measures the ability of the business to meet short term financial obligations using its current (within 12 months) assets

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19
Q

Quick Sufficient Working Capital Ratio

A

measures the ability of the business to meet short term financial obligations using only its immediate accessible cash. Thus not relying on the inventory or sale of inventories.

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20
Q

Equity

A

is using funds internally within the business

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21
Q

Debt and examples of external sources…

A

borrowing funds from an external source (banks, finance companies, loan sharks etc.)

22
Q

Short Term Debt Borrowing

A

help to finance the purchase of resources and inputs in business operations

23
Q

Overdraft

A

facility where banks allow a business to overdraw account by a certain limit. It is essentially giving a business access to more cash than it would usually have.

24
Q

Long Term Debt Borrowing

A

Are appropriate for the acquisition of long term assets like land and buildings, motor vehicles, plant and equipment etc.

25
Q

3 Examples of Long Term Debt Borrowings

A

mortgage loans, debentures (bonds), hire purchase

26
Q

Consequences of poor management of cash

A

bankruptcy, unable to pay staff wages, no liquidity, increased interest and bank charges

27
Q

4 reasons why a business may fail

A

lack of fore planning, unpayable debts, no profit, poor risk management

28
Q

how can cash flow be improved

A

increase inflow through increase in revenue streams, limit outflow by controlling expenses

29
Q

over-capitalisation

A

where an owner may invest too much capital into a business, that the funds lay idle and are not used to their full potential to achieve the highest possible return.

30
Q

under-capitalisation

A

not enough capital invested into the business the it cannot run efficiently on a day-to-day basis

31
Q

Purpose of a cash-flow statement

A

are needed in order to keep an accurate record on the cash flowing in and out of the business which helps determine the amount of cash needed to maintain liquidity within the business.

32
Q

Name an inflow and outflow for operating activities

A

receipts from sales, cash payments to suppliers

33
Q

Name an inflow and outflow for investing activities

A

long term assets (shares), purchases of assets (e.g furniture)

34
Q

Name an inflow and outflow for financing activities

A

adjustments to equity, adjustments to borrowings

35
Q

Gross Profit Ratio

A

measures percentage of sales which is retained as Gross profit

36
Q

Net Profit Ratio

A

measures percentage of sales which is retained as Net profit

37
Q

Rate of Return on Owner’s Equity

A

measures the return on the owners investment into the business

38
Q

Rate of Return on Total Assets

A

measures the ability of the assets in a business to generate net profit. Why the owner thought that the assets would generate money…

39
Q

Equity Ratio

A

measures the extent to which the owner has financed the business by equity sources as opposed to debt sources. (external sources of finance)

40
Q

Debt Ratio

A

measures the extent to which the owner has financed/funded the business by debt sources (loans).

41
Q

Current Working Capital Ratio

A

measures the ability of the business to meet short term financial obligations using its current (within 12 months) assets

42
Q

Quick Sufficient Working Capital Ratio

A

measures the ability of the business to meet short term financial obligations using only its immediate accessible cash. Thus not relying on the inventory or sale of inventories.

43
Q

Equity

A

is using funds internally within the business

44
Q

Debt and examples of external sources…

A

borrowing funds from an external source (banks, finance companies, loan sharks etc.)

45
Q

Short Term Debt Borrowing

A

help to finance the purchase of resources and inputs in business operations

46
Q

Overdraft

A

facility where banks allow a business to overdraw account by a certain limit. It is essentially giving a business access to more cash than it would usually have.

47
Q

Long Term Debt Borrowing

A

Are appropriate for the acquisition of long term assets like land and buildings, motor vehicles, plant and equipment etc.

48
Q

3 Examples of Long Term Debt Borrowings

A

mortgage loans, debentures (bonds), hire purchase

49
Q

Sales Forecasting

A

measures whether a business is succeeding or is problematic in the area of sales through a breakdown of sales records within the business.

50
Q

Cash Budgets

A

a tool for planning and controlling finances in order to predict cash receipts and cash payments. purpose for this is to plan times when a business may need additional funds to cover expenses and payments.

51
Q

Sources of Finance

A

overdraft facility, trade credit, leasing, hire purchase, credit cards, loans from family, bank loans, factoring sales, government loans/venture capital

Business Organisation Management (1 decks)

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