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Business Studies > Financial Management Strategies > Flashcards

Financial Management Strategies Flashcards

1
Q

What are the 4 Dot Points under Financial Management Stratergies?

A
  • Cash Flow Management
  • Working Capital Management
  • Profitability Management
  • Global Financial Management
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2
Q

What is Cash Flow?

A

The movement of cash in and out of the business

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3
Q

What are 3 Cash Flow Management Strategies?

A
  1. Distribution of Payments
  2. Discounts for Early Payment
  3. Factoring
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4
Q

What is Working Capital?

A

Funds that are availabile for short term financial comittments

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5
Q

What is the Net Working Capital formula?

A

Current Assets - Current Liabilities

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6
Q

What are the 3 Working Capital Strategies?

A
  1. Control of Current Assets
  2. Control of Current Liabilities
  3. Strategies on Leasing and Sale and and Lease-Back
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7
Q

What points are under Control of Current Assets?

A
  • Cash
  • Accounts Receivable
  • Inventories
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8
Q

What points are under Control of Current Liabilities?

A
  • Accounts Payables
  • Loans
  • Overdrafts
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9
Q

What is Leasing?

A

The payment of money to another party for the use of their equipment

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10
Q

What are benefits of Leasing?

A
  • Free up cash to use elsewhere
  • Depreciation won’t affect the business
  • Repayments are tax deductible
  • Less/Consistent cash outlflow
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11
Q

What are Methods of International Payment?

A
  • Payment in Advance
  • Letter of Credit
  • Bills of Exchange
  • Clean Payment
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12
Q

How is Cash controlled?

A

Use reserves and make sure it is being invested. Excess is not good. Shortage will require overdraft.

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13
Q

How can AR be controlled?

A
  • Charge late fees
  • Consider discounts for early payment
  • Construct aged debtors report
  • Remind customers
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14
Q

What must management do in regards to Inventory?

A

They must make sure they have enough inventory and not too less. All about balance. They must also check their rate of inventory turnover.

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15
Q

What are the cost controls?

A

Fixed+Variable costs, cost centres and expense minimisation

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16
Q

What are Cost Centres?

A

Departments of a business that managers can directly attribute costs to. They have direct and indirect costs

17
Q

How can Expense Minimisation be achieved?

A
  • Guidelines and policies established to encourage staff to minimise expenses
  • Expense budgets to make patterns visible within a business
18
Q

What is the Foreign Exchange Market? (FX)

A

Global market where currencies are traded

19
Q

What is Spot Exchange?

A

The value of the currency in terms of another currency on a particular day. They DO NOT last

20
Q

What are Exchange Rates?

A

The ratio of one currency to another

21
Q

What is Payment in Advance?

A

Exporter receives the payment THEN arranges for the product to be sent to the importer

22
Q

What is a Letter of Credit and when is it usually required?

A

A commitment by the importer’s bank to pay exporter once they can gurantee shipment and specific conditions have been met. It is required when exporters want to decrease the risk of non-payment

23
Q

What is a Bill of Exchange?

A

Document drawn up by exporter’s bank demanding payment at a specific time.

24
Q

What is a Clean Payment?

A

Exporter ships the product directly to the importer before the payment is received. Need high levels of trust.

25
Q

What is Hedging?

A

The process of minimising risk of currency fluctuation

26
Q

What are 4 Hedging Strategies?

A
  1. Establish offshore subsideries
  2. Use same foreign currency
  3. Establish import and export contracts
  4. Implement marketing strategies
27
Q

What are Derivatives?

A

Simple financial instruments used to reduce the risk of exchange rate fluctuations

28
Q

What are 3 Derivative Strategies/Contracts?

A
  • Forward Exchange
  • Options Contract
  • Swap Contract

Business Studies (7 decks)

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