Financial objectives

Question 1

Why set financial objectives

Answer 1

Reduce long-term debt
Attract investors
Help improve other areas (marketing,operations,hr)

Question 2

What is cash flow?

Answer 2

The time of payments and receipts

Question 3

What’s the order of the profit hierarchy

Answer 3

Revenue - Gross profit - Operation profit - Net profit

Question 4

Why is profit falling a negative thing?

Answer 4

View business as underperforming - less investment/image

Question 5

Why is lowering cost objective important

Answer 5

To improve efficiency
Compete on price (eg in recession)

Question 6

Example of cash flow objectives

Answer 6

Shorten payment periods from customer
Extending payment period to suppliers
Maintain cash reserves

Question 7

What is Capital structure

Answer 7

Balance between borrowed capital and capital from shares (gearing - risks of high/low gearing)

Question 8

Internal influences on financial objectives

Question 9

External influences on financial objectives