HSC Financial Strategies Flashcards
What strategies can a business use to improve cash flow?
Distribution of payments, discounts for early payment or factoring
Why is cash flow management important to a business?
Efficient management of cash flow is crucial to a business’s success. It helps to ensure that the business has enough money coming into the business (inflows) to be able to pay its expenses (outflows). Through utilising cash flow statements businesses are also better able to predict trends which can be used a predictors of change.
What strategies can be used to manage working capital (liquidity)?
Leasing and sale and lease back and the most common.
What is working capital management?
Determining the best mix of current assets and current liabilities
What assets would a business need to consider as part of controlling its current assets?
cash, receivables and inventories
What current liabilities must a business monitor and manage?
payables, loans, overdrafts.
What is profitability management?
Controlling both the business’s costs and revenue
Name two essential tools for effective profitability management
Accurate & up-to-date financial data and reports
What cost controls can a business implement as part of their profitability management?
Fixed & variable costs, cost centres & expense minimisation
What revenue controls can a business implement as part of their profitability management?
Sales objectives, sales mix and pricing policy
What is meant by global financial management?
The strategies implemented by a business to deal with the export component of business activities
How do currency fluctuations impact on businesses?
They create risks for businesses. Depreciation and appreciation will impact both on import & export levels and the payments made to overseas businesses or financial institutions
What are the main methods of international payment?
payment in advance, letter of credit, clean payment & bill of exchange.
What is hedging and how does it impact businesses?
The process of minimising the risk of currency fluctuations. It helps to reduce the level of uncertainty involved with international financial transactions.
What are derivatives and what impact do they have on businesses?
Simple financial instruments that may be used to lessen the exporting risks associated with currency fluctuations.
