Intro to FInancial Managament Flashcards
What is Financial Management
Financial management - the process of planning, organising, controlling, and monitoring financial resources with a view to achieve organisational goals and objectives
What is the objective of financial management
Primary objective is to maximise shareholder value through appropriate resource utilisation and decision-making
Give 4 reasons why financial management is important to study
A: Financial literacy is a key life skill.
A: Necessary whether you plan to start your own business, work in a company, in government, or in an NGO.
A: Lays important foundations to pursue accounting and finance.
A: Accounting and finance decisions have implications on all aspects of business operations.
Q: What are the main disciplines discussed in the course?
Accounting and financial management.
What is accounting
A: Accounting is the process of identifying, measuring, recording, and communicating economic information to assist users to make decisions.
Q: Why is accounting an important part of financial management?
Accounting is the language of business
Why is accounting the language of business
A: It helps in literacy by enabling you to speak to and understand your business colleagues (e.g. accounts receivable, prepayment, debit/credit, creditor, profit, loss, liquidity, solvency).
A: It helps in practice by involving audit, financial statements, income statement, and balance sheet.
What is Finance
Finance - a function that examines how companies (and other entities) source funding and informs how that money is invested
What are the two major areas of finance
A: Corporate finance and investments/asset pricing.
Q: What does corporate finance focus on?
A: It focuses on an entity and its management.
A: It addresses questions like which projects to invest in, how to finance operations, and how to pay out earnings.
Q: What does investments/asset pricing focus on?
A: It focuses on the view of the investor.
A: It addresses questions like what assets/securities are worth, how risky they are and how to form portfolios
Why is finance an important part of financial management
They help managers make good investment decisions and use resources effectively to overall maximise shareholder value. What to spend, where to spend and when to spend
Compare accounting and Finance
Accounting reports financial information to provide insights for effective decision making based on historical and real time data following standards such as GAAP and IRFS
Finance optimises the value of financial resources prioritising the ROI and follows assumptions
Finance needs accounting to provide high quality numbers for analysis to begin the process of valuation and make good investment decisions
What does tax deal with
the laws and regulations around how much money a business or individual needs to contribute to governments
What does understanding tax laws do
Ensure compliance, minimise tax liabilities and get avaliable deductions(stuff you use for your job). It helps you minimise lliabilities, get deductions and contribute ethically to government revenue
Who uses accounting information
Internal Stakeholders (shareholders, managers, employees) , Business (customers, supplies, goverment) and external stakeholders (local community, pressure groups)
Q: What are the different types of information in accounting?
A: Financial accounting, management accounting, audit and internal control and social and environmental accounting.
What is financial accounting
Financial accounting - focuses on the provision of information to external stakeholders eg investors creditors. presented in the financial statements
What is management accounting
focuses on the provision of information to internal stakeholders. Eg employees and managers To aid in operational planning and control decisions
What is audit and internal control
Ensures financial statement accuracy, verification - important for investers and creditors
What is social and environmental accounting
focuses on the provision of non- financial information to users to the enterprise
What is revenue and explain sales revenue
An increase in company wealth measured through cash recieved through selling G&S or promising to do so (accounts recievable)
What are the other forms of revenue
Interst income on bank accounts/ investments
Dividends from investments in other companies
What are expenses
Decreases in company wealth
