Introduction to financial management

Question 1

What is the objective of a financial manager?

Answer 1

It is to increase stakeholder’s value

Question 2

How do fiancial managers aim to increase stakeholders value

Answer 2

Through:
Investment decisions, PPE, Operating assets, Enterprises, & shares
Financing decisions, are investments financed by equity/debt
Dividend decisions

Question 3

Where do financial managers obtain information required when making decisions?

Answer 3

INTERNAL- Accounting records & management info
EXTERNAL- Economic & business environment

Question 4

What are the principles applied when making financial decisions?

Answer 4

Capital budgets
Portfolio management
Mergers & acquisitions
Cost of capital
Sources of financing
Capital structures
Types of financing
Analysis & interpretation
Risk & return
Hedging
TVM

Question 5

What is corporate governance?

Answer 5

The system of rules, practices & processes by which a firm is directed & controlled
It essentially involves balancing the interests of a company’s many stakeholders
Internal control supports good corporate governance practices

Question 6

Name the King IV principles

Answer 6

The board should be led ethically & effectively
The board should ensure that the organization is seen to be a responsible cooperate citizen
The board should appreciate that the organizations core purpose, it’s risks & opportunities, strategy, business model, performance & sustainable development are all inseparable elements of the value creation process
Integrated reporting

Question 7

Name & explain King code ethical values

Answer 7

INTEGRITY- Professional accountants should be straightforward, honest, fair, & truthful in professional & business relationships
CONFIDENTIALITY- Professional accountants should not use confidential information to acquire as a result of a professional/business relationship to the advantage of a 3rd party
PROFESSIONAL COMPETENCE & DUE CARE- Professional accountants should maintain professional knowledge & skill at the level required to ensure that clients/ employers receives competent professional service
PROFESSIONAL BEHAVIOUR- Professional accountants should comply with relevant laws & regulations & avoid any action that may bring discredit to the profession
TRANSPARENCY- Information provided by the company is accurate & clear, that it reflects to the true picture of the company
ACCOUNTABILITY & RESPONSIBILITY- A duty/readiness to accept responsibility for one’s acts/to answer for them

Question 8

What is corporate strategy?

Answer 8

Each company sets out a mission & vision, strategy is “how” the mission & vision is achieved
Strategic analysis-select a strategy-continuous analysis-monitoring
Strategic analysis tools: Porters 5 force model, PESTEL & SWOT

Question 9

Explain the Porters 5 force model

Answer 9

Competitive advantage obtained through cost leadership/ product differentiation/focus
The following 5 forces impact profitability; Threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers, rivalry among existing competitors