planning and implementing

Question 1

what is the process of determining financial needs

Answer 1

the process of determining the funds required to allow a business to operate and achieve its goals

Question 2

what are the factors influencing the financial needs of a business

Answer 2

size, life cycle, future plans and capacity to source finance

Question 3

what is the process of developing budgets ( like what does it do)

Answer 3

budgets provide quantitative information about the financial requirements of a business

Question 4

what are the types of ‘developing a budget’

Answer 4

operating budgets
project budgets
financial budgets

Question 5

what does operating budgets refer to

Answer 5

the main activities of a business

Question 6

what does project budgets relate to

Answer 6

capital expenditure and research and development

Question 7

what does financial budgets cover

Answer 7

the overall financial situation of a business including predictions of operating and project budgets

Question 8

why is having specific budgets do for a business

Answer 8

by having specific budgets it allows the business to understand how its money is being used

Question 9

why are budgets essential

Answer 9

budgets are essential financial management tools for coordinating departments, planning for the future, compare planned and actual performance

Question 10

what do record systems refer to

Answer 10

a set of practices all employees must follow to ensure data is recorded properly - so it can be accurate and reliable

Question 11

what does identifying financial risks refer to

Answer 11

it refers to the risk a business will unable to cover their financial obligations

Question 12

what is financial controls

Answer 12

policies and procedures aimed at reducing financial risk

Question 13

what are the 5 steps of the financial planning process

Answer 13

determining financial needs
developing budgets
maintain record systems
identifying financial risks
establishing financial controls
determining financial needs

Question 14

what is the acronym for the 5 steps to financial planning process

Answer 14

blue and red corner
B
R
C
N
R

Question 15

what is RBCNR

Answer 15

r- record systems
b- budgets
c - financial controls
n - financial needs
r - financial risks

Question 16

how long does the Australian Taxation office (ATO) requires businesses to keep certain financial records

Answer 16

5 years

Question 17

what are the advantages of debt financing

Answer 17

funds are readily available
can be acquired on short notice
does not dilute ownership of the business
repayments are predictable

Question 18

what are the disadvantages to debt financing

Answer 18

must pay interest

establishment fees and maintenance costs

repayments must be made by a set time and date, or late fees will be incurred

loans must be secured against an asset

financial risk is high

Question 19

define equity

Answer 19

funds raised by inviting new owners into the business as shareholders

Question 20

what are the advantages of equity

Answer 20

funds are not repaid

no interest or additional fees

investors are willing to wait for a return on their investment

if the business fails, the funds do not need to be repaid to investors

financial risk is low

Question 21

what are the disadvantages of equity

Answer 21

must share some profits with investors

dividends are not tax deductible

connecting with new investors is costly

does dilute the ownership of the business

Question 22

why matching the sources of finance to business purposes essential

Answer 22

the term of a loan should match the economic lifetime of the asset being purchased

short term finance should be used to fund current assets as less than 12 months and same for long term and non current assets. if the term of the loan does not match the asset, serious problems can arise