Role of Financial Management

Question 1

What is the strategic role of finance?

Answer 1

To ensure a business can OPERATE, GROW and ACHIEVE their goals through the management of financial resources.

Question 2

What are the objectives of financial management?

Answer 2

PLEGS

Question 3

What is profitability?

Answer 3

Ability of a business to maximise profit

Question 4

What is growth?

Answer 4

Ability of a business to increase its size in the long term through increasing value of assets

Question 5

What is effciency?

Answer 5

The ability to maximise value of assets with lowest possible production costs. Also to collect accounts receivable.

Question 6

What is Liquidity?

Answer 6

Ability of a business to meet its short term financial commitments

Question 7

What is solvency?

Answer 7

Ability of a business to meet its long term financial commitments

Question 8

Why is solvency important?

Answer 8

It indicates the level of risk of investments to owners, shareholders and creditors

Question 9

How do the KBFs help finance overall?

Answer 9

They increase profitability and efficiency

Question 10

Define Interdependence

Answer 10

The mutual reliance of one business function on another to meet the goals of the business.

Question 11

What is Financial Management?

Answer 11

The planning and monitoring of a business’s financial resources to enable the business to achieve its financial objectives.