setting financial objectives Flashcards
benefits of financial objectives
provide direction and can be used to measure financial performance
can be used to support decision making throughout the business
can be used to motivate employees and teams of employees
what can return on investment be used as
a financial objective
what is the calculation for return on investment
profit from investment (divided by) investment cost x 100
what does return on investment do
allows a business to calculate efficiency of a protect by comparing the amount invested with the snout by returned
what are two types of financial objectives
return on investment
long term funding
cash flow
revenue
costs
cash flow
investment
capital structure
what is are some objectives from long term funding
ensure no more than a certain % comes from debt
setting targets to reduce long term funding from debt can protect a business if there is an increase in interest rates
how is revenue calculated
quantity of goods sold x selling price per item
how is total cost calculated
fixed costs + variable costs
what does cash flow do
cash flow compares cash inflows and cash outflows to ensure a business always has enough cash to meet its short- term debts
what are investment objectives
cover the total expenditure planned by a business to develop capital projects
what is capital structure targets
capital structure targets focus on the proportion of capital recurved from different sources of finance
