syllabus - finance

Question 1

role of financial management

Answer 1

+ strategic role of financial management
+ objectives of financial management
+ interdependence with other key business functions

Question 2

objectives of financial management

Answer 2

+ profitability, growth, efficiency, liquidity, solvency

+ short-term and long-term

Question 3

influences on financial management

Answer 3

\+ internal sources of finance - retained profits
\+ external source of finance
\+ financial institutions
\+ influence of government
\+ global market influences

Question 4

external sources of finance

Answer 4

+ debt - short term borrowing (overdraft, commercial bills, factoring) long-term borrowing (mortgage, debentures, unsecured notes, leasing)
+ equity - ordinary shares (new issues, rights issues, placements, share purchase plans ), private equity

Question 5

financial institutions

Answer 5

\+ banks
\+ investment banks
\+ finance companies
\+ superannuation funds
\+ life insurance companies
\+ unit trusts
\+ Australian Securities Exchange

Question 6

influence of government

Answer 6

+ Australian Securities and Investments Commission

+ company taxation

Question 7

global market influences

Answer 7

+ economic outlook
+ availability of funds
+ interest rates

Question 8

processes of financial management

Answer 8

+ planning and implementing - financial needs, budgets, record systems, financial risks, financial controls
+ monitoring and controlling
+ financial ratios
+ limitations of financial reports
+ ethical issues related to financial reports

Question 9

planning and implementing - financial needs, budgets, record systems, financial risks, financial controls

Answer 9

+ debt and equity financing - advantages and disadvantages

+ matching the terms and source of finance to business purpose

Question 10

monitoring and controlling

Answer 10

+ cash flow statements
+ income statements
+ balance sheet

Question 11

financial ratios

Answer 11

+ liquidity - current ration (current assets / current liabilities)
+ gearing - debt to equity ratio (total liabilities / total equity)
+ profitability - gross profit ratio (gross profit / sales); net profit ratio (net profit / sales); return on equity ratio (net profit / total equity)
+ efficiency - expense ratio (total expenses / sales); accounts receivable turnover ratio (sales / accounts receivable)
+ comparative ratio analysis - over different time periods, against standards, with similar businesses

Question 11

financial ratios

Answer 11

+ liquidity - current ration (current assets / current liabilities)
+ gearing - debt to equity ratio (total liabilities / total equity)
+ profitability - gross profit ratio (gross profit / sales); net profit ratio (net profit / sales); return on equity ratio (net profit / total equity)
+ efficiency - expense ratio (total expenses / sales); accounts receivable turnover ratio (sales / accounts receivable)
+ comparative ratio analysis - over different time periods, against standards, with similar businesses

Question 12

limitations of financial reports

Answer 12

\+ normalised earnings
\+ capitalising expenses
\+ valuing assets
\+ timing issues
\+ debt repayments
\+ notes to the financial statements

Question 13

financial management strategies

Answer 13

+ cash flow statements
+ working capital management
+ profitability management
+ global financial management

Question 14

cash flow management

Answer 14

+ cash flow statements

+ distribution of payments, discounts for early payment, factoring

Question 15

working capital management

Answer 15

+ control of current assets – cash, receivables, inventories
+ control of current liabilities – payables, loans, overdrafts
+ strategies – leasing, sale and lease back

Question 16

profitability management

Answer 16

+ cost controls – fixed and variable, cost centres, expense minimisation
+ revenue controls – marketing objectives

Question 17

global financial management

Answer 17

\+ exchange rates 
\+ interest rates 
\+ methods of international payment – payment in advance, letter of credit, clean 
payment, bill of exchange 
\+ hedging 
\+ derivatives