Syllabus Only (Finance) Flashcards
Role of Financial Management overview
- strategic role of financial management
- objectives of financial management
- interdependence with other key business functions
Objectives of financial management (role of financial management)
- profitability, growth, efficiency, liquidity, solvency
- short-term and long-term
Influences on Financial Management overview
- internal sources of finance - retained profits
- external sources of finance
- financial institutions
- influence of government
- global market influences
External sources of finance (influences on financial management)
- 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
Financial institutions (influences on financial management)
banks, investment banks, finance companies, superannuation funds, life insurance companies, unit trusts and the Australian Securities Exchange
Influence of government (influences on financial management)
Australian Securities and Investments Commision, company taxation
Global market influences (influences on financial management)
economic outlook, availability of funds, interest rates
Processes of Financial Managment overview
- planning and implementing
- monitoring and controlling
- financial ratios
- limitations of financial reports
- ethical issues related to financial reports
Planning and implementing (processes of financial management)
- planning and implementing - financial needs, budgets, record systems, financial risks, financial controls
- debt and equity financing - advantages and disadvantages of each
- matching the terms and source of finance to business purpose
Monitoring and controlling (processes of financial management)
cash flow statement, income statement, balance sheet
Financial ratios overview
- liquidity
- gearing
- profitability
- efficiency
- comparative ratio analysis
Liquidity ratio
current ratio (current assets ÷ current liabilities)
Gearing ratio
debt to equity ratio (total liabilities ÷ total equity)
Profitability ratios
- gross profit ratio (gross profit ÷ sales)
- net profit ratio (net profit ÷ sales)
- return on equity ratio (net profit ÷ total equity)
Efficiency ratios
- expense ratio (total expenses ÷ sales)
- accounts receivable turnover ratio (sales ÷ accounts receivable)
Comparative ratio analysis (financial ratios)
- over different time periods, against standards, with similar businesses
Limitations of financial reports (processes of financial management)
- normalised earnings, capitalising expenses, valuing assets, timing issues, debt repayments, notes to the financial statements
Financial management stratagies overview
- cash flow management
- working capital management
- profitability management
- global financial management
Cash flow management (financial management stratagies)
- cash flow statements
- distribution of payments, discounts for early payment, factoring
Working capital management (financial management stratagies)
– control of current assets – cash, receivables, inventories
– control of current liabilities – payables, loans, overdrafts
– strategies – leasing, sale and lease back
Profitability management (financial management stratagies)
– cost controls – fixed and variable, cost centres, expense minimisation
– revenue controls – marketing objectives
Global financial management (financial management stratagies)
– exchange rates
– interest rates
– methods of international payment – payment in advance, letter of credit, clean payment, bill of exchange
– hedging
– derivatives
