Syllabus Only (Finance)

Question 1

Role of Financial Management overview

Answer 1

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

Question 2

Objectives of financial management (role of financial management)

Answer 2

• profitability, growth, efficiency, liquidity, solvency
• short-term and long-term

Question 3

Influences on Financial Management overview

Answer 3

• internal sources of finance - retained profits
• external sources of finance
• financial institutions
• influence of government
• global market influences

Question 4

External sources of finance (influences on financial management)

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 (influences on financial management)

Answer 5

banks, investment banks, finance companies, superannuation funds, life insurance companies, unit trusts and the Australian Securities Exchange

Question 6

Influence of government (influences on financial management)

Answer 6

Australian Securities and Investments Commision, company taxation

Question 7

Global market influences (influences on financial management)

Answer 7

economic outlook, availability of funds, interest rates

Question 8

Processes of Financial Managment overview

Answer 8

• planning and implementing
• monitoring and controlling
• financial ratios
• limitations of financial reports
• ethical issues related to financial reports

Question 9

Planning and implementing (processes of financial management)

Answer 9

• 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

Question 10

Monitoring and controlling (processes of financial management)

Answer 10

cash flow statement, income statement, balance sheet

Question 11

Financial ratios overview

Answer 11

• liquidity
• gearing
• profitability
• efficiency
• comparative ratio analysis

Question 12

Liquidity ratio

Answer 12

current ratio (current assets ÷ current liabilities)

Question 13

Gearing ratio

Answer 13

debt to equity ratio (total liabilities ÷ total equity)

Question 14

Profitability ratios

Answer 14

• gross profit ratio (gross profit ÷ sales)
• net profit ratio (net profit ÷ sales)
• return on equity ratio (net profit ÷ total equity)

Question 15

Efficiency ratios

Answer 15

• expense ratio (total expenses ÷ sales)
• accounts receivable turnover ratio (sales ÷ accounts receivable)

Question 16

Comparative ratio analysis (financial ratios)

Answer 16

• over different time periods, against standards, with similar businesses

Question 17

Limitations of financial reports (processes of financial management)

Answer 17

• normalised earnings, capitalising expenses, valuing assets, timing issues, debt repayments, notes to the financial statements

Question 18

Financial management stratagies overview

Answer 18

• cash flow management
• working capital management
• profitability management
• global financial management

Question 19

Cash flow management (financial management stratagies)

Answer 19

• cash flow statements
• distribution of payments, discounts for early payment, factoring

Question 20

Working capital management (financial management stratagies)

Answer 20

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

Question 21

Profitability management (financial management stratagies)

Answer 21

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

Question 22

Global financial management (financial management stratagies)

Answer 22

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