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2298A Management in Kin > week 6: financial management > Flashcards

week 6: financial management Flashcards

1
Q

financial management

A
  • planning and implementing the efficient and effective use of financial resources to achieve the goals of the organization
  • goals vs means
  • it is NOT just about numbers
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2
Q

fundamentals off management

A
  • income statement
  • balance sheet
  • cashflow statement
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3
Q

assets

A

a resource owned or controlled (ie. money, a building, inventory)

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4
Q

liabilities

A
  • a debt or financial obligation (what you owe on a loan)
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5
Q

owners/shareholders equity

A

total value of assets, taking into account liabilities
(equity = assets - liabilities)

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6
Q

revenue

A

funds received by an organization; increase in money

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7
Q

expenses

A

costs; outflow of money

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8
Q

profit

A

financial gain (revenue > expenses)

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9
Q

loss

A

financial loss (revenue< expenses)

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10
Q

what are the different financial statements?

A
  1. balance sheet
  2. income statement
  3. cashflow statement
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11
Q

balance sheets

A

provides a clear picture of the wealth of a sport organization through a compilation of assets and liabilities
- assets always appear at the top of these balance sheets
assets = liabilities + equity
- assets can be appreciate or depreciate

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12
Q

appreciate asset

A

value increase over time (ie. property)

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13
Q

depreciate asset

A

value decreases over time (ie. cars, gym equipment, office supplies etc)

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14
Q

income statements

A

provides a clear picture of the wealth of a sport organization through a compilation of revenues and expenses
- across a period of time
- records transactions when they occur regardless of when cash changes hands and shows the profit/loss achieved
- operating, investing, financing activities

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15
Q

cashflow statement

A

profit and cash are NOT THE SAME
- organizations cannot trade on profit terms, only cash terms
- basically summarizes what has gone in and our over the last accounting period

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16
Q

ratio analyses

A
  • a method of evaluating an organizations financial performance by comparing in accounts with those of : previous years, budgets, other companies
17
Q

key points to establish when using ratios

A

what are the “units” of the ratio?
what does the ratio mean?
what does a change in the ratio mean?
what is the “norm” for the ratio?
what are the limitations of the raio?

18
Q

what are units for ratios

A
  • growth
  • profit
  • productivity
  • liquidity
19
Q

profitability (performance)

A

growth, profit, and productivity ratios
- gross profit

20
Q

liquidity

A

financial status ratios
- current ratio

21
Q

profitability ratios

A

gross profit ratio:

22
Q

gross profit ratio

A

how much profit an organization generates after deducting its costs of revenues
- gross profit ratio = (gross profit/profit) x 100%

23
Q

gross profit and profit

A

gross profit: total earned - total spent

profit: total earned

24
Q

liquidity ratios

A

current ratio

25
Q

current raio

A

establishes whether a business has enough resources to meet immediate financial requirements
- current ratio = current assets/ current liabilities

26
Q

current assets

A

can be converted into cash easily

27
Q

current liabilities

A

short term

28
Q

ratio of 1

A

$1 of resource to meet $1 of liability
- ideally, should be >1 but it varies by sector
- caution: not necessarily good to have plenty of current assets

29
Q

what are the three types of budgets

A

1: operating budgets
2: program budgets
3: capital budgeting

30
Q

operating budgets

A

estimate as accurately as possible, the organizations’ revenue and expenses

31
Q

program budgets

A

allocating a designated amount of funds to each activity or program

32
Q

capital budgeting

A

involve significant investments that are intended to produce some level of financial return or public benefit

33
Q

what are some benefits for budgeting in sports organizations

A
  1. anticipate the future (assisting the strategic planning)
  2. determine resource needs and program priorities
  3. identify revenue shortfalls
  4. manage and monitor spending
  5. communicate the financial plans to key partners
  6. set and measure financial performance goals
34
Q

costing

A

is essential to budgeting
- provides a starting point for controlling and managing costs contrasting between fixed and variable costs

35
Q

fixed costs

A

remain constant - independent of the level of activity, or number of spectators, clients, or units

36
Q

variable costs

A

change in direct relation to the number of spectators clients and users

37
Q

break-even analysis

A
  1. break even
  2. profit
  3. loss
38
Q

break even

A

revenues = expenses
- not making money; not losing money

39
Q

profit

A

revenues > expenses
- making money

2298A Management in Kin (12 decks)

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