Financial Objectives

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  • Financial Objectives
    • Cashflow targets
      • A financial objective focused on maintaining a healthy cash balance
      • Return of investment, reducing bank overdraft, spreading costs more evenly throughout the year
      • A firm which doesn't set/achieve a healthy cash flow targets may struggle to survive due to liquidity problems
      • tactical aspect of cash flow management and improving cash flow
    • Cost minimisation
      • the process by which businesses attempt to maximise profits by keeping costs low
      • if they can minimise costs without having a negative effect on revenue, then the profit margins will be improved
      • Cost minimisation could be achieved by a tactical decision such as changing suppliers or through a more strategy decision such as to relocate abroad
      • Reducing raw materials, improve efficiency
    • ROCE
      • Return on capital employed targets
      • The minimum % return a business strives to achieve from the capital employed in business activities
      • net profit/capital employed  x100
    • Shareholders return
      • the financial rewards to a shareholder in return for their investment, can include dividends paid and increased share value
      • a high dividend per share
      • increasing the share price
    • Internal influences
      • Characters of the firm
        • size
        • status
        • age
        • product/service
      • Owners
        • depends on relationship between owners and directors
      • Sector
        • eg; private investors, private sector etc.
      • Opportunity cost
        • cost minimisation may reduce quality or workforce morale
      • corporate objectives
        • financial objectives need to be consistent with the overall corporate objectives of the business
    • External influences
      • competitors actions
      • economic conditions
      • suppliers
      • PESTLE
        • Political
        • Economic
        • Social
        • Techonological
        • Legal
        • Environmental


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