Finanical Strategies and Accounts

?
View mindmap
  • Financial Strategies and Accounts
    • Objectives are the targets pursued by a business, while the strategy is the medium to long term plan to achieve these objectives
    • Corporate objectives and strategies relate to the entire businesss, whereas function objectives relate to finance, markerting or other functional areas
    • Businesses pursue a range of financial strategies including cash flow targets, cost minimisation, ROCE targets and shareholders returns
    • Financial objectives can be influenced by internal and external factors. Examples include the businesses corporate objectives and the actions of the rivals
    • Balance sheets and income statements are vital finanical documents. Balance sheets record a business's assets and liabilities. Working capital and depreciation are important features of balance sheets
    • Income statements record the profit or loss made over a trading period
    • Ratio analysis compares two pieces of accounting data and can be used by a range of stakeholders
    • Ratios can be used to assess a businesses profitability, financial efficiency, liquidity and shareholders returns
    • Ratio analysis allows informed judgements to be made. It has significant limitations - effects of inflation change and it ignores non finanical issues
    • A financial strategy is a medium to long term plan designed to achieve the objectives of a business' finance function
    • Financial strategies include, raising finance, implementhing profit centres, cost minimisation and allocating capital expenditure
    • There are 3 major techniques of investment appraisal - payback, average rate of return and net present value
    • Payback measures investment decisions in relation to time, while ARR considers profitability. Net present value takes both of these factors into account
    • Investment decisions are frequently subject to uncertainty and therefore risky
    • Investment decisions are subject to a number of qualitative influences, including the businesses objectives, corporate image, relations with the workforce and the amount of risk the business is willingf to accept.

Comments

No comments have yet been made

Similar Business Studies resources:

See all Business Studies resources »See all Financial Planning resources »