Chapter 5: Selecting Financial Strategies
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- Created on: 12-12-14 13:10
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- Selecting Financial Strategies
- Cost Minimisation
- if it is to be pursued, all departments should be liaised with, as it will have an impact on them
- reducing overheads will allow profit margin to increase
- change in costs, may lead to decrease in quality or efficiency may fall
- if a company can cut its direct costs, then profit margin will increase
- Internal Sources of Finance
- Trading (Retained) Profit
- Sale of Assets
- Sale and Leaseback
- External Sources of Finance
- Ordinary Share Capital
- Bank Loan
- Loan Capital
- Debenture
- Bank Overdraft
- Profit Centres
- Advantages
- allow more focused study of a firm's finances
- benchmarking can take place
- finances may be run more efficiently
- responsibility of profit centre may motivate individual responsible
- Disadvantages
- diseconomies of scale
- allocating costs
- demotivation of staff
- setting targets
- external changes
- an identifiable part of an organisation for which costs and revenue can be calculated
- Advantages
- Cost Minimisation
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