Chapter 2: Using Financial Objectives

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  • Using Financial Objectives
    • Types of financial objectives
      • Cash Flow targets
        • maintaining minimum closing monthly cash balance
        • creating a more even spread of sales revenue
        • spreading costs more evenly
        • setting contingency fund levels
        • achieving a certain level of liquidity
        • raising levels of cash at certain times
      • Cost Minimisation
        • relocating to 'least-cost' site
        • reducing wage costs per unit
        • lower waste levels
        • improving efficiency of production
        • achieving economies of scale
      • ROCE
        • achieve a ROCE that exceed previous years
        • achieve a ROCE that exceeds competitors
        • achieve a ROCE which is favourable in the indutsry
      • Shareholder's Return
        • high dividend per share
        • high dividend yield
        • high earnings per share
        • increasing share price
      • Other financial objectives
        • sales maximisation
        • liquidity and gearing targets
        • financial efficiency targets
        • financial objectives for individual projects
    • Reasons for setting financial objectives
      • act as a focus for decision making
      • provide a yardstick to measure success or failure
      • improve co-ordination by giving a common purpose
      • improve efficiency by examining reasons for success or failure
      • allow other organisations to confirm financial viability of business
      • allow shareholders to see if business is a worthwhile investment
    • Internal Influences on financial objectives
      • Corporate objectives
        • consistent with corporate objectives
      • Human Resources (HR)
        • depends on effort and skill of workforce
      • Operational factors
        • relies on operations to manufacture products
      • Resources available
        • need strong resources base
      • Nature of the product
        • depend heavily on goods or services
    • External Influences on financial objectives
      • Political
      • Economic
      • Social
      • Legal
      • Environmental
      • Technological


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