Financial Strategies

My revision sheet for 2/4 of the financial strategies for A2 Business - the other 2 should come soon

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Financial Strategies
Financial strategies help to achieve the financial objectives.
There are 4 types of financial strategies:
1. Raising Finance
2. Profit Centres
3. Cost Minimisation
4. Allocating Capitol Expenditure
1.) Raising Finance
Retained profit (business savings). This helps with
future growth and improves profitability
Sell assets. This gives the business money instantly.
The things you sell are usually noncurrent assets
(stores, machinery etc.) This could effect profitability
long term.
Sale & Lease back. If the business needs the money,
you sell the noncurrent assets and then rent/hire them
back. This is used when you still need the asset but
also need the money. This helps cash flow but makes
the firm more vulnerable.
Bank loan. You have to pay this back with interest so
in the long term this can be costly. However it gives a
quick injection of cash into the business. Businesses
usually take out a bank loan to buy fixed assets.
Sell shares/share capitol. Investors put money into
the business and in turn they have a say in the running
of the business and get a share of the profits.
Bank overdraft. This is usually used by businesses to
buy assets that aren't fixed. The overdraft does have
to be paid back relatively quickly so the business
cannot be dependant on it but it does allow the
business to raise some money quickly,.
2.) Profit Centres

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Isolates every store and looks at their individual profits
­ the manager of the store is put in charge of the
financial aspects and different stores are compared
by the business.
This clearly shows what stores are more successful
and what stores are failing.
Makes each store responsible for own
Identifies failing stores
Regional managers look over around 10 stores in their
`area' and look at differences.
May not be stores ­ it may be products that are being
isolated.…read more


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