Financial Objectives

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  • Created by: hamishc
  • Created on: 18-04-16 20:46
What are financial objectives?
Financial goals that a business wants to achieve in a period of time.
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Who are financial objectives set by?
Financial managers.
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What are advantages of financial objectives?
They can improve coordination, set a focus for decision making, allow shareholders to decide on whether to invest.
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What are the 6 types of financial objectives?
Revenue, costs, profit, cash flow, return on investment, capital expenditure objectives.
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What is cash flow?
All the money flowing into and out of the business over a period of time.
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Why is cash flow important?
Business needs cash in the short term to survive, e.g. buy raw materials and make products.
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List 3 things that can cause a business to have poor cash flow?
Allowing credit on payments, investing too much money, overtrading (producing so much, it can no longer pay its debt to employees etc..)
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Why are cash flow objectives used?
To help prevent cash flow problems.
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What is return on investment?
A measure of how efficient an investment is.
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What is the ROI equation?
ROI = return on investment / cost of investment X 100
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What is capital?
Wealth in the form of money or other assets owned by the business.
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What is capital expenditure?
The money spent to buy fixed assets.
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What is capital structure and what is it made up of?
The way a business raises capital to purchase assets. Made of debt capital (borrowed funds) and equity capital (share money).
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Give 3 internal factors that influence financial objectives.
Overall objectives of the business, the status/ maturity of the business, other areas of the business (labour turnover etc..)
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Give 3 external influences on financial objectives
Competitor actions, the state of the economy, desires of shareholders.
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Card 2

Front

Who are financial objectives set by?

Back

Financial managers.

Card 3

Front

What are advantages of financial objectives?

Back

Preview of the front of card 3

Card 4

Front

What are the 6 types of financial objectives?

Back

Preview of the front of card 4

Card 5

Front

What is cash flow?

Back

Preview of the front of card 5
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