Role of financial management

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  • Created by: Alice
  • Created on: 04-04-13 10:20
definition of financial management
planning and monitoring of a business' financial resources to enable a business to achieve its financial goals
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What does strategic planning include (two)
- a long term view of where the business is goin, - strategies to achieve the goals
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definition of financial resources
resources that have monetary value
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what could the mismanagement of financial resources lead to?
- inadequate capital, - too many non productive assets, - delays in paying accounts, - business failure, - overstocking
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strategies in a strategic plan include
- paying debts, -developing control techniques, - auditing financial accounts, - continuing to make profits
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why is strategic planning important
it is essential for the growth and success of a business and to achieve financial goals
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5 objectives of financial management
Profitability, Growth, Effeciency, Liquidity, Solvency
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definition of profitability
the ability of a business to maximise its profits
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definition of growth
the ability of the business to increase its size in the longer run
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definition of effeciency
ability of a business to use its resources effectively in ensuring financial stability and profitability
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definition of liquidity
a measure of how quickly an asset may be converted into cash and therefore available to pay short term debts as they fall due
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defition of solvency
ability of a business to pay both long and short term debts as they fall due. It is a measure of a business' financial stability
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definition of gearing
how much debt finance the business has acquired to fund operations compared to its equity finance
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what are financial objectives
objectives are based on the goals of strategic plans and are either short or long term
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features of short- term goals
- tactical (1-2yrs) or operational (day to day), - reviewed reguraly to check targets are met
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features of long - term goals
- these are strategic plans, determined for a set period, very broad
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the role of finance in the interdependence of business functions
a financial manager must allocate adequate funds to each department to operate successfully and to develop budgets and cost controls for each department
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examples of business goals
- increase dividends to shareholders, - be environmentally friendly, to be a market leader
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what are goals?
longer term outcomes of a business
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how are goals turned into objectives
outcomes acheieved through greater detail and this is measured or evaluated
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why are strategic plans important?
- a long term view of where the business if going, - the strategies to acheive the goals
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Other cards in this set

Card 2

Front

What does strategic planning include (two)

Back

- a long term view of where the business is goin, - strategies to achieve the goals

Card 3

Front

definition of financial resources

Back

Preview of the front of card 3

Card 4

Front

what could the mismanagement of financial resources lead to?

Back

Preview of the front of card 4

Card 5

Front

strategies in a strategic plan include

Back

Preview of the front of card 5
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