M2-Topic 1 role of financial management Flashcards Preview

Business study Year 12 > M2-Topic 1 role of financial management > Flashcards

Flashcards in M2-Topic 1 role of financial management Deck (23)
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1
Q

what is financial management

A

the planning and monitoring of a business’s financial resources

2
Q

why is financial management important

A

careful financial management is important if a business if it is to achieve its financial objectives.

3
Q

what are strategic goals

A

they are long term broad aims for the business

4
Q

what is the strategic role of financial management

A

ensuring available funds for the smooth operation of all business activities.

5
Q

how does finances achieve their strategic role (4)

A

setting achievable financial objectives
preparing budgets
forecast future finances
maintaining sufficient cash flow

6
Q

what are the 5 objectives for financial management

A
profitability
growth
efficiency
liquidity
solvency
7
Q

what is profitability

A

earning performance of business + capacity to use resources to maximise profit

8
Q

what variables must be watched to monitor profitability(5)

A
revenue
pricing policies
costs
expenses
inventory level of assets
9
Q

what is growth

A

the ability of the business to increase in size in the long term

10
Q

what is efficiency

A

the ability of the business to minimise its costs and manage its assets.

11
Q

what variables must be watched to monitor profitability (3)

A

levels of inventories
cash
the collection of receivable

12
Q

what is liquidity

A

the extent to which a business can meets its short term financial commitments

13
Q

how can a business meets its financial commitments(2)

A

have sufficient cash to pay it off

converting current assets into cash quickly(selling inventory)

14
Q

what is solvency

A

the extent to which the business can meet its long term financial obligations

15
Q

what is the importance of managing solvency

A

it is the indication to shareholders and potential shareholders of the risk in their investment

16
Q

why is liquidity important

A

liquidity maintains the business’s level operate

17
Q

what impact does efficiency have on profitability

A

lowers costs, waste, and speeds up production. allowing the business to bring out goods faster, boosts cash flow, and maximises profitability

18
Q

what does operations provide for finance

A

operations produces products for sale (provides income)

19
Q

what does finance provide operations with

A

provides operations with a budget, to take care of expenses to create products(resources, wages, equipment.)

20
Q

what does marketing provide finance

A

marketing promotes product in hopes of boosting income generation

21
Q

what does finance provide marketing

A

finance provides a budget for marketing, in order to create future marketing campaigns

22
Q

what does H.R. provide finance

A

H.R. manages staff enabling to contribute to the financial success of the business

23
Q

what does finance do for H.R.

A

Finance provides, H.R. with a budget, in order to enable them to find and manage staff

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