Financial resources are those resources that have monetary value
Financial management is the planning and monitoring of an organizations financial resources to enable the organization to achieve its financial goals
Assets are the property and other items of the business both tangible and intangible.
Objectives of financial management:
Liquidity - ability to pay short-term debts.
Profitability - maximizing profits
Efficiency - ability to maximize profits with minimal resources
Growth - increase size in the longer term
Return on Owners Equity - percentage of profit compared with total invested.
The Planning Cycle
Address current financial position
Determine financial elements of business plan
Monitor cash flow
Interpret financial reports
Maintain record system
Planning financial controls
Minimizing financial risk and losses
Major participants in financial markets
Sources of funds
- Owners equity
- Retained profits
- Low gearing
- Less risk
Lower profits and return on OE
ÃÂ§ Bridging finance
ÃÂ§ Bank bills
ÃÂ§ Term loans
ÃÂ§ Trade credit
ÃÂ§ Venture capital
Tax deduction on interest repayments
Lenders have first claim on money if they go bankrupt
Leverage measures the relationship between debt and equity
The accounting framework
Analysis of report
ÃÂ§ Revenue statement - shows revenue earned and expenses incurred over the accounting period.
ÃÂ§ Balance Sheet - shows the businesses assets and liabilities at a point in time.
Current Ratio = Current assets
(working k) Current liabilities
2:1 safe position
Debt to equity = Total liabilities
Gross Profit = gross profit...