Business Studies: Finance
Card Set Information
Business Studies: Finance
Business Studies Finance
simple finance notes
Distinguish between goals and objectives.
are targets that the business plan to achieve, whereas
provide greater detail about the business's mission.
State the objectives of financial management.
Outline the influences of financial management.
internal sources of finance
external sources of finance
influences of government
Identify the main sources of external finance.
Debt and equity.
Main financial institutions.
finance and life insurance companies
Australian Securities Exchange (ASX)
Identify 3 global market influences.
Availability of funds
Outline the financial elements of planning cycle.
Identify the factors that determine business's financial needs.
size of the business
current phase of the business cycle
future plans for growth and development
capacity to source finance
management skills for assessing financial needs and planning
Summarise the different types of budgets and their importance in financial planning.
: sales production, expense, raw materials, labour hours
: capital expenditure, research and development
: income statement, balance sheet, cash flow statement
Most common causes of financial problems and losses.
damage or loss of assets
errors in records systems
Advantages & disadvantages for debt finance.
advantages - tax deduction fro interest payments & increased funds should lead to increased earnings and profits
disadvantages - security is required by the business & regular repayments have to be made
Advantages & disadvantages for equity finance.
advantages - cheaper than other sources of finance as there are no interest payments & less risk for the business and the owner
disadvantages - lower profits and lower returns for the owner & the expectation that the owner will have about the return on investment
Identify the 3 main financial controls.
1. cash flow statements
2. income statements
3. balance sheets
Outline the difference between an asset and a liability.
represent what is owned by a business, whereas
represent what is owed by the business.
Name the types of financial ratios.
current ratio = liquidity
debt to equity ratio = solvency
gross profit ratio = profitability
net profit ratio = profitability
return on equity ratio = profitability
expense ratio = efficiency
accounts receivable turnover ratio = efficiency
Identify the limitations of financial reports.
notes to the financial statement
Outline the 3 main types of audits.
: conducted by the business's employees
: conducted to review the business's strategic plan
: conducted by independent and specialised audit accountants
Outline the management strategies for a cash
identifying when the distribution of payments can be and are made
using discounts for early payments
Procedures for managing accounts receivable.
checking the credit rating of prospective customers
sending customers' statements monthly
following up on accounts that are not paid by the due date
instructing a reasonable period for the payment of accounts
putting policies in place for collecting bad debts
Main strategies for working capital management.
leasing - the hiring of an asset from another person or company who has purchased the asset and retains ownership of it
sale and lease-back - the selling of an owned asset to a lesser and leasing the asset back through fixed payments for a specified number of years