Business Studies: Finance

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Business Studies: Finance
2013-09-04 03:44:12
Business Studies Finance

simple finance notes
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  1. Distinguish between goals and objectives.
    Goals are targets that the business plan to achieve, whereas objectives provide greater detail about the business's mission.
  2. State the objectives of financial management.
    • profitability
    • growth
    • efficiency
    • liquidity
    • solvency
  3. Outline the influences of financial management.
    • internal sources of finance
    • global market
    • external sources of finance
    • influences of government
    • financial institutions
  4. Identify the main sources of external finance.
    Debt and equity.
  5. Main financial institutions.
    • banks
    • investment banks
    • finance and life insurance companies
    • superannuation funds
    • unit trusts
    • Australian Securities Exchange (ASX)
  6. Identify 3 global market influences.
    • Economic outlook
    • Availability of funds
    • Interest rates
  7. Outline the financial elements of planning cycle.
    • Financial needs
    • budgets
    • record systems
    • financial risks
    • financial controls
    • financial position
  8. 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
  9. Summarise the different types of budgets and their importance in financial planning.
    • operating budgets: sales production, expense, raw materials, labour hours
    • project budgets: capital expenditure, research and development
    • financial budgets: income statement, balance sheet, cash flow statement
  10. Most common causes of financial problems and losses.
    • theft
    • fraud
    • damage or loss of assets
    • errors in records systems
  11. 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
  12. 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
  13. Identify the 3 main financial controls.
    • 1. cash flow statements
    • 2. income statements
    • 3. balance sheets
  14. Outline the difference between an asset and a liability.
    Assets represent what is owned by a business, whereas liabilities represent what is owed by the business.
  15. 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
  16. Identify the limitations of financial reports.
    • normalised earnings
    • capitalising expenses
    • valuing assets
    • timing issues
    • debt repayments
    • notes to the financial statement
  17. Outline the 3 main types of audits.
    • internal : conducted by the business's employees
    • management : conducted to review the business's strategic plan
    • external : conducted by independent and specialised audit accountants
  18. Outline the management strategies for a cash
    • identifying when the distribution of payments can be and are made
    • using discounts for early payments
    • factoring
  19. 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
  20. 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