5.1 Role of Finance Function Flashcards
(26 cards)
What is the primary role of the finance function in a business?
To provide accurate financial information for decision-making
This includes costs, revenues, profit and loss data, and cash flow forecasting.
What types of financial information are vital for a business?
• Costs of revenues
• Profit and loss information
• Average rate of return and profitability data
Accurate and up-to-date data is essential for informed decision-making.
Which types of businesses typically have a separate finance function?
Larger businesses
Sole traders and partnerships usually rely on accountants for financial oversight.
Why might a business’s break-even output change?
Due to altered production processes
Changes can arise from initiatives like becoming more environmentally friendly.
How does the finance function support business planning?
By influencing startup, expansion, equipment replacement, and day-to-day expense management
Finance is crucial for operational continuity and growth.
What can restrict business activity related to finance?
An inability to gain finance
This limitation can impact operational capabilities and business growth.
What are the sources of finance?
Where a business gets its money from
Sources can include loans, investments, and revenue from sales.
What does revenue refer to in a business context?
Money made from sales
Revenue is a critical component of a business’s financial health.
Fill in the blank: The _______ is the number of products a business needs to sell in order to cover its costs.
Break-even
Understanding break-even is essential for pricing and sales strategies.
What is cash flow?
A record of the money coming in and going out of a business
Cash flow management is vital for maintaining liquidity and operational efficiency.
True or False: The finance function has no impact on business decisions.
False
The finance function plays a crucial role in informing and influencing business decisions.
What does the term ‘role of the finance function’ refer to?
The jobs done by a finance department in a business
What are the key responsibilities of the finance function? List at least three.
- Calculating sales revenues and production costs
- Forecasting cash flow
- Arranging finance from loans or shares
True or False: The finance function is only found in large businesses.
False
What is included in financial information?
- Details of profit
- Loss
- Cash flow
- Break-even
- Profit margin
- Average rate of return
Fill in the blank: The finance function provides financial information about ______, spending on marketing, and production costs.
cash flow
How does the finance function influence business decision making?
Provides financial information necessary for decisions like launching new products
What is the purpose of calculating the break-even output?
To avoid a loss
What might a business need to arrange finance for?
Loans or shares
What is the average rate of return used for?
To measure how well the business is doing
In small businesses, who usually helps with the finance function?
A firm of accountants
What is the role of the finance function in managing payments?
To manage wages, bills, and receipts of money from sales
What is meant by ‘forecasting cash flow’?
Estimating expected revenues and expenditures
Explain the interdependence of departments in a business.
Different departments, like finance and production, influence each other’s decisions
