CHAPTER 9 Flashcards
(18 cards)
What is financial management?
The planning, organising, and controlling of a business’s financial resources to achieve financial objectives and broader goals.
Why is financial management important for business success?
It ensures profitability, return on investment, long-term stability, and growth, while poor financial management can lead to business failure.
What is the strategic role of financial management?
To provide financial resources required to implement a business’s strategic plan and support operations, marketing, and HR functions.
Name three key responsibilities of finance managers.
- Setting financial objectives
- Preparing budgets and forecasts
- Sourcing finance
What are financial controls, and why are they important?
Policies and procedures to prevent theft, fraud, asset loss, and record-keeping errors, ensuring financial stability.
What are some consequences of mismanaging financial resources?
- Insufficient cash to pay suppliers
- Inability to pay long-term debts
- Business failure
What are the five main objectives of financial management?
Profitability, growth, efficiency, liquidity, and solvency.
Q: Define profitability in financial management.
A: The ability to make financial returns by ensuring revenues exceed expenses, maximising profit.
How does a business achieve growth?
Through expansion of product range, sales, profits, and market share, either internally or externally (mergers/acquisitions).
What is efficiency in financial management?
Minimising costs and maximising asset utilisation to achieve the highest profit with the least resources.
Define liquidity and why it is important.
The ability to meet short-term financial obligations; without liquidity, businesses may struggle to pay employees and suppliers.
What is solvency, and how is it measured?
The ability to meet long-term financial commitments; measured using gearing (ratio of debt to equity finance).
What is the difference between short-term and long-term financial objectives?
Short-term focuses on cash flow and profitability, while long-term emphasises business growth and expansion.
How can short-term and long-term financial objectives conflict?
Borrowing funds for long-term investment can strain short-term liquidity and profitability.
How does financial management interdepend with operations?
A: Operations rely on financial management for capital investments, budgeting, and cost controls to improve efficiency and profitability.
Q: How does finance support marketing?
A: Finance provides funds for promotions, sets budgets, and tracks sales and market performance.
Q: How does finance impact human resources?
A: Funds HR activities like salaries, training, and dispute resolution, affecting overall efficiency and profitability.
How has Qantas demonstrated effective financial management?
A: Through strategic cost savings, fleet investment, and recovery strategies post-pandemic, achieving record profitability in FY23 and FY24.
