financial management Flashcards
(39 cards)
it is the planning document used by an org that forecasts both the r/s btwn funds and expenses
budgeting
- through budgeting that an org turns its strategic plans into daily operations
it is the area of management that is concerned with profitability, expenses, cash flow, and credit. It involves making strategic decisions about how money is raised and spent to maximize the value of the organization.
financial management
[handling money in a smart way within an organization
It focuses on
- making a profit
- controlling spending
- managing cash coming in and going out
- handling debts and loans]
it is a process of making a plan on how you will spend on your businesses money over a given period
budget/ budgeting
- can estimate/ predict companies revenue and expenses for a particular period
- hence they are to be re-evaluated/ re-adjusted on periodic places so that it will be a useful tool in daily operations where strategic plans are being carefully applied
who are the roles of leader according to Henry Mintzberg
Interpersonal Roles:
- interactions with others inside and outside the organization.
- Figurehead – Performs ceremonial duties and represents the organization formally.
- Leader – Motivates and manages employees, builds team spirit.
- Liaison – Maintains a network of contacts outside the organization to gather information and build relationships.
Informational Roles:
- receiving and sharing information.
1. Spokesperson – Represents and speaks on behalf of the organization to outsiders (e.g., media, stakeholders).
2. Monitor – Gathers internal and external information relevant to the organization.
3. Disseminator – Communicates information to employees within the organization.
Decisional Roles:
- involve making important decisions and allocating resources.
1. Decision Maker (more precisely: Entrepreneur) – Initiates change and innovation.
2. Disturbance Handler – Deals with unexpected issues and conflicts.
3. Resource Allocator – Decides where to allocate resources such as budget, time, and personnel.
4. Negotiator – Participates in negotiations with other organizations or individuals.
*budgetary is not the correct term daw
true or false:
the evaluation of income and expenses are non periodically
true - it can be monthly basis, quarterly, weekly, semiannual etc
(depends on the suitability of the organization)
well planned financial budget will lead to?
a powerful tool to achieve a long term goal of in any business
most imptly, it keeps the shareholders and other members of the organization updated of the functioning of the business
[guides the business toward success and helps everyone stay on the same page.]
briefly explain the strategic plan process
gather facts > swot analysis > review inputs > strategic matrix >
define strategies > review and adjust
[Gather facts – Collect data about the organization and its environment.
SWOT analysis – Identify Strengths, Weaknesses, Opportunities, and Threats.
Review inputs – Look at all information and insights gathered.
Strategic matrix – Organize and analyze strategies based on priorities.
Define strategies – Choose clear goals and how to achieve them.
Review and adjust – Regularly check the plan and make changes as needed.]
briefly explain the approaches in budget
- centralized
- fully controlled by the leader/ top management - decentralized
- there is participation of the lower level as designated by the top leader
[Centralized means only the boss decides.
Decentralized means the team helps plan.]
briefly explain the types of budgeting
FIX-CEILING BUDGET
- aka budget ceiling
- means cup on standing
- uppermost spending limits set by the org
- ensures that the company wont spend more than what it earns
[sets a max. spending limit]
OPEN-ENDED BUDGET
- dangerous type
- has no specific amt declared
- auditing budget happens only right after the activity ends
[budget is only reviewed after activty ends]
FLEXIBLE BUDGET
- aka variable budget
- financial plan of estimated revenues and expenses based on the current actual amounts of output
- estimates how the revenues will change based on the output
- one can adjust
- to predict best and worst case scenario
- provides a “what if” look at the financial performance
SUNSET BUDGET
- self destructing and cessation budget
- ensure to spend within a determined date
(fr ex: budget of 10K and predetermined date is after 6 months - so stop after 6 months)
ZERPO BASED BUDGET
- start from ntg
- budget is not based form the previous budget but starts at 0
- have to justify everything before putting in the official budget
- pri goal: to reduce spending by looking at where cost can be cut out
CONTINGENCY BUDGET
- used during emergency
- this are set aside for unexpected cost
- if it has been all been used up, it needs to be replenished
it deals with the process of planning for the lab as an ongoing business concern accounting for everyday need
operational budget
[plan that helps a lab manage its everyday money needs so it can keep running smoothly.]
operational budget prep:
1. time frame
- timeline
2. forecasting stage
- business foresight (projected expenses and profit)
3. scheduling stage
- when and whr the budget will go
4. synthesis of information
- collation of info for budget prep
[Decide how long the plan will last (like a month or year).
Guess how much money you will spend and earn.
Plan when and where you will spend the money.
Put all this information together to make a clear plan.]
the important determinant in forecasting the staffing needs for the budget year is the projected volume of work
when planning, how to know how many staff is needed for the year
look ar how much work you expect to do
expenses and job costing
- refers to any money spent
- no. of labor hours needed can be projected in ratios that calculate the tests performed per paid and/ or worked hours
*if there is an increase in usage of raw materials, there is an increase in equipment etc, therefore the overhead cost will also increase
[More work means you need more staff and materials, which means more costs overall.]
what are revenue
sales or earnings
it is the pri tasks of the accounting process
providing financial info
- an effective accounting system provides managers w 3 types of info
- internal reporting to managers
- used in planning and controlling current operation - internal reporting to managers
- used in strategic planning
[- helps w long term planning and big decisions] - eternal reporting to stockholders
- gov and other outside parties
[to show how the business is doing]
how can business organization classified
for accounting tax purposes
1. privately owned
- profits from the enterprise are distributed to the owners
- they r called non profit companies and subject to all taxes
- government, charitable religious or educational org
- serves a social cause have a special tax exempt status
[[businesses are either private companies that pay taxes and share profits with owners, or special groups that serve the public and may not have to pay taxes]]
briefly explain the accounting specialties
financial accounting:
- referred to as a score keeping function
- pri dedicated to recording bottom line financial position of the org
- function is on the cash flow and financial position of the firm
cost accounting:
- aka managerial accounting (whr the managers decide on how to minimize the loss and increase revenue)
- provide manager w operation to operate the business
- emphasize on analyzing and providing operational info (EXPENSES and PROFIT)
[financial accounting shows the big money picture, while cost accounting helps manage and improve daily business costs.]
it is the balance sheet provides a snapshot of the economic status of the business at a specific time
the accountig eqn
- reflected in the balance sheets
- consists of: assets and equities
[Assets = Liabilities + Equity]
it is the resources that the firm uses to conduct its business and they are consumed or expire in the day to day operation of the enterprise
assets
- anything valuable that the company owns
- ex: equipment, machineries, intellectual properties
“how much do i have?”
briefly explain the 2 parts of equities
equity
- refers to remaining value of owner’s interest in a company
- net amt of funds invested by its owners without any retained earnings
- liabilities
- same for all enterprise and consists of bills owned or other obligations
- fr ex: loans, mortgage, or any money that owed from someone else
- “how much do i owe?”
2 stockholder equity or retained earnings
- remaining value of the company
- depend on the type of corporate structure
- how much value is left over once totaled on the valuable i have minus to the creditors
- “how much is left over?”
[Equities = What I own (after paying debts) + What I owe.]
calculation of profit + not for profit
PROFIT
assets = equites (liabilities + stockholder equity)
NON-PROFIT
assets = equities (liabilities + retained earnings)
“hw much do i have”
assets
it is the net amt of funds invested by its owners without any retained earnings
equities
"”how much do i owe”
equities - liabilities
“how much is left over?”
equities - stockholder equity or retained earnings
this method is the one additional concept is important to understand the principles that guide accounting
recording of financial activity
- record and report income and cost
- 2 standard technique:
cash basis
⤷ simplest method
⤷ does not provide any info to manager abt the operation of the company (cash in and out)
⤷ when received from customers
⤷ expenses are recorded when cash paid to suppliers and employee
accrual basis
⤷ aka expense recognition
⤷ attempts to measure net income for a particular period by matching expenses against revenues (forecasting)
⤷ uses invoices/ bills (did not receive any payment but have a transaction)
*the differences are the timing of transaction records
[cash = small businesses
accrual = large businesses]
[Cash basis = record money in and out.
Accrual basis = record money earned and spent, even if cash hasn’t moved yet.]
