Introduction to Finance and Financial Management Flashcards
(13 cards)
What is the Board of Directors?
The managers and stewards of the business who should act in the best interest of the shareholders.
What is financial management?
The purpose of financial management is to support the specified business objectives of an organisation. Financial management is concerned with the financing and investment decisions made by the management of companies in pursuit of corporate goals. The basic objective in business finance is to maximise the wealth of the ordinary shareholder.
What are financial managers responsible for?
Financial managers are responsible for the efficient and effective management of the finances of an organisation in order to achieve its objectives.
Name some other terms used interchangeably or associated with the term ‘financial management’.
Business Finance, Corporate Finance, Managerial Finance, Strategic Finance.
Name the 3 primary decisions involved in Financial Management.
Investment decision, Financing decision, Dividend decision
What is the Investment Decision?
The investment decision determines the future earning potential of a company. The investment decision, once taken, is often costly to exit. It is deemed the most important decision facing a business finance manager.
What is the Financing decision?
The financing decision involves determining the source of finance to be used by a company for funding its on-going operations and investment activity.
What are the 2 main types of finance?
Debt - typically a loan
Equity - share capital or retained reserves
What is the dividend decision?
This involves the companies decision to provide a return to shareholders. It involves the process of determining a dividend policy.
What is the role of the finance manager?
Strategic management, risk management, operations management. A Finance Manager works with other managers to provide relevant information, which is used by the Board of Directors for strategies to achieve the business objectives.
What is strategic management?
Strategic management is concerned with the development of objectives and the formulation of long-term plans to achieve them. Strategic management identifies possible courses of action. Through strategic management the finance manager evaluates options and makes choices in order to achieve objectives.
What is operations management?
Operations management involves the day-to-day management of a business. Through operations management the finance manager ensures that business activities conform to the business plans.
What is risk management?
Risk management analyses business and financial risk e.g. economic risk, interest rate risk, exchange rate risk etc.
