processes

Question 1

6 steps of financial planning

Answer 1

1 Addressing financial
position
2 Determining Financial
needs
3 Developing Budgets
4 Maintaining Record
Systems
5 Assessing Financial
Risk
6 Establishing Financial
controls

Question 2

debt finance: advantages and disadvantages

Answer 2

A: funds readily available, increased earnings and profit, tax deduction for interest payments
D: increased risk, security is required, repayments, lenders have claim on money in the case of bankruptcy

Question 3

equity financing: advantages and disadvantages

Answer 3

A: no repayments, no interest, control over how its used, low gearing, less risk
D: lower returns, expectations of return on investment

Question 4

financial ratios

Answer 4

liquidity – current ratio
gearing – debt 2 equity ratio
profitability – gross profit ratio, net profit ratio, return on equity ratio
efficiency – expense ratio, accounts receivable turnover ratio

Question 5

Limitations of Financial Reports (NCVTDN)

Answer 5

normalised earnings
capitalising expenses
valuing assets
timing issues
debt repayments
notes to financial statements

Question 6

ethical issues related to financial reports (GRRA)

Answer 6

goods and services tax
audited accounts
record Keeping
reporting practices