Profits Flashcards
(13 cards)
What is financial management
The art of managing a business so that it can achieve its financial goals
What are the 3 responsibilities of a financial manager
Financial Planning
Investment / Spending money
Financing / raising money
What is a financial ratio
The relationship between two elements of a firm’s financial statements
What can financial ratios be compared with
The firm’s own past ratios
Ratios of competitors
Industry averages
Look at slides on calculating profitability
What are Retained Earnings
Profits not paid out
What are 3 ways to apply retained earnings in a business
Investing surplus funds
Expanding existing capacity and capabilities
Creation of new product lines
What are the 2 sources of return for shareholders
Dividends
Capital growth
What is the formula for stock total return
((P end - P start) + Dividend) / P start
What is a sign of good fundamentals to shareholders
Stable and growing dividends
What is the difference between mature companies and younger companies
The younger ones are usually faster growing and offer higher growth opportunities but lower dividends
What are the 4 factors that influence dividend policy
Financial performance
Balance sheet strength
Legal constraints
Investor expectations
