Financial Management Notes
ROLE OF FINANCIAL MANAGEMENT
- Financial management is one of the functions of management
- Financial management is concerned with o Profits and losses of operations o Control over funds o Ensuring appropriate cash flow is available o Chas management o Raising funds / controlling internal funds o Investment of funds o Cost control / pricing o Forecasting / measuring financial performance against expectations
- Accounting is a subset of financial management. Financial transactions must be recorded, classified, stored and eventually reported to the managers.
- OBJECTIVES OF FINANCIAL MANAGEMENT o Liquidity Refers to cash reserves being held, or to the ability to turn and investment into cash with little or no delay or loss of capital o Solvency Refers to a business ability to pay its debts when due, and remain a going concern o Profitability Refers to how profitable the business is from the perspectives of profit on sales, assets and shareholders equity o Efficiency Examines how well working capital is managed, that is how quickly cash is collected from debtors, inventory sold and creditors paid. o Growth Once a business is formed and operations commence, it enters a growth phase, where there should be an increase in the number of goods or services sold
- THE PLANNING CYCLE o Strategic or corporate plans involve how the business can accomplish its objectives, generally to create a strong competitive advantage o Organisational planning processes involve
The formulation of mission, goals and objectives,
An analysis of key environmental variables that present opportunities, threats, and constraints. It is known as an environmental audit
An organisational audit to evaluate strengths and weaknesses and identify where change needs to be met
The formulation of strategies within deadlines to achieve specific objectives
Monitoring and review to ensure that the mission is on target and that performance indicators are being met
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- Financial management is one of the functions of management
- Financial management is concerned with o Profits and losses of operations o Control over funds o Ensuring appropriate cash flow is available o Chas management o Raising funds / controlling internal funds o Investment of funds o Cost control / pricing o Forecasting / measuring financial performance against expectations
- Accounting is a subset of financial management. Financial transactions must be recorded, classified, stored and eventually reported to the managers.
- OBJECTIVES OF FINANCIAL MANAGEMENT o Liquidity Refers to cash reserves being held, or to the ability to turn and investment into cash with little or no delay or loss of capital o Solvency Refers to a business ability to pay its debts when due, and remain a going concern o Profitability Refers to how profitable the business is from the perspectives of profit on sales, assets and shareholders equity o Efficiency Examines how well working capital is managed, that is how quickly cash is collected from debtors, inventory sold and creditors paid. o Growth Once a business is formed and operations commence, it enters a growth phase, where there should be an increase in the number of goods or services sold
- THE PLANNING CYCLE o Strategic or corporate plans involve how the business can accomplish its objectives, generally to create a strong competitive advantage o Organisational planning processes involve
The formulation of mission, goals and objectives,
An analysis of key environmental variables that present opportunities, threats, and constraints. It is known as an environmental audit
An organisational audit to evaluate strengths and weaknesses and identify where change needs to be met
The formulation of strategies within deadlines to achieve specific objectives
Monitoring and review to ensure that the mission is on target and that performance indicators are being met
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