The Financial Role of Management -
Business Goals and Objectives - Businesses purposes for existing are translated in to goals → could include increasing dividends to shareholders, be environmentally friendly, Goals are the longer term outcomes of a businessesMain purpose is usually to maximise profits → can only achieve this if it has strategically planned how it will achieve this. Goals/purposes/mission → business objectives → strategic planning → Tactical planning → Operational planning
Strategic plans Most important plans for a business Encompass long term views of where a business is going, how it will get there and keep track of progress along the way May cover periods of up to 10yrs
Managing financial resources Financial resources are those of a business of monetary or money value → financial management is the planning and monitoring of a business's financial resources to enable it to achieve it's goals Mismanagement can lead to problems eg. Inadequate capital to expand, overstocking of materials etc.
Objectives of financial management to achieve long term goals a business must have a set of short-term objectives to improve: profitability - ability of a business to maximise it's profits - satisfies in the short term but important for sustainability in the long term growth - ability of business to increase it's size in the long term - depends of ability to use its asset structure to increase sales, profits and market share - ensures business is sustainable in the future efficiency - ability of a business to minimise it's costs and manage assets so that maximum profit is achieved liquidity - ability of a business to pay its debts as they fall due solvency - is the extent to which the business can meet it's financial commitments in the longer term - important to shareholders, owners and creditors - indicates whether a business will be able to repay amounts that have been borrowed for investments in capital must identify alternative courses of action
Short-term and long-term financial objectives based on goals of it's strategic plan Short-term financial objectives are the tactical (one-two years) and operational (day-to-day) plans of a business reviewed regularly to see if targets are being met and to see if resources are being used to the best advantage egs. Updating old equipment, new technologies, expanding in to new markets Long-term financial objectives are the strategic plans of a business determined for a set period of time → usually more than 5 years tend to be broad eg. Increasing profit/market share require short-term goals to assist acheivment
Interdependence with other key business functions Key business functions include - - operations - marketing - finance - human resources means one must interact with all the other functions in order to achieve goals of a business ← Finance → | Operations Marketing Human resources
Influences on financial management influences on the financial management of business include a range of external factors such as the domestic govt economic decisions and