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... displayed 300 characters
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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
o Tactical plans focus on the most efficient resource use by a business unit or department
o Operational plans are concerned with implementing the strategic plan through day to day processes, procedures, workflow and efficiency
o Financial plans represent the dollar quantification of the strategic and operating plans
o And business plan should be the result of an integrated approach that encompasses all three
o The planning cycle involves developing strategies, implementing them, monitoring the progress made, evaluating the success of them, and modifying where necessary
o One approach that can be taken is
? Determine the financial elements of the business plan
? Maintain the record systems
? Develop budgets
? Consider the cash flows
? Interpret the financial reports
? Address the present financial position
? Plan financial controls
? Minimise financial risks and losses
- MANAGEMENT OF FUNDS
- SOURCES OF FUNDS
o Internal
? Owners equity ? where owners of any kind contribute to new capital
? Retained profits ? the business may self-capitalise through retained profits from previous years, the funds are not invested in the owners, but back into the business
? Sale of assets
? Changing the ownership of structure
o External
? Short term borrowing
? Overdrafts ? are arrangements between then business and its bank in which the business may borrow through its cheque account up to a certain amount... displayed 300 characters
