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6 Cards in this Set
- Front
- Back
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Strategic Role of Financial Management
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Process of setting objectives throughout the business and deciding what resources will be needed to achieve these objects
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Objectives of Financial Management
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Liquidity
Profitability Growth Efficiency Return on Capital |
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Liquidity
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Business's ability to pay its short-term debts.
Factors that affect liquidity include the amount of cash tied up on customer debts and inventory, the ease with which inventory can be turned into cash, and the efficiency with which customer debts are collected. |
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Profitability
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Refers to the return to the business that results from its activities.
Levels are important: Must be high enough to attract new capital. If too low, both the current owners and creditors to the business will become concerned and attempt to recover their money from the business. |
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Efficiency
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Refers to the relationship between inputs and outputs.
Increased efficiency gives the manager the option of either lowering prices and increasing market share, at the expense of competitors, or increasing profit. |
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Return on Capital
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Captial refers to productive resources such as land, machine, buildings and workers used to produce other goods.
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