Financial Objectives

• Financial targets must be SMART to be effective
• Financial targets are goals or objectives set by managers in the finance department to help achieve corporate objectives
• Financial objectives are specific SMART targets for departments to achieve their aims
• Financial strategies are long-term/medium-term plans devised at a senior management level to achieve objectives
• Financial tactics are short-term financial measures adopted to meet the needs of a short-term threat or opportunity
• Each department must achieve their aims and objectives to help achieve the overall company objectives
• Cash flow is the total amount of cash flowing into the business (inflows) minus all the cash leaving (outflows) over a period of time
• Cash inflows include receipts of cash from customers, loans, rent, and selling assets
• Cash outflows include payments for raw materials, goods, equipment, loans, and interest
• Profit is the final result at the end of a financial period where revenue is greater than total costs
• Cash is the actual money held within a business in the short term that can be used to pay debts
• A business may look profitable on its accounts but may struggle with low cash levels
• Investment (capital expenditure) levels may target spending on expansion, growth, acquiring capital equipment, and non-current assets like machinery, property, and vehicles
• Shareholder targets aim to satisfy shareholders who assess a firm's success based on the dividends they receive, where high dividends are likely linked to high profits
• Internal and external factors influence a firm's financial objectives and decisions
• Reasons for setting financial objectives include guiding decision-making, providing a benchmark for performance, and aligning efforts towards common goals