Finance

• Influences - internal sources of finance – retained profits and Owners Equity
• Influences - Debt – short-term borrowing (overdraft, commercial bills, factoring), long-term borrowing (mortgage, debentures, unsecured notes, leasing)
• Influences - Equity – ordinary shares (new issues, rights issues, placements, share purchase plans), private equity
• Influences - financial institutions – banks, investment banks, finance companies, superannuation funds, life insurance companies, unit trusts and the Australian Securities Exchange
• Influences - Influence of government – Australian Securities and Investments Commission, company taxation
• Influences - Global market influences – economic outlook, availability of funds, interest rates
• Processes - planning and implementing – financial needs, budgets, record systems, financial risks and financial controls
• Processes - Financial Controls - debt and equity financing – advantages and disadvantages of each
• Processes - Financial Controls - matching the terms and source of finance to business purpose
• Processes - monitoring and controlling – cash flow statement, income statement, balance sheet
• Processes - Financial Ratios - liquidity – current ratio (current assets ÷ current liabilities)
• Processes - Financial Ratios - gearing – debt to equity ratio (total liabilities ÷ total equity)
• Processes - Financial Ratios - profitability – gross profit ratio (gross profit ÷ sales); net profit ratio (net profit ÷ sales); return on equity ratio (net profit ÷ total equity)
• Processes - Financial Ratios - efficiency – expense ratio (total expenses ÷ sales), accounts receivable turnover ratio (sales ÷ accounts receivable)
• Processes - Financial Ratios - comparative ratio analysis – over different time periods, against standards, with similar businesses
• Processes - limitations of financial reports – normalized earnings, capitalising expenses, valuing assets, timing issues, debt repayments, notes to the financial statements
• Processes - ethical issues related to financial reports
• financial management strategies - cash flow management: cash flow statements, distribution of payments, discounts for early payment, factoring
• financial management strategies - working capital management – control of current assets (cash, receivables, inventories), control of current liabilities (payables, loans, overdrafts) and strategies – (leasing, sale and lease back)
• financial management strategies - profitability management – cost controls (fixed and variable), cost centres, expense minimisation and revenue controls (marketing objectives)
• financial management strategies - global financial management - exchange rates, interest rates, methods of international payment (payment in advance, letter of credit, clean payment, bill of exchange), hedging and derivatives
• Role - Objectives - Profitability, Growth, Efficiency, Liquidity and Solvency
• Role - Short term and Long term objective