financial function

• Financial function

  To maximize profits and make sure there's enough capital available in a business to carry out operations
• Financial controls

  Income, investments, sourcing, etc.
• Feasibility studies

  Preliminary investigations into the potential benefits of undertaking specific activities
• Purpose of feasibility studies


  • Consider all factors associated with the activity
  • Ensure total investment needs are considered (construction, cash reserves, labour, outsourcing, etc.)
  • Address costs and other factors
  • Ensure reasonable understanding of what will be needed to create a new product for a profit
• Factors in feasibility studies

  • Technology & system feasibility
  • Economic feasibility (cost/benefit analysis)
  • Legal feasibility
  • Operational feasibility
  • Schedule feasibility
  • Market feasibility
  • Resource feasibility
  • Environmental feasibility
  • Financial feasibility
• Revenue


  The income and must have interest on the fixed deposit
• Cost

  Operational expenses, production costs, and production costs
• Operational costs

  Expenses incurred in the normal activity of running a business (e.g. Salaries, advertising)
• Production costs

  Costs sustained by manufacturing businesses, made up of material costs, labour costs, and overheads
• Types of costs

  • Fixed (remain constant)
  • Variables (can change with level of production)
  • Controllable (businesses can influence)
  • Non-controllable (businesses can't influence)
• Break-even analysis


  Relationship between the size of investment and sales required to achieve profitability
• Break-even point

  Fixed costs/(selling price per unit - variable cost per unit)
• Budgets

  Future-orientated financial tools that forecast financial needs and results of a business
• Types of budgets

  • Financial budget
  • Capital budget
  • Cash budget
  • Sales budget
• Pricing objective


  The objective of the business when determining pricing at a particular moment in time
• Pricing objectives

  • Income or profit motive
  • Sales volume
  • Market share
  • Status quo
  • Survival
• Pricing techniques

  • Cost-based pricing
  • Demand-based pricing
  • Competition-based pricing
  • Combination pricing
• Factors affecting selling price

  • Price discrimination
  • Psychological pricing
  • Prestige/status pricing
  • Customary pricing
  • Perceived value pricing
  • Promotional pricing
  • Penetration pricing
  • Bait pricing
  • Loss leaders
• Investment

  Money that is saved so it can grow
• Major asset classes

  • Cash
  • Property
  • Bonds
  • Shares
• Diversification benefits

  Spreading investment risks between various asset classes
• Risk profiling

  Understanding investors' tolerance for risk and expected return
• Insurance


  A contract of good faith between an insurance company and the individual where the company promises to repay the insured for any loss
• Types of assurance

  • Life assurance
  • Term assurance
  • Endowment
  • Disability cover
  • Funeral costs
• Compulsory insurance

  • Unemployment insurance (UIF)
  • Compensation for Occupational Injuries and Diseases Act (COIDA)
  • Road Accident Fund (RAF)
• Insurable interest


  The requirement that the insured can prove they would lose financially if the insured object is damaged
• Contract

  A legal document that involves two or three parties
• Elements of a contract

  • Contractual capacity
  • Obligation
  • Intention to bind
  • Executable
• Advantages of insurance

  • Protects business from financial loss
  • They pay for the damages
  • Helps find ways to bring back financial positions in the business
• Advantages of assurance

  • Provides security to families
  • Protects the creditors
  • Dependent by taking our life assurance