Documenti di Didattica
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Documenti di Cultura
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Develop budgets
Addressing the present financial position To determine where a business id headed, how it will get there Financial info needs to be collected and examined Determining financial elements of the business plan Drawing up a business plan Determines aims to achieve, process to be used to achieve aims and benchmarks Used when seeking finance and support Developing budgets Provide quantitative info Provide financial info for achieving goals Monitoring cash flows Sufficient supplies of cash are essential to ensure financial objectives are met. Interpreting financial reports Shows what the organisation plans to achieve by the end of a aperiod Provides warning signals and a realistic assessment of how the business is going Maintaining record systems Ensure data is recorded and info is accurate, reliable, efficient and assessable. Planning financial controls The policies and procedures that ensure that the plans of an organisation will be achieved in the most efficient and effective way Minimising financial risk and losses
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Comprises of stockbroker corporations and partnerships, and provides a marketplace for the trading of shares. Assists listed companies to raise funds from the public through share issues (equity) and trade in debt instruments Regulates and monitors its members and its activities and ensures that the listed companies meet the listing requirements. Primary markets Deal with the new issue of debt instruments by the borrower of funds. Enables a company to raise a new capital through the issue of shares and through the receipt of proceeds from the sale of securities Secondary markets Deal with the purchase and sale of existing securities. Where the pre-owed or second-hand securities, such as shares, are traded between investors who may be businesses, individuals, governments or financial institutions. Increases the liquidity of financial assets and therefore influences the primary market for securities.
Overseas and domestic market influences and trends in financial markets and their implications for business financial needs
Trends in financial markets Volume of activity in financial mkts continues to increase due to Aus. reliance on international trade and foreign inflows. New trading instruments developed to meet changing needs of businesses Changing technology = 24/7 business environment Steady investor interest in Aus. From China, India, Europe and Japan. Influences of financial markets on business The fluctuations in the business cycle require business managers to continually monitor how these factors will affect their business. E.g. In periods of economic downturn consumers delay purchases businesses like Harvey Norman offer loans to keep up turnover.
Competing Shane Daly demands for funds in Aus. Business Studies Financial Planning and Management
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Employemnt patterns
World events
Political risks
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Management of Funds
Sources of funds
Internal
Equity Retained Profits
Mortgage
Long Term
Debentures
Sources of finance
Unsecured notes
Overdraft
Accounts payable
Bank bills
Short Term
Promissary notes
External
Leasing Factoring Trade credit Venture capital
Other
Grants
Internal finance (equity) The funds provided by the owners of the business (capital) or from the outcomes of the businesses activities (retained profits) Owners equity The funds contributed by the owners/ partners to establish and the build the business. Retained Profits Most common source of internal finance Cheap, accessible source of finance
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owner leaves business No interest = cheap Owners who contribute have control over how finance is used Low gearing Less risk for business owner
returns for owner May leave owner short of funds in emergencies Money may earn higher return if invested elsewhere
External finance (debt) The funds provided by sources outside the business Short term Bank overdraft Most common short term borrowing Allows a business to overdraw its account to an agreed limit Always paying interest on this limit though Bank bills Period of 90-180 days Business receives money immediately and promises to pay back Long term Mortgage A loan secured by the assets of the business Regular repayments and interest Leasing Only small capital required Payment of money to use assets owned by another company Other Factoring Selling debt for discounted price for instant cash Advantages Disadvantages Can borrow more money = increased Added charges have to be paid e.g. earnings = increased profits interest, bank fees, govt. charges Can claim tax reductions on interest Security is required by lender (bank) payments Regular repayments must be made Lenders have first claim on money if business goes under
Financial considerations
Debt Set-up costs Interest costs Availability of funds Flexibility of funds (liquidity) Level of external control
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Equity
Loan has to be repaid Provider of finance do not own any part of business No interest Payments are non-tax deductable Providers of finance own some of business
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Accounts receivable turnover ratio = Sales/ Acc receivable (S/ AR) Answer/ 365 Effectiveness of the credit policy, how quickly it collects debt information from balance sheet + revenue statement
Formula
C.A. C.L. T.L. T-equity G.P. S.R. N.P. S.R. N.P. O.E.
Solvency debt to equity ratio Profitability gross profit ratio Profitability net profit ratio Profitability return of owners equity Efficiency expense ratio Efficiency accounts receivable turnover ratio
-Reduce expenses reduce T-expense Lower = better Higher = poor staff, cut wages, S.R. control over expenses out/insource, new supplier SR AR 365 ANS Lower = better Higher = bad debt collection -Discounts for early payments -Improve credit policy -Encourage cash sales -Chase up slow paying ppl
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Choose supplier carefully Loans Capital budgeting = seeing how much money can be made on loaned money Overdrafts Online banking system
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Inappropriate cut-off periods Profits need to be matched with the costs and revenues that generated it. It is possible to create a false profitability position by choosing a cut-off period where significant revenues are separated from the costs associated with them. Misuse of funds Control system would restrict the ability of people to misuse funds; measures include computer passwords, requirement of multiple signatures or certain types of expenditures. Make detection of errors more likely by regularly doing physical checks of things such as inventory levels. Introduce penalties.