Role of financial management

Syllabus Content

strategic role of To ensure a business can operate, grow and achieve their goals through the
financial management of financial resources.
management
To make funds available for business activities and to ensure that day to day transactions
and operations run smoothly from a financial objective

Tasks involved in financial management include:

- Maintaining and reporting information about the firm’s financial position
- Forecasting future financial outcomes
- Distributing financial resources to various business function
- Acquiring additional financial resources

Financial objectives:
- Profitability → maximise profits
- Growth → increase size and value
-

objectives of Includes short and long term objectives

financial Long term > 12 months
Management Short term < 12 months

– profitability, Short term goals are ensuring the business is sufficiently liquid and solvent while also
growth, ensuring long term profitability and efficiency
efficiency,
liquidity, These goals can sometimes conflict; having high liquidity usually means keeping assets
solvency in cash, but this can limit growth potential.

– short-term and Solvent = more assets than debt

long-term - Ability to cover its long term liabilities

Profitability = Revenue less total costs.

Can be decreased by raising revenue or lowering costs

Efficiency
- Minimisation of costs

Productivity
-

Growth
- Increasing the size of the business

Efficiency
- Maximising the outputs relative to the inputs in the business. I.e getting the most
for your dollar

Liquidity
- Assets which are cash or easily converted to cash.
- Liquidity is about how easily cash can be accessed

Finannce supplies money to each of the KBF’s, who in return are ale to make the
interdependence business more profitable, giving more money to the finance team.
with other key
business Operations
functions Costs
- Reduce production costs
Quality
- Produces high quality products that can be sold at a higher cost
Investment
- New technologies improve efficiency

Marketing
- Generates revenue through the promotion and selling of products
- Provides information on sales and profit forecasts

Human resources
- Manages employees
- Provides training and ongoing support to employees
- Offers performance rewards and incentives