Complete Topic 3 Finance Notes - Yr 12 Business Studies

39 Pages • Complete Study Notes • Year: Pre-2021

Role of Financial Management Strategic Role of Financial Management Developing a strategic plan as part of a business’s financial management will ensure that the business survives and grows in the competitive business world. Businesses exist for a number of purposes that are translated into goals. For example, a business’s goals may include: o To increase the dividends to shareholders o To maintain an environmentally friendly business o To be a market leader within five years The main purpose or goal for a business is usually to maximise profits. Strategic Plan Strategic plans encompass a long-term view of where the business is going, how it will get there and a monitoring process to keep track of progress along the way. The strategies that a business uses to achieve its goals are incorporated into a strategic plan. Managing Financial Resources Financial resources are those resources of a business that have a monetary or money value. Financial management is the planning and monitoring of a business’s financial resources to enable the business to achieve its financial goals. The mismanagement of financial resources can lead to problems such as: o Insufficient cash to pay suppliers o Inadequate capital for expansion o Too many assets that are non-productive o Delays in accounts being paid o Possible business failure o Overstocking of materials Strategies for monitoring the financial resources include: o Monitoring as business’s cash flows o Paying its debts o Developing financial control techniques o Auditing of financial accounts o Continuing to make profits for its owners and shareholders

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