FINANCE

Question 1

(syllabus) role of financial management

Answer 1

• strategic role of financial management
• objectives of financial management (profitability, growth, efficiency, liquidity, solvency) (short term and long term)
• interdependence with other key business functions

Question 2

(syllabus) influences on financial management

Answer 2

• internal sources of finance (retained profits)
• external sources (DEBT, SHORT-TERM: factoring, overdraft, commercial bills) (DEBT, LOG-TERM: mortgages, debentures, unsecured notes, leasing) (EQUITY, ORDINARY SHARES: new issues, rights issues, placements, share purchase plans, (PRIVATE EQUITY)
• financial institutions - banks, investment banks, finance companies, superannuation funds, life insurance companies, unit trusts and the Australian Securities Exchange
• influence of government - ASIC, company taxation
• global market influences - economic outlook, availability of funds, interest rates

Question 3

(syllabus) processes of financial management

Answer 3

• planning and implementing (financial needs, budgets, record systems, financial risks, financial controls)
• monitoring and controlling (cash flow statement, income statement, balance sheets)
• financial ratios (liquidity, gearing, profitability, efficiency, comparative ratio analysis)
• limitations of financial reports (normalised earnings, capitalising expenses, valuing assets, timing issues, debt repayments, notes to the financial statements)
• ethical issues related to financial reports

Question 4

(syllabus) financial management strategies

Answer 4

• cash flow
• working capital management
• profitability
• global financial management

Question 5

(syllabus) cash flow

Answer 5

• cash flow statements
• distribution of payments, discounts for early payment
• factoring

Question 6

(syllabus) working capital management

Answer 6

• control of current assets (cash, inventories, receivables)
• control of current liabilities (payables, loans, overdrafts)
• strategies (leasing, sale and lease back)

Question 7

(syllabus) profitability

Answer 7

• cost controls (fixed and variable, cost centres, expense minimisation)
• revenue controls (marketing objectives)

Question 8

(syllabus) global financial management

Answer 8

• exchange rates
• interest rates
• methods of international payment (payment in advance, clean payment, bill of exchange, letter of credit)
• hedging
• derivatives