Business Studies Financial Management - Complete Notes

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HSC Business Studies Year 2016 Mark 93.00 Pages 38 Published Jan 14, 2017 Business Studies Financial Management - Cmplete Ntes By Katie (99.15 ATAR)

Pwered by TCPDF (www.tcpdf.rg) Yur ntes authr, Katie. Katie achieved an ATAR f 99.15 in 2016 while attending Mt St Patrick Cllege Currently studying Cmbined Law at The University f Sydney Katie says: My name is Katie Jnes, and I achieved first place in NSW fr Extensin 1 English in 2016, 97% in Advanced English, alngside an ATAR f 99.15, and seven Band 6s. I spent extensive time thrughut year 12 cmpleting hundreds f practice essays acrss English/Legal Studies/Business Studies/Studies f Religin/CAFS, and have cllated ntes, study guides and persnal past papers that cntain infrmatin beynd what textbks ffered me. T excel in the HSC, yur infrmatin must be extensive; my ntes prvide such depth.

Financial Management Ntes 1. ROLE OF FM Strategic rle f F.M; Ensure that a business cntinues t grw, perate and is able t achieve future gals and bjectives Lng term gals include strategies t reinvest r distribute prfits Strategic decisins may invlve grwth and acquisitins Financial managers need accunting skills t measure/cmmunicate financial inf Develping a strategic plan as part f a business s financial management will ensure the business grws in the cmpetitive business wrld Objectives f F.M; Objectives; series f shrt term targets t achieve final gal Prfitability, grwth, efficiency, liquidity, slvency Financial managers; shrt and lng term funding decisins/develp financial plicies (cash cntrl). Financial reprts; picture f prfitability/stability Managers can use data t measure the extent f bjectives achieved - prfitability; All business seek t increase prfit thrugh increased sales and decreased csts Owners cntribute t financial resurces (capital). The return n this capital is the amunt f prfit returned t wners/stakehlders (percentage f riginal investment) Owners can reinvest prfit int the business r withdraw their share frm the business Prfitability; measured using net prfit calculated in incme statement Grss prfit; prfit made n sale f gds after paying the cst f purchasing them frm whlesalers Grss prfit; prfit made n the sale f gds after paying the cst f purchasing them frm the whlesaler and transprting them t the business fr sale; sales revenue minus COGS; desn t accunt fr ther expenses Net prfit; final amunt f revenue remaining after all expenses have been paid. Earnings befre interest and tax (EBIT) is a mre precise measure f prfitability

that net prfit; it measures prfit made directly frm the peratins f the business COGS = OS (pening stck) + P (purchases) CS (clsing stck) Grss prfit = revenue COGS Net prfit = grss prfit expenses (wages, utilises, rent, advertising) - grwth; A business that grws will increase its size and lng term prfitability Increased utput; mre sales and mre revenue Grwth can be achieved by; - increasing physical size f the business (mving t a larger ffice) - increasing the value f assets in the business - increasing sales and prfits - increasing market share - pening mre branches in Aus/verseas - taking ver a cmpetitr - merging with anther business in the same industry - expanding range f prfits - efficiency; Related t prfitability because a business will be able t increase its prfit when it can decrease its csts In service-based business ; largest expense is wages In manufacturing; largest expense is raw materials and equipment Efficiency may be calculated via an expense rati (ttal expenses divided by ttal sales); the lwer the result, the mre efficient the business Efficiency is als gained is a business can achieve the same level f prfit frm smaller amunt f inputs eg. small manufacturing business may have the latest equipment, allwing it t make the same level f prfit as a larger manufacturer with lder equipment. In this case, the smaller business is mre efficient Anther measure f efficiency is the business ability t cllect its accunts receivable; many sell n credit t clients they have a relatinship with

Custmer receives an invice and is required t pay by a certain date; hw lng depends n the business credit terms Accunts receivable turnver rati calculates h.m days n average it takes custmers t pay their invices (shrter the time, the mre efficient) mnitring and cntrlling; (incme statement/balance sheet/cash flw statement) purpse f financial reprts is t cmmunicate relevant and reliable infrmatin abut the bus that can be used t make decisins. Need t be able t trust figures. Data can make frecasts (prjected sales) and evaluate perfrmance by cparing current years sales t previus Data shuld be; understandable, relevant, cmparable and reliable Statements frm the basis f cmmunicatin f imprtant inf t internal and external stakehlders eg ptential investrs/financial institutins. Functin f statements will be t prvide inf related t financial perfrmance, financial psitin and cash mvement. Fr perfrmance, it will be the infrmatin related t the business; capacity t make effective use f its assets t generate cash flw. Psitin refers t the business ability t manage its resurces, financial structure, liquidity and slvency as this will assist with predicting its capacity t meet financial cmmitments. Cash mvement refers t inflws and utflws and the availability f cash; including cllecting cash frm sale f gds, investing activities and sales f assets. - cash flw statement; Firms need t be able t pay debts r run int shrt term liquidity prblems and lng term inslvency (expenditure exceeds incme fr unacceptable length f time) Cash flw statement summarises cash transactins; prvides inf abut flw f cash receipts and payments within accunting perid, and prvide management with details fr budgets and identifying perids f shrtage/surplus; enables bus t mnitr/cntrl functins - incme statement Summary f incme/expenses ver specific accunting perid Shws relatinship between revenue and expenses t calculate net prfit and thus indicates prfitability and efficiency

Pwered by TCPDF (www.tcpdf.rg) Als knwn as prfit and lss statement, as it shws ttal revenue, grss prfit, cs f gds sld, expenses and net prfit Prduced at end f FY (june 30) Manager ca establish trends and make cmparisns - balance sheet; Summary f what business wns and wes n a certain day Illustrates relatinship between assets, liabilities and equity (A = L + E) Can determine stability in shrt and lng term Als referred t as statement f net wrth