Business Studies Hsc Course Finance and Operation

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Finance
Role of financial management
* Financial management is the planning and monitoring of a business’ financial resources to enable the business to achieve its financial goals * 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. * Tactical objectives are what a business aims to achieve in 1-2 years and operational objectives are set day-to-day. * To achieve long term financial objectives, it is crucial to set many tactical and operation objectives and constantly monitor the progress. Objectives of Financial management

Profitability
* Profitability
Liquidity
Efficiency
Growth
Solvency
Profitability
Liquidity
Efficiency
Growth
Solvency
The ability of a business to maximise its profits to ensure sustainability * Must monitor its revenue and pricing policies, costs and expenses, inventory levels and levels of assets. Growth
* Increase the size in the long run to ensure the business is sustainable in the future * Develop and use assets to increase sales, profit and market share Efficiency
* Use resources efficiently to ensure financial stability * Monitor the levels of inventories and cash and the collection of receivables Liquidity
* The ability to meet short term financial commitments by turning assets into cash or having a positive cash flow Solvency
* The ability to meet financial commitments in the long-term. * An indication to potential investors of the risk associated with the business Influences on Financial Management

Sources of Finance

* With a bank overdraft, the bank allows a business or individual to overdraw their account up to an agreed limit and for a specified time, to help overcome a temporary cash shortfall. * Commercial bills are a type of bill of exchange (loan) issued by institutions other than banks. * A bill of exchange is a document ordering the payment of a certain amount of money at some fixed future date. * Factoring is the selling of accounts receivable for a discounted price to a finance or factoring company. * A mortgage is a loan secured by the property of the borrower (business). * Debentures are issued by a company for a fixed rate of interest and for a fixed period of time. * An unsecured note is a loan for a set period of time but is not backed by any collateral or assets. * Leasing is a long-term source of borrowing for businesses. It involves the payment of money for the use of equipment that is owned by another party. Financial Institutions

* Financial Institutions
Internal Finance
Global Market
Government
External Finance

Financial Institutions
Internal Finance
Global Market
Government
External Finance

Banks are the major operators in financial markets and are the most important source of funds for businesses. Banks receive savings as deposits from individuals, businesses and governments, and, in turn, make investments and loans to borrowers. * Investment banks are one of the fastest growing sectors of the financial markets and provide specialised advice and services for business financial needs. * Finance and life insurance companies are non-bank financial institutions and act primarily as financial intermediaries. * Superannuation funds are able to invest the contributions of members into a range of short- and long-term investments with the aim of maximising a return. * The business sector increasingly uses superannuation funds for long-term investment in growth and development. Government influences

* The Australian Securities and Investments Commission (ASIC). It enforces and administers the Corporations Act and protects consumers in the areas of investments, life and general insurance, superannuation and banking in Australia. * The aim of ASIC is to assist in reducing fraud and unfair practices in financial markets and financial products....
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