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What is the ability to meet long term financial obligations?
Solvency
What is the name of the main organisation which ensures legal and ethical compliance of finance matters for companies under the Corporations Act 2001.
Australian securities and investment commission (ASIC)
How do you calculate the current ratio.
Current assets over current liabilities
Name a strategy to improve profitability
Control of revenue - marketing objectives.
Control of expenses (fixed/variable costs, expense minimisation, cost centres)
The opening cash balance value for the next month is also the same as what?
Closing cash balance of the previous month
Which national flag in the world is perfectly square instead of the conventional rectangle shape?
Switzerland
What is the strategic role of financial management?
Acquiring, planning, controlling and monitoring financial resources to achieve business goals and/or maximise shareholder wealth.
What is private equity as an equity finance option?
The funds raised by a private company through selling partial ownership of the business.
What is are TWO disadvantages of debt financing
Interest Obligations
Repayment Pressure (must be repaid on schedule)
Increased Risk --> increase financial risk and potential for insolvency.
Reduced Flexibility
Creditworthiness Impact --> Excessive borrowing can lower credit rating, making future borrowing harder or more expensive.
Potential for Asset Loss (Collateral)
What is sale and lease back?
When you sell a non current asset such as a vehicle and lease it back - provides an injection of cash (Working capital strategy)
Name all the headings IN ORDER on an income statement?
SALES, COGS, GROSS PROFIT, NON OPERATING EXPENSES, NET PROFIT
Which planet rotates backwards causing the Sun to rise in the west?
Venus
Give an example of a possible conflict between short term and long term objectives
To achieve long term growth, a business may need to invest (eg new equipment) which may conflict with short term liquidity
Which financial institution are also non-bank financial intermediaries (NBFI’s) that specialise in smaller commercial finance (E.g. overdrafts) and are regulated by the Australian Prudential Regulation Authority (APRA).
Finance Companies
In sentence form, what does a net profit ratio of 5% mean?
For every $1 of sales a business retains $0.05 in net profit
What is working capital management?
The process of managing a company’s short-term assets and liabilities to ensure it has enough liquidity to meet daily operational needs while maximising efficiency.
How do you calculate COGS?
Opening stock + Purchases - Closing stock
What land OR sea predator already existed on earth before trees?
Sharks
How is finance dependent (impacted by) on human resources?
Acquire and manage new and existing staff efficiently whilst adhering to budgets
What would have a lower interest rate
1. An unsecured note
2. A debenture
You must briefly state why
Debenture - A debenture is a secured loan backed by the company’s assets thus, lenders face less risk.
A process where revenue and expenses are recorded in different periods (I.e., do not match the period in which the related activity occurs) is what?
Timing Issues (Limitations of financial reports)
Describe ONE way a business can improve their existing cash flow?
Distribution of payments
Discounts for early payments
Factoring
Which is the only ratio that cannot be interpreted as a percentage and why?
ARTR --> expressed as a number (times per period) because it measures how many times, on average, a company converts its receivables into cash.
How many words did Shakespeare invent that is still used in the English language today?
Approximately 1700 words
How is marketing dependent on (impacted by) finance?
Funds are allocated to undertake various forms of price, promotion, product and place development
Name the THREE primary conditions that will determine the ease a domestic business can access funds (for borrowing) on the international financial markets.
risk, demand and supply, domestic economic conditions
What is a benefit of internal and external audits
1. Assist in risk management (E.g., guarding against unnecessary waste, inefficient use of resources, misuse of funds, fraud and theft)
2. Detects errors whereby an independent review can uncover issues management might miss.
3. To see if they’re prepared in line with accepted accounting standards (Legal compliance) + financial records provide accurate information
4. Enhances credibility and strengthens trust in the business’s financial reporting.
5. Assures stakeholders confidence in financial statements.
What is the impact of factoring on the current ratio?
Increases cash but reduces accounts receivable therefore, decreases current ratio
What is the purpose of a balance sheet?
Shows the financial stability of the business --> prepared at the end of the accounting period
What 1985 Japanese game series was inspired by 8-bit pixel art (rely on a tile-based system, where 8x8 pixel tiles are used to build backgrounds)?
Super Mario Bro's