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Name one Financial Objective
P,L,E,G,S
What does ASIC stand for?
Australian securities and investment commission (the government main organisation which ensures legal and ethical compliance of finance matters for companies)
How is accounts recievable turnover shown?
Days (or number of times per year)--- Days is assumed knowledge
Name a strategy to improve profitability
Control of revenue- marketing
Control of expenses (fixed costs/ expense minimisation, cost centres)
What is the other name for a revenue statement
Profit and Loss
What is the other name for a balance sheet
Statement of financial position
What is the ability to meet short term financial obligations?
Liquidity
Name 2 short term debt finance options
Commercial bill, overdraft, factoring
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
Define cost centres
Where a business allocated budgets and monitors costs/expenses within sections of a business
Time frame for revenue statement
1 year, 6 months, quarterly (3 months) it will state it on the statement
Time frame for a balance sheet
A snapshot- one day
Define Solvency
The abiltiy of the business to meet its financial obligations (long term)
Name 2 long term debt finance options
Mortgage, debenture, unsecured notes
How do you calculate the current ratio.
Current assets over current liabilities
Describe two ways you can improve efficency?
Accounts recievable turnover- pay earlier
Expense ratio- reduce expenses without losing sales
Calculate COGS
Opening stock + Purchases - Closing stock
ASSUMED Knowledge
Why does a balance sheet balance?
The financial equation of A=L+OE
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
What is private equity (as an equity finance option)?
Private equity is funds raised by a private company through selling partial ownership of the business.
As apposed to public equity: Raised by a public company by selling partial ownership of the business through the sale of shares to the general public. (ASX)
Define normalised earnings
When earning are smoothed out and any abnormal earnings are removed
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. (Cash management/working capital strategy)
Calculate the NET PROFIT for this company
Sales $100 000, COGS $30 000, Expenses $40 000
Net profit is $30 000
What are the three most common current assest shown an a balance sheet?
Cash, Inventory, Accounts Recievable
Give an example of interdependance from the Finance Syllabus (hint- its a strategy)
What would have a lower interest rate- a mortgage or a debenture (and why)
A mortgage as it is secured against property which is safe (low risk) for the lender
Comparitive ratio analysis---- what are the 3 ways of doing this?
Over time (within a business, compare across years)
Against an industry benchmark (Industry average)
Against a similar business
Does factoring improve liquidity? Why?
In reality yes as it improves cash flow- but the current ratio will worsen - so liquidity on paper is not improved.
Name all the headings IN ORDER on a revenue statement
SALES, COGS, GROSS PROFIT, EXPENSES, NET PROFIT
Calculate owners equity
Current assets $50 000, Non Current assets $150 000
Current liabilties $25 000 Non Current liabilities $100 000
OE= 75 000