Role and Objectives
This is the strategic role of financial management that ensures funds are available for business operations and growth (syllabus point)
What is ensuring the business has sufficient funds and managing capital effectively?
This internal source of finance comes from profits that are reinvested back into the business.
What are retained profits?
These institutions accept deposits and provide loans to businesses and individuals.
What are banks?
This government body regulates companies and enforces corporate law in Australia.
What is ASIC (Australian Securities and Investments Commission)?
This refers to the general state of the economy and influences business confidence and borrowing decisions.
What is economic outlook?
These five key financial objectives guide financial decision-making in a business.
What are profitability, growth, efficiency, liquidity and solvency?
This short-term debt facility allows a business to withdraw more money than is currently in its account.
What is an overdraft?
These institutions assist businesses with large capital raisings, mergers and underwriting share issues.
What are investment banks?
This is the tax imposed on company profits by the Australian government.
What is company tax?
When this increases, borrowing becomes more expensive for businesses.
What are interest rates?
This objective refers to a business’s ability to meet its short-term financial obligations as they fall due.
This long-term debt instrument is secured against property and commonly used to purchase buildings.
What is a mortgage?
This institution operates Australia’s primary securities market where shares are bought and sold.
What is the Australian Securities Exchange (ASX)?
This explains how ASIC influences financial management decisions.
What is:
- Transparency
- Disclosure
- Protecting investors
This refers to how easily businesses can access credit or investment funds in financial markets.
What is availability of funds?
This objective focuses on long-term financial stability and the ability to meet long-term debts.
What is solvency?
These are two equity methods where existing shareholders are offered shares first, or shares are offered to selected investors.
What are rights issues and placements?
These institutions pool funds from members for retirement and are major investors in businesses.
What are superannuation funds?
This explains how company taxation can influence dividend and reinvestment decisions.
What is higher taxation reduces profit and slows reinvestment?
When global interest rates rise, this happens to the cost of repaying loans for businesses with a lot of debt.
What is debt repayments become more expensive?
These are the long term financial objectives
What is profitability, growth and solvency?
This form of finance involves selling part ownership of the business to investment firms that are not publicly listed on the stock exchange.
What is private equity?
These managed investment vehicles pool funds from many investors and are professionally managed to invest in diversified assets.
What are unit trusts?
This describes how government regulation can increase business compliance costs but improve investor confidence.
What is regulation increasing administrative costs while making the market stable and trusted?
During a global recession, businesses are more likely to do this with their spending and borrowing.
What is reduce spending and borrowing and focus on saving cash?