role
This financial objective is defined as the ability of a business to maximize its earnings, without which a business could face involuntary administration.
What is profitability?
This readily accessible internal source of finance represents profits that are not distributed to the owners but instead reinvested into the business
What are retained profits
This financial statement provides a snapshot of a business's net worth at a specific point in time, following the equation Assets = Liabilities + Owner's Equity.
What is a balance sheet?
This cash flow management strategy involves selling a business's accounts receivable to a third party at a discount to improve immediate liquidity
What is factoring
This primary analytical tool is utilized to monitor and control a business's financial performance, by allowing comparisons of data both over different time periods and against industry benchmarks
What are financial ratios?
Beyond simply increasing sales or profits, this objective also considers expansion in terms of market share or geographic reach.
What is growth?
Unlike a major bank, this type of financial institution specializes in short to medium-term finance, is non-bank, and often provides lease financing.
What is a finance company?
In the processes of financial management, this activity involves keeping and tracking financial records, whereas the other involves enacting changes to ensure finances align with goals
What is monitoring?
In the realm of profitability management, costs that do not vary with the level of operating activity, such as rent, are categorized under this term.
What are fixed costs?
To assess a business's ability to meet its short-term financial commitments, this common ratio is employed, with a generally accepted benchmark often cited as 2:1.
What is the current ratio?
While a business might be able to meet its short-term obligations and thus be considered liquid, failing to meet its long-term financial commitments indicates a lack of this critical quality.
What is solvency?
This government body acts as a corporate regulator, overseeing markets where businesses issue new shares and collecting financial information to reduce fraud
What is the Australian Securities and Investments Commission (ASIC)?
When a business adjusts earnings to remove the impact of one-off items or changes in the economic cycle, it is engaging in this process, a limitation of financial reports.
What are normalised earnings?
While similar to leasing, this specific strategy increases a business's liquidity by involving the direct sale of an owned asset to a lessor, followed by the immediate renting back of the same asset.
What is sale and lease back?
A high figure for the Debt to Equity Ratio, particularly one greater than one, primarily indicates that a business is relying more heavily on this source of finance, potentially increasing its financial risk
What is debt financing?
The strategic role of financial management views a business's journey with a long-term perspective, while the tactical component specifically focuses on achieving these types of goals.
What are short term goals?
While both lend money, this specific type of bank primarily focuses on the business sector, often customizing loans and potentially requiring some equity from the borrowing business.
What is an Investment bank?
This specific financial ratio measures the effectiveness of funds contributed by owners in generating profit, calculated as Net Profit divided by Total Equity, and should ideally be as high as possible.
What is the return on equity ratio?
When an Australian business's currency strengthens, making foreign imports cheaper but Australian exports more expensive, this phenomenon of exchange rates is occurring.
What is currency appreciation?
This specific limitation of financial reports occurs when an expenditure is improperly recorded as an asset rather than an expense, leading to an overstatement of both assets and reported profits.
What is capitalising expenses?
In the interdependence of key business functions, the finance department relies on this specific function to both generate sales and, consequently, revenue for the business.
What is marketing?
Distinct from personal income tax, this type of government influence on finance is applied at a flat rate to a company's earnings, regardless of the income bracket
What is company tax?
Recording an expense as an asset rather than on the income statement leads to an overstatement of assets and profits, and an understatement of expenses, illustrating this specific limitation of financial reports.
What is capitalising expenses?
Among the methods of international payment, this specific derivative grants the buyer the right, but not the obligation, to execute a currency transaction at an agreed rate on a future date, protecting against unfavorable fluctuations while allowing for potential gain
What are option contracts?
Beyond the quantitative data presented in the main financial statements, a complete and ethical evaluation of a business's health critically relies on scrutinizing these crucial disclosures, which often detail accounting methodologies and significant financial context
What are notes to the financial statements?