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Unit 10 – Financial ManagementLearning outcomes
1. Explain the role and responsibilities of financial managers.
2. Outline the financial planning process and explain the three key budgets in the financial plan.
3. Explain why firms need operating funds.
4. Identify and describe different sources of short-term financing.
5. Identify and describe different sources of long- term financing.
The Role of Finance and Financial Managers:
o Finance - The function in a business that acquires funds for the firm and manages them within the
firm.
• preparing budgets
• doing cash flow analysis
• planning for the expenditure of funds on such assets (plant, equipment, machinery).
o Financial management - Managing a firm’s resources to meet its goals and objectives.
o Examine financial data prepared by accountants and recommend strategies for improving the
financial performance of the firm.
Auditing: internal inspection of a company,
it’s a detailed inquiry into the policies and
financial statements of the business.
External/ internal
Collecting funds: establishing the maximum
amount of credit you are willing to issue to a
company/consumer & how the collection of
those accounts will be handled.
Obtaining funds: raising money
Budgeting: exercising financial control as a
means of allocating funds towards expenses.
Financial planning: the future state of the
organization and assessing foreseeable
variables such as income and asset value.
o Three of the most common reasons a firm fails financially are:
1. Undercapitalization (SABC)
• insufficient funds to start the business
• cannot pay its creditors
• no cashflow
2. Poor control over cash flow. (Toys r Us )
3. Inadequate expense control. (eskom)
• practice of identifying means to reduce costs while increasing revenue for the company
• despite raising tariffs, Eskom is still losing money
, Unit 10 – Financial Management
Financial Planning:
Financial Plan
Short-Term Long term
Forecasting
Forecasting
Long-Term
Forecasting
Operating
(master)
Budget
Capital Cash
Budget Budget
Cash Budget
Financial
Controls
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