Summary
Summary CH14 Financial Management
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- University Of South Africa (Unisa)
A summary of CH14 Financial Management
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Chapter 14: Financial Management:The financial function and financial management:
Concerned with the flow of funds
Acquisition of funds (financing)
Application of funds for the acquisition of assets (investment)
Administration of, and reporting on, financial matters.
Performs following tasks:
Financial analysis, reporting, planning and control
Management of the application of funds
Management of the acquisition of funds.
Concepts in financial management:
The Statement of Financial Position (or Balance Sheet) is an overview of the financial position of the
business. The asset side reflects all the possessions of the business and these assets represent the
asset structure:
Non-current assets: Vehicles, equipment, land and buildings, fixed deposit
Current assets: Inventories, Cash and cash equivalents, trade debtors.
The liabilities side reflects the nature and extent of interests in assets:
Long-term funds/non-current liabilities: Mortgage loan, Bank loan etc.
Shareholders’ interest: Owners’ equity, preference share capital, reserves
Short-term funds/current liabilities: Bank overdraft, trade creditors.
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, Capital:
Accrued power of disposal over products and services used by a business to generate a
monetary return or profit
Capital for investing in non-current assets – the need for fixed capital
Capital for investing in current assets – the need for working capital.
Income:
Receipts resulting from the sale of products and/or services
Income = Units sold x Price per unit
Can also be obtained from other sources such as interest on investments.
Costs:
Monetary value sacrificed in the production of goods and/or services produced for resale. Costs can be
subdivided as follows:
1. Direct cost
2. Indirect cost
3. Overhead expenses
4. Fixed costs
5. Variable costs
6. Semi-variable costs
7. Variable cost per unit
8. Total costs.
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