Summary

Financial Management 214 Summary

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Course
Financial Management 214

Institution
Stellenbosch University (SUN)

This document summaries the whole semesters work. It is a summary of both the chapter slides and the textbook notes including various formulas, calculations and ratios needed. The structure of the financial statements require for the module are included as well.

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Uploaded on May 28, 2023
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, FINANCIAL MANAGEMENT 2I4
AareER-XE

managementcreates wealth by effective utilisation of enterprise's resources to generate income... cash

to I wealth, business activities need to generate an acceptable return on capt. Investment

higher return: higher share price

·
all fin decisions should contribute to wealth maximisation:

investment in assets:Capital budgeting (LT) -Wht should be done we profit?
·

pay dividend

buy-back
·

shares
how to
manage working capital
·
reinvest back in the firm

assets:capital
financing structure

ROLE OFF INANCIAL MANAGER

more the
managing cash flow keeping eye on books

use financial tools + principles to solve business problems

assist mangment in making the
right decisions: · capital investmentdecision
·

financing decision

·mangmento f working capt.
·
dividend decision

not just to max. Profitbutmanage risk as well

FINANCIAL ECONOMICS
·
macro econ - its impact on the business
·
focus on working of fin. mrkts institutions
+

anticipate effecto fon company since it'll no significanteffecto n fin. Situation per formance
+
on the enterprise
Which enterprise finds itself
-

. econ. environ. the

FINANCIAL ACCOUNTING
·

reporting of fin. data according to guidelines
focus:d iff. frm fin.
·

Mangmnt
. focus:o n profit + historical data

3
primary objective compiling fin. Statements according to IFRS

FINANCIAL MANAGEMENT
·
micro econ. Ivl i.e. Win enterprise

·focus:
on decision making mangmut of
+

decisions
·
focus on cash flow creating value in future

INVESTINGING DECISION
to make t o determine which investments in assets required
-

ist decision fin.
tht manager needs
-

·

·
decision w/ regard to NC assets (vehicles, machinery, factories, buildings, etc) assets
cur rent
+

(cash, inventory, TR, etc) the enterprise requires: needs to be made
task of fin. Manager... identification,
eval. implementation of
I
profitable projects
investments:c onsidered
-

·

only profitable

FINANCING DECISIONS
finance investments
and importantdecision
how to
.

·
whn making w i tht fin.
decisions: manager attempts to implement optimal capital structure

DIVIDEND DECISION
be reinvested as reserves / ifthey're going to be distributed btwn SH
·
decision whether earnings:g oing to

·
decision-making continuous
process: [in enterprise's situation:constantly occur]

capital redemption:non-distri. reserve into which amts: transferred following redemption purch of company's own shares of
out distri profits or in certain circumstances from proceeds of a fresh issue of shares

, FINANCIAL MANAGEMENT 2I4
-MaR
FNO

I
FINANCIAL POSITION ON GIVEN DATE
.
economic resources avail. SFP

assets, liab. equity
· +

I
year(
FINANCIALPERFORMANCEFORSPECIF PER zinFinal SPI
·

Profit + LOSS

years)
CHANGES IN FINANCIALPOSITION FOR CERTAIN PERIOD (Financial
SCF

operating, investment financing activities
· +

REQUIREMENTS

understandable logical
-

relevant(enable to eval historic, current,
a

future changes)

significant (if exclusion leads to incorrect decision)

timely (during period in much it can no effect (

Reliable

accurate

objective

comparable

fin. Statements according to
accounting guidelines (IFRS)

diff. guidelines interpretations to report same item

standardised fin. Statements

statement
of financial
position

ASSET:NON-CURRENT

capt. Investment applied to
generate income
-

PPE @CV
·
cOSt

·

accum. dep.

intang, assets (non-physical u sed to
but gen. Turnover (
.
good will
·

patent rights
·

manufacturing licenses

·
trademarks
·
computer software

·
NB:difference amortization us impairment

financial assets
·
investments in associates
50%
·38!;
·other share investments
·
20%

cOSt
·

·
loans granted (interest bearing)

ASSETS:CURRENT

relatively shot period:1yr

converted into cash w/ relative ease

inventories (required for operations)

TR (CR SAICS)
other receivables

casht cash equivalents
DreDm+S
ST fin. assets ST loans investments
+

EQUITY +
LIABILITIES

forms c apt. used to
of finance assets
equity
NCL +CL

Ord. SH equity:
ord. Share capt.- issued shares x ave issue price

· SH position of ownership. When buy-bck
there:

non-distri, reserves
>future redemption of capt.

·
I be distri. As div. ·
reval reserve, capt redemption reserve

distri, reserves
in SPL
4 in GR=> transfer of gen. reserve
,

·
distri, to ord. SH via. div. RE, general reserve

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