100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Summary Financial Management 332 Summaries R120,00
Add to cart

Summary

Summary Financial Management 332 Summaries

 0 purchase

In-depth summaries, class notes, exercises and examples for financial management 332.

Preview 4 out of 104  pages

  • March 6, 2024
  • 104
  • 2023/2024
  • Summary
All documents for this subject (9)
avatar-seller
luschkelabuschagne
FINANCIAL MANAGEMENT 332
Luschke Labuschagne
25100572


Component 1
Budgets as financial management tool

Nature of budgets


• Budget: summary of a business’s plan on what they intend to sell and obtain
• Requirements in terms of information:
- Objective, consistent, reliable, realistic
- Key words: planning, future, quantitative money (monetary) terms, comparative measures,
control
• Purpose:
- Higher profitability
Limit waste (capacity of PPE)
Improve management decisions
- Ensure optimal liquidity
Identify best means of financing
Advanced knowledge of future cash requirements
• Function of budgets:
- Task assignment, authorization to act
- Means of communication
- Forecasting function (looking at future sales and size of market)
- Means of co-ordination (between different divisions)
- Means of control (ito issues)
- Educate managers

Attitude towards budgets

• Most important obstacles:
- Conflict as a result of conflicting interest
- Excessive expectations of subordinates (communication between upper and lower levels of
staff/ management)
- Excessive emphasis of control function
- No room for own discretion

Management planning and control

• Planning:
- Development of future- orientated objectives

Copy right: Luschke Labuschagne

, - Drawing up plans quantified in monetary terms to achieve objectives
• Three types of projections:
- Reference projection (as if nothing changed, as it is in the present)
- Desired projection (aspirations to be better)
- Planned projection (compromise between reference and desired)
• Control:
- Observation of differences between financial norms & actual figures
- Combined with critical evaluation & reporting
- Steps of control:
Setting of standards (norms and ratios) (specific to industry)
Collection of information; comparing actual performance with standard
Analysis and evaluation of performance
Corrective action




Top down- order of creating a budget

Integrated budget system:




• Income statement- Balance sheet

Copy right: Luschke Labuschagne

,Cash budget

• Preview of:
- Expected cash receipts and payments
- Future cash requirements
- Periods where financing is required for cash shortages; investment of surplus cash
• Cash management:
- Delay payments; speeding up recoveries
- Synchronizing inflow and outflow of cash
- Inventory model applied for cash management
• Differences between profit and cash:
- Income statement show profit/loss (gain/loss disposal of PPE) – converted to corresponding
cash values
- Contains non-cash items (depreciation, amortization) – excluded, but impact on tax
calculations is NB
- Cash budget must show all cash tax payments – income tax, tax on gain/loss disposal of PPE
• Other transactions:
- Capital investment: - cash purchases of assets, repayment of instalments
- Capital structure:
o Shares issued/ repurchased; dividends paid
o Loans obtained/ redeemed; finance cost
• Cash receipts:
- Sales revenue:
o Cash sales: cash received immediately
o Cash discount: discount sometimes offered on cash sales
o Credit sales: repayment by debtors over time
o Bad debt: credit sales not collected
- Other cash receipts:
o Disposal of assets (PPE, Investments)
o Investment income (interest/ dividends received)
• Cash payments:
- Purchases
o Cash purchases: cash paid immediately
o Credit purchases: repayment to creditors over time
o Cash discount: discount sometimes received on cash purchases
- Calculating of purchases
o Opening inventory+ purchases – cost of sales= closing inventory
- Operating expenses
o Salaries, wages, electricity, rent
- Tax
- Other cash payments
o Purchases of assets (PPE, Investments)
o Finance cost (interest/ dividends paid)

Copy right: Luschke Labuschagne

, Cash management

• Negative cash balance
- Short-term solutions:
o Apply for Bank overdraft, short term debt
o Sell marketable securities
- Long-term solutions
o May require adjustment to capital structure
o Additions LT K(v), equity
• Positive cash balance
- Short-term utilization:
o Redeem short term debt or bank overdraft
o Purchase marketable securities
- Long-term utilization
o Investment in non-current assets
o Replace or expand your PPE

Class exercise: Cash budgeting: Problem 1




Copy right: Luschke Labuschagne

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying this summary from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller luschkelabuschagne. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy this summary for R120,00. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

69066 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy summaries for 15 years now

Start selling
R120,00
  • (0)
Add to cart
Added