1. Chapter 9:Introduction to financial managementSupporting Function = Enabler

2. View Point: Am I managing the company correctly? Creating wealth for shareholders Effective Efficient Benefit of all stake holders

4. Value = cost

5. Allocate

6. Trace

7. Monitor

9. Figure 9.2: Integration of financial management with the rest of the organisation

11. It is a means of conveying policy to subordinates

12. It is an instruction to subordinates and delegates the authority they need in order to act

13. It provides a means of co-ordination within and among departments

14. It is a means of control

15. It can make managers aware of their own responsibilities © Van Schaik Publishers 2006

17. Project budget

18. Annual budget

19. Cash budget

20. Variable or flexible budgets

21. Zero-base budgeting

22. Standard method of budgeting© Van Schaik Publishers 2006

23. Budget planning and control Control takes place in 4 stages: Setting standards Collecting figures and compare with standards Critically analysing and evaluating the organisation’s performance Taking any corrective measures © Van Schaik Publishers 2006

25. Limitations of financial statements

26. External and internal financial reporting

27. Management accounting and reporting

28. Profit versus cash flow© Van Schaik Publishers 2006

29. Figure 9.3 The integrated budget system

31. Assets

32. Non-current fixed assets

33. Current assets

34. Liabilities

35. Long-term liabilities

36. Current liabilities

37. Revenue

38. Expenditure© Van Schaik Publishers 2006

40. Income statement

41. Cash flow statement

42. Management income statement© Van Schaik Publishers 2006

43. Figure 9.4: The organisation in financial terms

45. The working capital cycle

46. Determination of working capital requirements

47. Stock management

48. Trade receivables (debtors)

49. Credit policy

50. Accounts receivable© Van Schaik Publishers 2006

54. Index analysis

55. Common size analysis

56. Ratio analysis

57. Comparison of ratios with benchmark industry ratios

58. Structured ratio analysis© Van Schaik Publishers 2006

59. Figure 9.5: The Du Pont ratio analysis

61. Return on total assets

62. Profitability ratio

63. Profit margin on sales (gross profit)

64. Expense analysis

65. Activity ratio (asset management ratios)

66. Stock turnover© Van Schaik Publishers 2006

68. Leverage ratio

69. Times interest earned

70. Liquidity ratio

71. Acid test

72. Earnings per share (EPS)

73. Fixed commitment cover

74. Cash flow ratios© Van Schaik Publishers 2006

76. Simplification and summarisation

77. Estimation, judgement and accounting policies

78. Lagging Indicator© Van Schaik Publishers 2006