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  • • www.times100.co.uk Edition 13 – ‘CIMA: Financial information in decision making’• Business Review, Volume 10, Number 3, February 2004 – ‘Strategic Finance’• www.tutor2u.net ‘Business Café’: ‘Cutting costs keeps profits in good shape’• www.tvchoice.uk.com TV Choice dvd: ‘Are we making a profit?’
  • Internal factors which might influence the achievment of the financial objectives External factors which might influence the achievement of the financial objectives
  • 3.2 slides

    1. 1. Objectives: •Cash flow targets •Cost minimisation •ROCE targets •Shareholders’ returns •Internal and external influences on these targets
    2. 2. 1. Cash Flow Targets 2. Cost minimisation 3. Return on capital employed ROCE 4. Shareholders
    3. 3. 1. Liquidity and gearing ratios 2. Payback periods 3. Accuracy of budgeting 4. Sales maximisation
    4. 4. In small groups prepare a 1 or 2 page presentation on the types of targets involved in: •Cash flow •Cost minimisation •ROCE •Shareholder returns Your presentation might include: explanation of the types of objectives reasons why these objectives are important advantages and disadvantages of prioritising it as a key objective Internal factors which might influence the achievement of the financial objectives External factors which might influence the achievement of the financial objectives
    5. 5. Log on to the VLE and download the case study and questions on SONY
    6. 6. Without cash a business is likely to face failure •Maintaining a minimum closing monthly cash balance •Reducing the bank overdraft •Creating a more even spread of sales revenue •Spreading its costs more evenly •Achieving a certain level of liquid, non cash items •Raising certain levels of cash at a particular point in time •Setting contingency fund levels
    7. 7. Reducing costs is a way of raising profits There are, obviously, lots of ways of reducing costs: • reducing waste by recycling • reducing staff levels by automation • adopting lean production methods • closing down unprofitable activities • finding cheaper suppliers • reorganisation • outsourcing
    8. 8. ROCE is the amount of profit a business generates in relation to the amount of money invested in the business ROCE is of particular interest to the owners of the business • they have probably invested the most money! Objectives might be • to increase ROCE over time • to match or exceed the ROCE of other businesses in the same industry
    9. 9. Financial objectives are often influenced by shareholders’ interests Shareholders might be interested in • dividend per share per share • the amount of profit paid to shareholders dividend yield dividend paid can be misleading – it must be related to the price of the share = (dividend per share / share price) x 100
    10. 10. Stakeholders Corporate strategy Capacity Internal influences Ethical stance Departmental influence
    11. 11. Economic climate Competition Consumer tastes Political factors External influences Pressure groups Population trends Legislation World events
    12. 12. Log on to the VLE and download the case study and questions on TeesWear

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