3. 1. Liquidity and gearing
ratios
2. Payback periods
3. Accuracy of budgeting
4. Sales maximisation
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. Log on to the VLE and download
the case study and questions on
SONY
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. 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. 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. 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
12. Log on to the VLE and download
the case study and questions on
TeesWear
Editor's Notes
• 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
