Detailed Notes On Finance (Easy to Remember)

Resource Description

Detailed Notes On Finance (Easy to Remember)

role of financial management
• strategic role of financial management

The strategic role of finance is to manage the financial resources (debt/equity) both efficiently and effectively in order to achieve the triple bottom line.
• objectives of financial management
– profitability, growth, efficiency, liquidity, solvency
– Profitability: the ability of a firm to generate profit (the difference between revenue and expenses
– Growth: the ability of the business to increase its size in the longer term.
– Efficiency: is the ability of the firm to use its resources effectively in ensuring
financial stability and profitability of the business.
– Liquidity: the ability of a firm to pay its short-term debt obligations as they fall
due i.e., overdrafts, accounts payables, inventory purchases, wages and
commercial bills.
– Solvency: the ability of a company to meet its long-term financial obligations
(MUDL)
– short-term and long-term

• interdependence with other key business functions
The marketing, operations and human resources departments rely on financial
managers to allocate them adequate funds.

Ops
– requires funds to purchase inputs and carry out their transformation processes
– relies on operations to produce the products

Marketing
– requires funds to undertake the various forms of promotion
– relies on marketing to promote the products

HR
– requires funds in order to pay for staff
– relies on HR to manage staff
*Each of these functions helps the business generate sales and therefore provide
income to the finance department.