1-financialintroductionmarch2009-090302065354-phpapp01 (1)
Transcript of 1-financialintroductionmarch2009-090302065354-phpapp01 (1)
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Financial Management
Introduction
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RA21/04/2012
Role of
Finance
Payment of wages
and salaries
Maintenance offinancial records
Production oforganisations
annual accounts
Analysis ofAccounting info
e.g. ratio analysis
Payment ofaccounts and
credit control
Preparation and monitoringof internal financial
information (e.g. budgets)
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RA21/04/2012
Role and importance of financial
managementVitally important to success or failure of anorganisation. Efficient financial management has to:
Ensure funds available to achieve objectives e.g.
pay bills - materials, electricity, advertising pay wages and salaries acquire resources
develop new products Ensure costs are controlled Ensure adequate cash flow Establish and control profitability levels
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RA21/04/2012
Question
In your own words, explain the role andimportance of financial management to a
manufacturer whose objective is to improvequality.
(4 marks)
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Solution
to make sure there are sufficient funds for the organisation tobuy all the resources it needs to achieve its objectives i.e.appropriate quality of raw materials, correctly trained staff,well maintained machinery (1)
to make sure there is enough money to recruit and trainappropriately skilled staff to satisfy the objective of improvingquality. (1)
to make sure that all the costs/expenses are under control (1) to make sure that the organisation is performing profitably and
efficiently without compromising quality (1) to reduce costs of raw materials by ensuring the best value for
money from suppliers. (1)
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RA21/04/2012
Question
Outline 2 reasons why the marketing andfinancial departments may face conflicts of
interest within an organisation(2 marks)
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Solution
Marketing department may require cash in order tocarry out promotional activities e.g. advertising,free gifts
Marketing may wish to discount price
Marketing may wish to use techniques like BOGOF
All of the above are costs to the business and mayresult in reduced profits.
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RA21/04/2012
Payment of wages & salaries
Work closely with HR department to calculatewages/salaries
Use information held by HR Dept. to calculate wages e.g.name, address, bank account details, sick days, hours
worked etc. before payment takes place. Most organisations use Bank Automated Credit System
(BACS)
Advantages: No need for large sums of money to be kept on business
premises No need for large sums of money to be transported to the
business premises Cheaper for the business
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Payment of accounts
Accounts fall into CASH or CREDIT categories.
CASH accounts
Normally paid to companies or individuals that the businessdoesn’t deal with on a regular basis.
Normally paid using petty cash. Imprest used to meet daily cash expenses of the business.
CREDIT accounts
Business receive goods or services and pay at a later date. Amount and timescale dependent on ‘credit history’
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RA21/04/2012
Question
Distinguish between a cash account and acredit account.
(1 mark)
Describe the advantages of using the BACSsystem to pay wages.
(3 marks)
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Solution
A cash account is normally paid using pettycash whereas a credit account is where a
business receive goods or services and payat a later date.
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RA21/04/2012
Maintenance of financial records
Companies must maintain financial records - a history ofthe business’s activities.
Inland Revenue require businesses to retain financialrecords for a period of 6 years for possible investigation.
Limited companies must comply with Companies Act of1985 & 1989 which states that it is an offence not to
maintain proper financial records.
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RA21/04/2012
Managers and decision makers can makeinformed judgements and decisions based onfinancial information identified by the financedepartment.
Identify financialinformation fordecision makers
Cash Flow Financial
Statementsand Reporting
FinancialAnalysis
Budgets