Financial Management Introduction

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Questions and Answers

What is primarily meant by financial management?

  • It only involves budgeting procedures.
  • It aims to maximize debt at all costs.
  • It focuses solely on accounting practices.
  • It refers to the management of financial activities to ensure sustainability. (correct)

Which factor does NOT influence the determination of capital requirements?

  • Cost of current assets
  • Long-range planning
  • Employee satisfaction ratings (correct)
  • Promotional expenses

What does the capital structure of a business refer to?

  • The permanent staff and management hierarchy.
  • The relative mix of different types of capital required. (correct)
  • The operational expenses incurred during a fiscal year.
  • The total assets owned by the enterprise.

Which is NOT an objective of financial planning?

<p>Maximizing raw material inventory. (A)</p> Signup and view all the answers

What is a key importance of financial planning?

<p>It maintains a balance between revenue generation and expenses. (B)</p> Signup and view all the answers

Which activity is related to the monitoring aspect of financial management?

<p>Evaluating financial performance against planned outcomes. (A)</p> Signup and view all the answers

What does effective financial management aim to control?

<p>The overall financial health and governance of the utility. (D)</p> Signup and view all the answers

Which financial policies are framed under financial planning?

<p>Policies involving cash control and borrowing. (D)</p> Signup and view all the answers

Flashcards

Financial Management

Effectively managing a utility's financial functions, including accounting, policies, procedures, record-keeping, reporting, planning, forecasting, budgeting, and oversight.

Financial Planning

Estimating capital needs and determining funding sources. It involves creating financial policies for acquiring, investing, and managing funds.

Capital Requirements

The total amount of funds needed for acquiring assets and expenses, broken down into short-term and long-term needs.

Capital Structure

The mix of debt and equity financing used to fund a business.

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Financial Policies

Rules and guidelines for managing cash flow, lending, and debt.

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Financial Planning Objectives

Goals of financial planning, including determining capital needs, capital structure, and financial policies.

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Importance of Financial Planning

Ensuring adequate funds, balancing inflows and outflows, and maintaining financial stability.

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Financial Manager Role

Ensuring optimal utilization of financial resources at the lowest cost to achieve maximum return on investment.

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Study Notes

Financial Management Introduction

  • Financial management effectively manages a utility's financial functions, including accounting, policies, procedures, record-keeping, reporting, planning, forecasting, budgeting, and oversight.
  • The goal is to ensure financial sustainability.
  • Financial management involves planning, organizing, directing, monitoring, decision-making, and controlling financial activities (procurement and utilization of funds).
  • It applies general management principles to financial resources.

Financial Planning Definition

  • Financial planning estimates capital needs and assesses competition.
  • It forms financial policies related to procurement, investment, and fund administration.

Financial Planning Objectives

  • Determining capital requirements: Considers current and fixed asset costs, promotional expenses, and long-term planning; short-term and long-term needs are important.
  • Determining capital structure: Involves the composition of capital (e.g., debt-equity ratio) for short-term and long-term needs.
  • Framing financial policies: Covers cash control, lending, and borrowings.
  • Maximizing resource utilization: Ensuring efficient use of resources at the lowest cost for maximum return on investment.

Importance of Financial Planning

  • Ensures enough funds.
  • Maintains a balance between inflows and outflows to maintain stability.
  • Creates effective and adequate financial and investment policies.

Financial Management Objectives

  • Focuses on procuring and allocating resources.

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