Financial Management Overview

The primary conflict is that directors are hired to run the company on behalf of shareholders, which can lead to decisions that may not align with shareholders' interests.

Companies can use reward schemes that incentivize managers to make decisions in the best interests of the company.

Corporate governance codes are designed to ensure directors make decisions that are in the best interests of the company and its shareholders.

<p>Common categories include profitability and return, debt and gearing, liquidity, and investor ratios.</p> Signup and view all the answers

<p>The primary objective is to deliver a specific service or benefit rather than to make money.</p> Signup and view all the answers

<p>Value for Money assesses whether the organization is providing its services effectively and efficiently.</p> Signup and view all the answers

<p>Independent NEDs provide independent advice to the board and help achieve the company's objectives.</p> Signup and view all the answers

<p>Financial management is crucial for effectively allocating available funds to programs and activities.</p> Signup and view all the answers

<p>The primary objective is to maximize the company's value to its shareholders by increasing share price and dividend payout.</p> Signup and view all the answers

<p>Profit maximization can focus on short-term gains which may compromise long-term sustainability, thus not necessarily increasing shareholder wealth.</p> Signup and view all the answers

<p>Factors such as high expenses for growth initiatives or risky operations can result in high profits but not sufficient cash flow.</p> Signup and view all the answers

<p>Stakeholder groups are individuals or entities with an interest in the company, including employees, managers, customers, and suppliers.</p> Signup and view all the answers

<p>The Stakeholder View advocates that companies should maximize shareholder wealth while also considering the needs of all stakeholders.</p> Signup and view all the answers

<p>Agency Theory explains the relationship between principals, such as shareholders, and agents, like managers, who are hired to perform tasks on behalf of the principals.</p> Signup and view all the answers

<p>The quality of earnings can affect perceptions if earnings come from risky operations, making them less sustainable over the long term.</p> Signup and view all the answers

<p>Maximizing short-term profits may lead to underinvestment in critical areas like research and development, harming long-term prospects.</p> Signup and view all the answers

<p>The primary purpose of financial management is to ensure the efficient use of financial resources to achieve the organization's goals.</p> Signup and view all the answers

<p>Financial management focuses on the planning and control of financial resources, while financial accounting primarily deals with recording and reporting financial transactions.</p> Signup and view all the answers

<p>Shareholder wealth maximization and profit maximization are two key financial objectives that organizations may pursue.</p> Signup and view all the answers

<p>Agency theory explains the relationship between principals (shareholders) and agents (management), focusing on conflicts of interest and aligning their goals.</p> Signup and view all the answers

<p>Not-for-profit organizations focus on achieving social goals rather than profit maximization, which affects their financial objectives.</p> Signup and view all the answers

<p>The dividend decision is important because it affects the amount of profit distributed to shareholders and the amount retained for reinvestment.</p> Signup and view all the answers

<p>The financing decision involves determining the optimal mix of debt and equity to finance the company's operations effectively.</p> Signup and view all the answers

<p>Managerial reward schemes are designed to align the interests of management with those of the stakeholders, encouraging them to meet organizational objectives.</p> Signup and view all the answers