What is financial management and why is it important? Demonstrate the types of b
ID: 2791333 • Letter: W
Question
What is financial management and why is it important?
Demonstrate the types of budgets / reports that are helpful in the financial management of a business.
Describe the types of information required to set up a budget.
Discuss the financial reporting process.
- Who monitors the budget and relevant information?
- How often are management reports prepared?
- What are budget variances?
- How often should budgets be reviewed?
- Explain contingency plans and their role in the financial management process.
Discuss the impact of poor cash flow on a business?
Provide strategies on how to improve the cash flow of a business.
What do ageing summaries tell you about a business?
Explain GST as applied to the Australian economy and the reporting requirements.
How is GST handled in the budget process
Explanation / Answer
answering only the first question as these are separate and independent questions.
Financial management is the planning, organizing, executing and monitoring of the financial resources of the company in such a way that shareholder wealth is maximized.
It involves procuring capital at the cheapest possible rate, and deploying it at the maximum return generating rate.
It is important because in the absence of financial management, not ony it is difficult for business to generate orofit, but it could be making economic lossed even while generating accounting profits. Example, if a company has a short creditor settlement period, but a long debtor settlement period, it could be making a profit, but paying a very heavy interest cost due to large working capital requirements. In such a scenario, better financial management can bring down the cost of capital of the company and improve its valuation.
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