3.2 slides
- 1. Objectives: •Cash flow targets •Cost minimisation •ROCE targets •Shareholders’ returns •Internal and external influences on these targets
- 2. 1. Cash Flow Targets 2. Cost minimisation 3. Return on capital employed ROCE 4. Shareholders
- 3. 1. Liquidity and gearing ratios 2. Payback periods 3. Accuracy of budgeting 4. Sales maximisation
- 4. In small groups prepare a 1 or 2 page presentation on the types of targets involved in: •Cash flow •Cost minimisation •ROCE •Shareholder returns Your presentation might include: explanation of the types of objectives reasons why these objectives are important advantages and disadvantages of prioritising it as a key objective Internal factors which might influence the achievement of the financial objectives External factors which might influence the achievement of the financial objectives
- 5. Log on to the VLE and download the case study and questions on SONY
- 6. Without cash a business is likely to face failure •Maintaining a minimum closing monthly cash balance •Reducing the bank overdraft •Creating a more even spread of sales revenue •Spreading its costs more evenly •Achieving a certain level of liquid, non cash items •Raising certain levels of cash at a particular point in time •Setting contingency fund levels
- 7. Reducing costs is a way of raising profits There are, obviously, lots of ways of reducing costs: • reducing waste by recycling • reducing staff levels by automation • adopting lean production methods • closing down unprofitable activities • finding cheaper suppliers • reorganisation • outsourcing
- 8. ROCE is the amount of profit a business generates in relation to the amount of money invested in the business ROCE is of particular interest to the owners of the business • they have probably invested the most money! Objectives might be • to increase ROCE over time • to match or exceed the ROCE of other businesses in the same industry
- 9. Financial objectives are often influenced by shareholders’ interests Shareholders might be interested in • dividend per share per share • the amount of profit paid to shareholders dividend yield dividend paid can be misleading – it must be related to the price of the share = (dividend per share / share price) x 100
- 10. Stakeholders Corporate strategy Capacity Internal influences Ethical stance Departmental influence
- 12. Log on to the VLE and download the case study and questions on TeesWear
Editor's Notes
- #2: • www.times100.co.uk Edition 13 – ‘CIMA: Financial information in decision making’• Business Review, Volume 10, Number 3, February 2004 – ‘Strategic Finance’• www.tutor2u.net ‘Business Café’: ‘Cutting costs keeps profits in good shape’• www.tvchoice.uk.com TV Choice dvd: ‘Are we making a profit?’
- #5: Internal factors which might influence the achievment of the financial objectives External factors which might influence the achievement of the financial objectives