role of financial management

Jun 21st, 2015
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Strategic role of financial management • Financial management deals with the analysis, interpretation and evaluation of all financial records of the business. • The long-term or strategic role of financial management is to ensure that a new business continues to operate, grows and is able to achieve its goals and objectives.

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Topic 3: financeChapter 11: role of financial managementStrategic role of financial managementFinancial management deals with the analysis, interpretation and evaluation of all financial records of the business.The long-term or strategic role of financial management is to ensure that a new business continues to operate, grows and is able to achieve its goals and objectives.The decision making process is: Owners and managers make decisions and plansOwners and managers collect information relating to the decisions and plansOwners and managers analyse and evaluate the results of decisions and plansObjectives of financial managementThe first measure owners want to establish is how much profit their business is making. Financial reports give a detailed financial picture of the businesss profitability and stability.The financial managers objectives will include the businesss ProfitabilityThe earnings of the business after expenses have been paid. Profitability is measured using net profit from the income statement. Gross profit is sales revenue minus wholesale cost and freight inwards (or COGS).Net profit is the final amount of revenue remaining after all expenses have been paid.Earnings before interest and tax (EBIT) is a more precise measure of profitability, it measures profit made from operations.GrowthThis is the size of the business compared to its competitors in the same market. More profits may be obtained if the size is bigger. It can

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