ROLE OF FINANCIAL MANAGEMENT EXAM QUESTIONS AND ANSWERS 100% CORRECT!!

Objectives of financial management - ANSWER The main goal of many business owners is to become wealthy. There are different ways to measure financial success. The first is how much profit their business is making- how much revenue remains after all expenses have been paid- represents their return on capital they have invested. The owners can reinvest money back into the business (retained profit) or withdraw money for their own use. (drawings for sole trader or partnership and dividends for a company). The role of financial management is to develop a tactical plan identifying short term objectives and strategies that enable finance to support the whole business in achieving its strategic goals. Objectives include profitability, growth, efficiency, liquidity and solvency. Financial managers will make short and long term funding decisions on debt and equity sources, to develop financial policies such as cash control or borrowing and making the best use of financial resources.Financial reports give a detailed picture of profitability and financial stability. Analysis of the data will show change from one year to the next, creating trends. Profitability - ANSWER The earnings of the business after expenses have been paid. Gross profit - ANSWER The revenue remaining after paying costs of good sold, that is, the expenses of purchasing the goods wholesale and transporting them to the business ready for sale (freight or cartage inwards). GP= sales- COGS