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PROCESSES OF FINANCIAL MANAGEMENT (INCLUDING CASE STUDY) 2023

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Planning and Implementing - ANS-Cycle: Determining financial needs, developing budgets, maintaining record systems, identifying financial risks, establishing financial controls. Financial Needs - ... ANS-To determine the direction a business is going and how it will get there, these must be identified. Financial information needs to be collected to help to create future plans. they are determined by: - The size of the business - The current phase of the business cycle - Future plans for growth and development - Capacity to source finance - debt and equality - Management skills for assessing financial needs and planning A business plan might be used when seeking financial support because some financial institutions require a guarentee that their financial commitment will be successful i.e. the business can generate an acceptable return. A business plan sets out finance required, the proposed sources of finance and a range of financial statements. The required financial information must include; an analysis of financial performance, income statement, cashflow statement, balance sheet and financial ratio analysis reports. Budgets - ANS-provide information in quantitative terms about requirements to achieve particular purpose and are drawn up to show: - Cash required for planned outlays for a particular period - Cost of capital expenditure and associated expenses against earning capacity - Estimated use and cost of raw materials or inventory. - Number and cost of labour hours required for production Budgets reflect strategic planning decisions - how resources are used; provide financial information for specific business goals; are used in strategic, tactical and operational planning; enable constant monitoring of objectives providing a basis for administration control, direction of sales effort, production planning, control of stocks, price setting, financial requirements, control of expenses and production cost. It is used in both planning and control aspects of business. Planned performance can be measured against actual performance and corrective action taken as requirement. Factors considered in planning a budget: - Review of past figures/estimates gathered from relevant departments - Potential market or market share - Proposed expansion/discontinuation - Proposals to alter pricing/quality - Current orders/capacity - Considerations from external environment e.g. availability of materials and labor i.e. in 2018, McDonalds planned to outlay US$2.5billion in capital expenditure to renovate and open new stores, recognising financial needs and budgeting for them Continues... [Show More]

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