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Strategic role of financial management

Bankruptcy

Role of Finance

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HSC Finance - Role of

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Questions 8

Answers

1
Bankruptcy
When a business is legally has more liabilities than assets
When a bank will not lend you any money
When you have very high account receivable
When you are not allowed to borrow anymore money
2
Strategic role of financial management
Ensuring financial resources are available when needed
To make sure the business has enough money to pay its staff
Growth, profitability, liquidity and solvency
To plan the long term needs of the business
3
Efficiency
The ability to use the least inputs for the greatest output
Fast effective operations processes
Ability to convert marketing to sales quickly
High speed communication systems
4
Growth
More sales over a short period of time
Increased popularity
Increase in a business’s size, sales, COGS or expenses
Increased market share in comparison to competitors
5
Solvency
Inability to pay debts
Long term debt management
An indication of a business’s long term financial stability.
Used to clean paint from your hands
6
Financial resources
Are used to buy assets for the business
Are resources that need to be paid for
Are those resources in a business that have a monetary value
Are short term resources
7
Liquidity
Ability to pay short term debts as they fall due
Current assets/Current Liabilities
Ability to pay long term debts
All of the above
8
Profitability
Low COGS compared to gross profit
A measure of a business, compares income to COGS & expenses
Increased income compare to expenses
When a business has a high gross profit