1. Financial Objectives
A2 Business Studies

2. Aims and Objectives Aim: To understand financial objectives.
Define financial objectives
Explain the internal and external influences on financial objectives.
Analyse the internal and external influences on financial objectives.
Evaluate the trade off between shareholder and employee satisfaction.

3. Starter Q) Define a financial objective
Goal or target set and/or pursued by the finance department or function. Usually be SMART.

4. Financial Objectives Targets
Cash Flow Targets (cash inflows and outflows. E.g. Growing business
Cost Minimisation
(Seeking to reduce all costs)
ROCE (percentage of profit generated by capital)
Shareholders
(increasing shareholders returns)

5. Internal and External Influences on Financial Objectives
Brainstorm in groups the internal and external factors which influence a businesses’ financial objectives.
Internal A B C
External A B C

6. Internal Influences on Financial Objectives
Corporate Objectives of the Business
Nature of the Product/Service Sold (if product is price elastic managers may pursue objective of cost minimisation).
Attitudes and Aspirations of Managers (if managers hold shares, then pursuing shareholders interest may be a more attractive objective for them!)

7. External Influences on Financial Objectives
Actions of the Businesses’ Competitors
Availability of External Finance (if a business is experiencing difficulty in raising capital then financial objectives may focus on profits)
Market Conditions (if market is expanding may focus objectives on shareholder returns or higher ROCE figures)
Economic Climate

8. Shareholders & Managers
Split into groups – shareholders and managers of ASDA.
Decide on 4 objectives you wish to be achieved by ASDA as either a manger or a shareholder.

9. Conflict Between Objectives
Profit Maximisation & Dividends
Shareholders
Salaries, working conditions, job security, sales and employment
Managers

10. Divorce of Ownership & Control
Shareholders
Managers
Interested in profit maximisation and dividends.
Only interested in managers making profits.
Incentivised by money.
Bonuses/performance related pay.
May seek market size in terms of output, employment and sales rather than profitability.
However, managers want to signal to shareholders that they are performing well and so chose not to profit maximise but to profit satisfice (just enough to satisfy shareholders).

11. Employee or Shareholder Satisfaction?
Briefly explain how internal influences affected the financial objectives of Optical Excellent PLC.
How might external influences have affected the workers attitudes towards their pay?