1. FINANCAL PLANNING and MANAGEMENT  Role of financial planning  Financial markets relevant to business financial needs  Management of funds  Using financial information  Effective financial management  Effective financial planning  Ethical and legal aspects

2. THE ROLE OF FINANCIAL PLANNING  STRATEGIC ROLE  Organisational goals and objectives  Strategic Plans  Managing financial resources

3. OBJECTIVES OF FINANCIAL MANAGEMENT

4. OBJECTIVEDEFINITIONDATA Profitability Earnings after expenses have been paid  Gross profit  Net profit Efficiency Ability of the business to minimise costs and maximise profits  Expenses Growth Ability to increase in size in the longer term  Market share  Number of outlets Return on capital Financial return to owners as a percentage of their contribution  Net profit  Owners’ equity Liquidity Ability to pay debts as they fall due  Current assets and current liabilities

5. THE PLANNIN G CYCLE 1. Address present financial position. 2. Determine financial elements of business plan. 3. Develop budgets a) Operating- b) Project c) Financial

6. THE PLANNING CYCLE 4. Predict cash flows 5. Prepare financial reports 6. Interpret financial reports 7. Plan financial controls 8. Minimise financial risks and losses.

7. FINANCIAL MARKETS  MAJOR PARTICIPANTS  Banks  Finance and insurance companies  Superannuation funds  Companies  Government  ASX

8. FINANCIAL MARKETS  TRENDS  Deregulation  Interest rates  Globalisation

9. MANAGEMENT OF FUNDS SOURCES OF FUNDS

10.  INTERNAL (EQUITY) (EQUITY) o Owners’ personal funds o Retained earnings  EXTERNAL (DEBT) SHORT TERM o Bank overdraft o Bank bills o Trade credit o Factoring LONG TERM LONG TERM o Mortgage o Debentures o Leasing

11. SOURCES OF FUNDS  Matching sources with purpose  Consider: o Set up costs o Interest costs o Availability of funds o Flexibility of funds o Level of external control

12. SOURCES OF FUNDS  DEBT versus EQUITY  Gearing/ leverage.

13. FINANCIAL INFORMATION 1. REVENUE/INCOME/ PROFIT and LOSS STATEMENT. Shows revenue earned, expenses incurred over the accounting period and the resultant profit or loss. Gross Profit = Gross Profit = COGS = COGS = Net Profit = Net Profit = 1. BALANCE SHEET. Shows assets and liabilities at a particular period of time, represents the net worth of the business. Assets = Liabilities + Owners’ Equity Assets = Liabilities + Owners’ Equity

14. FINANCIAL INFORMATION  ANALYSIS Ratios compared vertically, horizontally or trend analysis  INTERPRETATION Make judgements using the data gathered from the analysis.

15. FINANCIAL RATIOS  LIQUIDITY Current ratio=Current Assets/Current liabilities  SOLVENCY Debt to equity ratio= Total liabilities/ Owners’ equity

16. FINANCIAL RATIOS  PROFITABLITY Gross profit ratio=Gross profit/Sales Net profit ratio= Net profit /Sales Return on owners’ equity=Net profit / Owners’equity

17. FINANCIAL RATIOS  EFFICIENCY  Expense Ratio= Expenses/Sales  Accounts Receivable Turnover= Sales/Accounts Receivable

18. WORKING CAPITAL MANAGEMENT  Control of current assets Cash Cash Receivables Receivables Inventories Inventories  Control of current liabilities Payables Payables Loans Loans Overdrafts Overdrafts

19. WORKING CAPITAL MANAGEMENT  Strategies Leasing Leasing Factoring Factoring Sale and lease back Sale and lease back

20. PROFITABILITY MANAGEMENT  Cost Control Fixed costs Fixed costs Variable costs Variable costs  Revenue Controls