1. Strategic Financial Objectives

Stakeholders

Persons and entities that have an interest in the strategy of an entity.

Agency Theory

The theory that agents (managers/accountants) pursue their own self-interest rather than the interest of the principals (i.e. shareholders).

Maximise Shareholder Wealth

The main objective of all for-profit entities, achieved through dividend payout and capital growth.

Dividend Payout

One of the ways to maximise shareholder wealth by distributing profits to shareholders.

Capital Growth

Increase in share price as a method to maximise shareholder wealth.

Financial Objectives

Targets related to financial performance, such as return to investors and profitability.

Non-Financial Objectives

Objectives that consider the impact on stakeholders other than shareholders, such as employees and the community.

3 Es Model for Value for Money

A model that assesses the performance of an activity based on economy, efficiency, and effectiveness.

Effectiveness

A measure of how well an entity meets its aims and objectives.

Economy

Achieving financial efficiency by minimizing costs and resource consumption.

Efficiency

Maximizing the ratio of outputs to inputs, ensuring the best use of funds.

International Operations

Considerations for a company when expanding internationally, including competition and country factors.

Competition abroad

The level of market competition that may differ from domestic markets.

Profitability Ratios

Metrics used to evaluate financial performance, such as gross profit margin and net profit margin.

Gross Profit Margin

A profitability ratio calculated as (gross profit / revenue) * 100, indicating pricing power and production cost control.

Operating Profit Margin

A profitability ratio that shows profit from core operations after overheads, calculated as (operating profit / revenue) * 100.

Net Profit Margin

A profitability ratio showing final profit as a percentage of revenue, calculated as (profit after tax / revenue) * 100.

Risk Exposure

The potential for losses due to financial decisions or external factors affecting a company.