Financial Objectives

What is the main purpose of financial objectives for a business?

Measure financial performance against the business' objectives.

What formula is used to calculate Return on Investment (ROI)?

(Profit from investment) ÷ (Investment cost) × 100.

What is a benefit of financial objectives related to employee motivation?

Motivates employees to work hard

What is considered revenue in a business context?

Revenue’s calculated by quantity of goods sold x selling price per item.

How is total cost calculated for a business?

Adding together fixed costs and variable costs.

What does cash flow compare in a business?

Cash flow compares cash inflows and cash outflows to ensure enough cash to meet short-term debts.

What influences must be considered when setting financial objectives?

Internal and external influences, including overall business objectives, other departments' objectives, shareholders, and competitors.

Why might a business set targets to reduce long-term funding from debt?

To protect itself if there is an increase in interest rates.

What is the impact of overall business objectives on financial objectives?

Finance objectives must support the business’ overall aim.

Why is it important to consider the opinions of shareholders when setting financial objectives?

Shareholders need to be satisfied, and their desires can impact investment objectives.