Year 12 HSC Business Studies Financial Management

A set of vocabulary flashcards based on Year 12 HSC Business Studies past paper questions focusing on financial objectives, balance sheet components, and ratio analysis.

Liquidity

The financial objective concerned with meeting short term liabilities as they fall due.

Objectives of financial management

The five primary goals of financial management: profitability, liquidity, growth, efficiency and solvency.

Short term external funds

Sources of external finance for a business including commercial bills, bank overdrafts and factoring.

Retained profits (Cut Above Pty Ltd)

The specific value of retained profits from the $30$ June $2012$ balance sheet, calculated as $\$178\,100$.

Current ratio

A measure of liquidity calculated by dividing current assets by current liabilities.

Expense ratio

A financial ratio specifically used as a measure of efficiency.

Global market influences

External factors that impact the financial management of a business.

Accounts receivable turnover ratio

An efficiency ratio used to measure how effectively a business manages its credit sales, calculated as $\text{Sales / Accounts Receivable}$.

House Party Pty Ltd Liquidity

The liquidity of House Party Pty Ltd as of $30$ June $2015$, calculated as current assets ($\$120\,000$) divided by current liabilities ($\$124\,000$).

Accounts Payable

A current liability representing the amount a business owes to its suppliers for goods or services purchased on credit.

Accounts Receivable

A current asset representing the amount of money owed to a business by its customers for goods or services delivered on credit.

Mortgage

A non-current liability representing a long-term loan used to purchase property, such as land or buildings.

Overdraft

A short-term external source of funds where a bank allows a business to withdraw more money than is in its account.

Solvency

One of the five objectives of financial management, relating to a business's ability to meet its long-term financial commitments.