Business Studies Easy Memorisation

strategic role of financial management

Using financial decisions to help the business achieve its long term goals.

profitability

Ensuring the business earns more money than it spends.

growth

Increasing the size and value of the business over time.

efficiency

Using resources as productively as possible to minimize time and costs.

liquidity

Having enough cash available to pay short term debts and expenses.

solvency

Having enough assets to pay all debts including long term ones.

short term objectives

Financial goals focused on immediate needs usually within one year.

long term objectives

Financial goals focused on future growth and sustainability over many years.

interdependence with other key business functions

Financial management works together with marketing, operations, and HR to achieve business goals.

internal sources of finance

Money raised from within the business itself.

retained profits

Profits the business keeps and reinvests instead of paying out to owners.

external sources of finance

Money raised from outside the business.

short term borrowing

Money borrowed that must be repaid within one year.

overdraft

When a business spends more than it has in its bank account, the bank covers the difference.

commercial bills

A short term loan issued by a bank that the business agrees to repay with interest on a set date.

factoring

Selling your unpaid invoices to a third party at a discount to get cash immediately.

long term borrowing

Money borrowed that is repaid over many years.

mortgage

A long term loan secured against property.

debentures

A long term loan issued to the public that pays regular interest.

unsecured notes

Similar to debentures but not backed by any assets, higher risk for lenders.

leasing

Paying to use an asset over time without owning it.

ordinary shares — new issues

Selling new shares to the public to raise money.

rights issues

Offering existing shareholders the right to buy additional shares at a discounted price.

placements

Selling shares directly to selected investors rather than the general public.

share purchase plans

Allowing existing shareholders to buy a set number of new shares at a fixed price.

private equity

Investment from private individuals or firms who are not listed on a stock exchange.

banks

Provide everyday financial services like loans, savings accounts and overdrafts.

investment banks

Help businesses raise large amounts of capital and manage complex financial transactions.

finance companies

Provide loans and credit to businesses and consumers.

superannuation funds

Manage retirement savings and invest large amounts of money into businesses.

life insurance companies

Collect premiums and invest the money into financial markets.

unit trusts

Pool money from many investors to invest in a diversified portfolio.

Australian Securities Exchange (ASX)

The marketplace where shares in Australian companies are bought and sold.

Australian Securities and Investments Commission (ASIC)

The government body that regulates companies and financial markets to ensure fairness and transparency.

company taxation

Businesses must pay tax on their profits to the government.

economic outlook

The expected state of the economy affects business confidence and spending.

availability of funds

How easy or difficult it is to access money in financial markets.

interest rates

The cost of borrowing money, set by the Reserve Bank of Australia.