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Foundations of Financial Management
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1
Question
What is financial management?
Page 1
Answer
Managing money to achieve business objectives.
2
Question
Why is financial management important for a business?
Page 1
Answer
It prevents overspending, ensures bills can be paid, and avoids business failure.
3
Question
What are the consequences of poor financial management?
Page 1
Answer
Lack of cash, inability to pay suppliers, excessive debt, unused assets, business collapse.
4
Question
Define profitability as an objective of financial management.
Page 1
Answer
Earning enough revenue to cover expenses and make profit.
5
Question
What does liquidity mean in financial management?
Page 1
Answer
Having enough cash to meet daily expenses (e.g., wages, rent, bills).
6
Question
Define growth as a financial management objective.
Page 1
Answer
Expanding the business sustainably.
7
Question
What is risk management in financial management?
Page 1
Answer
Strategies to minimize financial risks (insurance, policies, security).
8
Question
Define cash flow.
Page 1
Answer
Money entering and leaving the business from operations, financing, and investing.
9
Question
What is the difference between cash and profit?
Page 1
Answer
Cash is actual funds available now; profit is revenue minus expenses.
10
Question
How can a business be profitable but run out of cash?
Page 1
Answer
If customers pay late.
11
Question
List examples of cash inflows.
Page 1
Answer
Sales, loans, investment, interest.
12
Question
List examples of cash outflows.
Page 1
Answer
Expenses, wages, inventory purchases, bills.
13
Question
Name one way to improve cash flow by encouraging payments.
Page 1
Answer
Offer discounts or send reminders.
14
Question
How can delaying payments improve cash flow?
Page 1
Answer
Delay payments where possible.
15
Question
Name a method to improve cash flow by reducing costs.
Page 1
Answer
Reduce expenses.
16
Question
What is a plan for low cash periods in cash flow management?
Page 1
Answer
Plan for low cash periods.
17
Question
What are internal sources of finance?
Page 1
Answer
Owner's capital, retained profit.
18
Question
List examples of external sources of finance.
Page 2
Answer
Bank loans (long-term), overdrafts (short-term), leasing, credit cards, investors, mortgages.
19
Question
What is short-term finance? Give examples.
Page 2
Answer
Overdraft, trade credit.
20
Question
What is long-term finance? Give examples.
Page 2
Answer
Loans, mortgages.
21
Question
How do higher interest rates affect businesses?
Page 2
Answer
Increase loan costs, reducing business spending and profit.
22
Question
What impact does high unemployment have on customer spending?
Page 2
Answer
Reduces customer spending.
23
Question
How does low economic activity affect sales?
Page 2
Answer
Leads to fewer sales.
24
Question
How does high economic activity affect opportunities?
Page 2
Answer
More opportunities.
25
Question
What does OALER stand for in types of accounts?
Page 2
Answer
Owners' Equity, Assets, Liabilities, Expenses, Revenues.
26
Question
Define Owners' Equity (OE).
Page 2
Answer
Owner investment and drawings.
27
Question
Give examples of Assets (A).
Page 2
Answer
Cash, Inventory, Motor Vehicles.
28
Question
Define Liabilities (L).
Page 2
Answer
Debts owed (Loans, Accounts Payable).
29
Question
What are Expenses (E)? Give examples.
Page 2
Answer
Costs of running business (Wages, Rent).
30
Question
Define Revenues (R). Give examples.
Page 2
Answer
Income earned (Sales, Service Fees).