Search for notes by fellow students, in your own course and all over the country.

Browse our notes for titles which look like what you need, you can preview any of the notes via a sample of the contents. After you're happy these are the notes you're after simply pop them into your shopping cart.

My Basket

You have nothing in your shopping cart yet.

Title: A2 Level AQA Business Studies
Description: Chapter 2 - Understanding Financial Objectives

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above


CHAPTER 2: UNDERSTANDING FINANCIAL OBJECTIVES
...

- In order to achieve corporate aims and objectives, functional ones must be consistent with
corporate ones
...

- A business should constantly review all of its objectives, in case the reason for strategy failure is
an inappropriate objective
...

- Examples include: maintaining a minimum closing cash balance; reducing the bank overdraft by a
certain sum by the end of the year; creating a more even spread of sales revenue; spreading costs
more evenly; achieving a certain level of liquid, non-cash items; raising certain levels of cash at a
particular point in time; setting contingency fund levels
...
can keep its price the same and benefit from higher profit margins
...
it can use its cost reduction to reduce the selling price of its finished product and thus attract
more customers
...

- Targets based on cost minimisation must be used with caution – cheaper raw materials may be of
inferior quality which can reduce the quality of the finished products
...

- If cost minimisation has adverse side effects, it may not be an appropriate objective
ROCE targets
- The capital employed is a measure of the value of resources used by a business and is an excellent
guide to its size
...

- A business will typically set itself one or more of three types of objectives for its ROCE:
1
...

2
...

3
...

- On occasions, a business may set a less ambitious objective for its profits
...

- Financial objectives that meet shareholders’ needs are: a high dividend per share; a higher dividend
yield; increasing the share price; high earnings per share
...

- Some major reasons are to: act as a focus for decision making and effort; provide a yardstick
against which success/failure can be measured; improve coordination, by giving teams and
departments a common purpose; improve efficiency, but examining the reasons for success and
failure in different areas; allow shareholders to assess whether the business is going to provide a
worthwhile investment; enable outside organisations e
...
customers and suppliers, to confirm
financial visibility of a business
...

Corporate objectives
- The overall aims of an organisation are a key influence on the objectives of a functional area
- The finance department must ensure that its objectives are consistent with the corporate
objectives
...

-such a business can set more challenging objectives
...

- Effective planning of the workforce and a good recruitment and training policy can enable a
business to increase its profitability, but increasing the efficiency of the workforce
...

- Cost minimisation is a particular case in point
...
g
...


Operational factors
- The finance department relies on each of the other functional areas in order to reach its objectives
...

Resources available
- A business that has built up a strong resource base will be able to target and achieve a strong
financial performance e
...
quality of the workforce, brand names
...

- In many cases, successful companies have happened to be in the right place at the right time
...
g
...

-PESTLE:
Political
Economic
Social
Technological
Legal
Environmental
Examples of factors influencing financial objectives
Political factors
- Financial objectives often geared towards wishes of shareholders BUT
- Greater openness has led to expectations to serve the needs of other groups e
...
workforce;
customers; local community and the environment
...

-For luxury products it is unlikely to be significantly lower
...
g
...

Technological change
- Can lead to improvements in communication
...

- Objectives/strategies modified in light of changing circumstances
...
g
...

Environmental factors
- Growing environmental awareness among consumers and actions by pressure groups = financial
implications for a business
...

Other external issues not a part of PESTLE model
Market factors
- Demand for certain types of products goes through cycles of expansion and decline, closely related
to the life cycle of that type of product
...

Competitor’s actions and performance
- The level of competition is also an influence on a firm’s financial objectives
Suppliers
- Suppliers can have a major impact on a business’ financial objectives
Title: A2 Level AQA Business Studies
Description: Chapter 2 - Understanding Financial Objectives