Interdependence:
Different parts of the business depend and do roles for other divisions in a reoccurring cycle to keep the business going.
complete sales
Operations--------------------------->Finance
Provide funds when needed
Generate sales--> income
Marketing--------------------------------->Finance
Provide funds when needed
Manages workforce effectively/efficiently-->Sales-->Income
Human resources---------------------------------------------------------------->Finance
Provides funds when needed
Strategic role:
Tasks involved- Maintain and report financial information e.g balance sheet.
- Forecast the business's future finances
- Distribute funds to different parts of the business
- Source funds when needed
Day-to-day- Release funds when needed
- Follow all laws
- Manage transactions
Longer-term- Maintain low levels of debt (still allow growth)
- Leave all options open e.g if the business wants to issue shares
Financial management goals:
Short-term goals-
- Liquidity- How easy assets are turned into cash (cash available to pay short-term debts).
-Need to balance short-term obligations and growth opportunities
- Solvency- How easy assets are turned into cash (cash available to pay long-term deb)
- Payments have to be sustainable.
Long-term goals-
- Efficiency- Increasing sales revenue and/or decreasing expenses (recover receivables)
- Profitability- Increasing sales revenue and/or decreasing costs and expenses.
- Growth- Increasing the size of the business.
- Three main ways of making a business larger; direct expansion, merging, acquisition
- Growth has to be sustainable
Conflict-
Mainly between:
- Liquidity and profitability
- Solvency and profitability
- Solvency and growth