Understanding Financial Objectives for Businesses

The video discusses the importance of setting financial objectives for businesses, emphasizing the need for these objectives to be SMART (Specific, Measurable, Achievable, Realistic, and Time-bound). It highlights how financial objectives vary based on a business's current state and external factors like market competition and economic conditions. Common financial objectives include maximizing ROI, ensuring financial safety, minimizing costs, fostering innovation, and managing capital structure. The video also explores strategies for financial survival, cost management, and the role of capital investment in driving innovation.

Why is it important for businesses to set financial objectives?

• To avoid setting any goals

• To ignore the current market conditions

• To ensure they have a clear direction for future growth

• To focus solely on past financial performance

What does ROI stand for in financial terms?

• Rate of Interest

• Return on Investment

• Reduction of Inventory

• Revenue on Income

How is ROI calculated?

• Revenue divided by total investment

• Profit divided by each unit of cost

• Cost divided by total profit

• Profit divided by total revenue

What might a business focus on if it wants to ensure financial safety?

• Expanding rapidly without planning

• Ensuring debts are sustainable and manageable

• Increasing its debt levels

• Maximizing short-term profits

Why might a company invest in research and development?

• To avoid market competition

• To reduce its workforce

• To stimulate innovation and remain competitive

• To increase its short-term debts