QCE Business — Unit 4
Financial Management — Flashcards & Quiz
Financial management covers how a business plans, monitors and controls money to meet its objectives. QCE Business Unit 4 expects you to explain budgets and cash flow, interpret key ratios, compare sources of finance, and recommend financial strategies for a case study. Strong answers quantify recommendations — "raise $500k via a retained earnings injection" beats "get more money".
Key Points
- Budgets translate strategy into numbers — operating, cash, capital.
- Cash flow statement tracks inflows and outflows; insolvency risk hits when cash runs out even if profit is positive.
- Liquidity ratios (current, quick), profitability (gross/net margin, ROE), gearing (debt/equity).
- Sources of finance: internal (retained earnings), short-term debt (overdraft, trade credit), long-term debt (loans, bonds), equity (shares).
- Matching principle: finance long-term assets with long-term funds, working capital with short-term sources.
- Risk vs return: debt is cheaper but riskier; equity dilutes ownership but is less risky.
Common Mistakes to Avoid
- Confusing profit with cash — businesses go broke with profit on paper but no cash.
- Recommending debt without checking the existing gearing ratio.
- Using a single ratio without trend or industry benchmarks.
- Ignoring timing — seasonal cash flow gaps need different finance than structural deficits.
- Forgetting that retained earnings depend on past profitability.
Exam Strategy
QCE Unit 4 finance questions typically ask you to evaluate a financial position and recommend a strategy. Method: (1) analyse current budgets, cash flow and ratios, (2) identify the financial issue, (3) evaluate options with costs, benefits and risks, (4) recommend a specific strategy with quantified numbers, (5) justify with case evidence and benchmark data.
Revision Tip
Budgets, ratios and sources of finance are core recall — drill them on Revizi then rehearse applying them to a mock case for exam-ready analysis.
Last updated: March 2026