Internal and External Influences on Financial Objectives
The main internal and external influences which are likely to affect the financial objectives include:
The nature of business ownership has a significant impact on financial objectives. A venture capital investor would have quite a different approach to a long-standing family ownership.
Size and status of the business
E.g. start-ups and smaller businesses tend to focus on survival, breakeven and cash flow objectives. Quoted multinational businesses are much more focused on growing shareholder value
Other functional objectives
Almost every other functional objective in a business has a financial dimension – which often brings the finance department into conflict with other functions.
As demonstrated by the Credit Crunch. The economic downturn forced many businesses to reappraise their financial objectives in favour of cost minimisation and maximising cash inflows and balances.
Significant changes in interest rates and exchange rates also have the potential to threaten the achievement of financial targets like ROCE.
Competitive environment directly affects the achievability of financial objectives. E.g. cost minimisation may become essential if a competitor is able to grow market share because it is more efficient
Social and political change
Often an indirect impact. E.g. legislation on environmental emissions or waste disposal may force an business to increase investment in some areas, and cut costs in others