The financial objective of the company describes the goals related to finances and that in turn allow to achieve the general objective.
In this way, we can say that the general objective indicates the guidelines of the entire company and the financier, which should be taken by their finances. Thus, as we will see below, these goals must be framed in the so-called "financial plan." This is the main tool to channel the resources of the company towards the desired result.
Financial plan and financial objective of the company
The financial plan is linked to the financial goal, in fact, it shows you the way to go. In this way, we can say that what it does is put in writing what was previously a claim. In addition, it is an essential part of the economic financial plan of the company, which includes others such as the marketing plan.
Therefore, this report is the backbone of the finance department. It helps to know, by all employees, where they want to go in the company’s finances. In addition, it allows investors to have access to the financial structure and make decisions. On the other hand, it also provides important information to the public finances.
Within this section we cannot fail to mention financial control. This is essential to know the possible deviations and take the appropriate corrective measures. Therefore, it is those processes and adjustments that allow the CFO to check if the planning has produced results in accordance with the objectives. Within this we find the budget control, related to the budgets of expenses and income.
Some essential goals
Next we are going to see some of the most relevant financial objectives:
- The increase in revenue, which is usually expressed as a percentage of increase in sales or turnover. These sales are the basis of any business and are what provide monetary funds to the company to, among other things, deal with external financing.
- Increased shareholder profitability. This objective is closely related to a ratio, financial profitability. This, in turn, indicates to investors the earnings (in percentage) that they obtain for their actions. Therefore, increasing it is always an important objective.
- Control the so-called "financial leverage" that we have explained here in detail. Just add that this financial objective of the company is usually related to maintaining the proper balance between debts and own resources. Above all, it is necessary to avoid over-indebtedness, which entails high financial costs and high risk.