Setting, Examples, Aims & Influences (2024)

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Financial Objectives

Every business has two objectives: One is to make money; the other, more elusive, is to make money consistently."

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  • Business Case Studies
  • Business Development
  • Business Operations
  • Change Management
  • Corporate Finance
  • Financial PerformanceSetting, Examples, Aims & Influences (3)
    • Analysing Financial Performance
    • Average Rate of Return
    • Balance Sheet
    • Break Even Analysis Chart
    • Break-Even Analysis
    • Cash Flow
    • Cash Flow Budget
    • Cash Flow Forecast
    • Cash Flow Improvement
    • Cashflow Problems
    • External Sources of Finance
    • Financial Objectives
    • Financial Performance and Stakeholders
    • Financial Statements
    • Financial Terms And Calculations
    • Income Statements
    • Internal Sources of Finance
    • Investments
    • Profitability Ratio
    • Sources of Finance
  • Human Resources
  • Influences On Business
  • Intermediate Accounting
  • Introduction to Business
  • Managerial Economics
  • Managers
  • Nature of Business
  • Operational Management
  • Organizational Behavior
  • Organizational Communication
  • Strategic Analysis
  • Strategic Direction

TABLE OF CONTENTS :

TABLE OF CONTENTS

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Setting, Examples, Aims & Influences (5)

Every business has two objectives: One is to make money; the other, more elusive, is to make money consistently."

- Dave Liniger

Although making money is a financial objective, businesses should ideally set more specific financial goals to be able to realistically achieve them. Let's take a look at the different types of financial objectives businesses may have.

Financial objectives examples

Financial objectives are the goals or targets related to the financial performance of a business. They are the goals that enterprises set for success and growth.

There are six main types of financial objectives:

  • Revenue objectives,

  • Cost objectives,

  • Profit objectives,

  • Cash flow objectives,

  • Investment objectives,

  • Capital structure objectives.

Revenue objectives

Revenue objectives are the most common objectives used by all types of firms.

There are three types of revenue objectives:

1. Revenue growth (percentage or value). For example, aiming to grow total revenues by 30%, reaching £1 million in annual revenue.

2. Sales maximization. For example, maximizing total sales no matter whether they are profitable or not.

3. Market share. For example, growing market share to 40%.

Cost objectives

Cost objectives aim to simply minimize the costs without lowering the quality of a product or service. For example, cutting variable costs to £50 per unit.

Profit objectives

Profit objectives are typically supported by revenue and cost objectives. For example, when growing revenue and cutting costs an enterprise will generate a higher profit.

There are four types of profit objectives:

Cash flow objectives

Cash flow objectives are typically used by small businesses and start-ups which are not yet profitable. The objectives focus on improving the cash flow.

This can be achieved by:

  • Reducing borrowings,

  • Minimising interest costs,

  • Reducing inventory and credit sales,

  • Reducing seasonal swings in cash flow.

Investment objectives

Investment objectives aim to increase the return on investment.

There are two types of investment objectives:

1. Level of capital expenditure. It is setting an absolute amount or percentage of revenues. For example, investing £1 million or 5% of revenues per year.

2. Return on investment. It is a target percentage of return. For example, ROCE (return on capital employed) of 20%. (See the article about financial ratios.)

Capital structure objectives

Capital structure objectives are related to how an enterprise is financed and how its capital is structured.

There are two types of capital structure objectives:

1. Higher equity. It is usually used by start-ups and companies which do not have to pay dividends.

2. Higher level of debt. It is used when interest rates are low and profits are high.

It is important to note that businesses can also set non-financial objectives. Check out our explanation Non-Financial Data to learn more!

Personal financial objectives

Personal financial objectives are financial aims set by individuals rather than businesses.

Personal financial objectives are goals and targets regarding the finance of individuals.

For example:

  • Creating a budget,

  • Saving for short-term and long-term plans (trip, retirement, children),

  • Paying off debts,

  • Investing in the stock market,

  • Starting an emergency fund (saving money for unpredicted expenses).

Setting financial objectives

There are some simple steps that will help you to set financial objectives:

1. Decide on what you are going to use the money for

Imagine that you set a financial goal and achieve it. You earned all the money you wanted. What now? Think about what you are going to do with the earned money. Always try to make your money work and earn. You can do it by for example further investments.

2. Categorise your financial goals

Segregate your financial goals regarding their length of time:

  • Short-term financial goals (six months to five years).

  • Mid-term financial goals (five to ten years).

  • Long-term financial goals (more than ten years).

3. Set deadlines

Try to set a target date for each financial goal. For example, if you are going to retire in 25 years, make sure you save enough money by that time.

4. Prioritise your goals

It is impossible to achieve all your financial goals at the same time. Therefore, you should decide on which goal is the most important to you and which you need to achieve first. For example, if you want to save money for your child who is going to college next year and save money for your retirement, focus on the first goal first.

5. Know how much you have now and how much you want to have

Calculate how much money you possess at the moment and determine how much you still need to save. You can also think about how much time you have to achieve your financial goal and calculate the amount you need to save each month.

Purpose and benefits of setting financial aims

Here are some of the benefits of setting financial objectives:

It makes you aware of where you are heading - Owing to setting financial goals you are able to determine what you want to achieve and what success means to you.

It helps to determine how much you need to save - Imagine you have £800,000 now and by the end of the next year, you need to achieve double this amount. Thanks to setting a financial objective you can easily calculate how much money you still need to save. You can also calculate how much to save each week or each month.

It allows you to follow an appropriate strategy- Depending on how big your financial goal is, you might need to find and follow an appropriate strategy. Having set your financial objective, you can work out a strategy right for you.

It helps to shape your everyday choices - If you are aware that next month you will have to pay rent for your flat and you have barely the amount needed for the rent, you are aware that you need to save and even earn money. In such a situation, you can for example give a miss to another drink at a pub or take one more shift at work.

It creates a sense of achievement and awareness - Knowing your financial objectives and being aware of how to achieve them also have a positive psychological and intellectual impact. Firstly, achieving your goal automatically makes you feel fulfilled and secondly, the entire process makes you more aware of how money is generated and how much effort needs to be put there.

Disadvantages of setting financial objectives

The disadvantages of setting financial objectives include:

  • It might prevent you from spending money - Having set financial goals and aiming to follow them, it is typical to avoid additional and unexpected expenses. However, sometimes it is essential to spend more money in order to increase sales and generate higher profits.
  • Failing to achieve a set goal might make you feel disappointed - If someone sets a goal, they aim to achieve it. However, it is not always possible to be successful. You should bear in mind that some plans fall apart and it does not have to be your fault.

Influences on financial objectives

There are two types of influences that can impact financial objectives: internal and external.

Financial Objectives: Internal influences

Size and status of an enterprise. A lot depends on how big the business is. For example, small companies and start-ups tend to focus on survival, rather than on setting ambitious financial objectives, whereas huge companies are typically able to focus on growing their profits.

Business ownership. It makes a huge difference whether an enterprise is owned for example by an individual or by the government. An individual has more deciding power over their company and therefore bigger possibilities than if a company was owned by the government.

Other functional objectives. Most companies consist of various departments. These departments tend not to agree with one another and consequently limit their ability to set financial objectives.

Financial Objectives: External influences

Competitors. The competitive environment has an enormous impact on each business including its financial objectives. For example, if a firm’s competitors grow market share, the firm needs to catch up with them and consequently give a miss to their financial goals.

Economy. An economic downturn may hold an enterprise back from achieving its financial objectives. Even though they have set such objectives, their plan might easily fall apart.

Social change. Trends tend to change and people tend to drop out using some goods and start using different ones instead. Nowadays there are many factors that have an impact on society. Therefore, a company that has been successfully achieving its financial goals might be easily disabled from continuing to do it because of a change in consumer habits.

Political change. Similarly to social change, politics may hold a company back from achieving its set financial objectives. For example, they might launch new taxes charging a company’s account.

Financial Objectives - Key takeaways

  • Financial objectives are the goals or targets related to the financial performance of a business.

  • There are six types of financial objectives: revenue objectives, cost objectives, profit objectives, cash flow objectives, investment objectives and capital structure objectives.

  • Financial objectives can be set by both enterprises and individuals. These are called personal financial objectives.

  • Non-financial objectives are objectives that are not related to money.

  • To set financial objectives you should decide on what you are going to use the money for, categorize your financial goals, set deadlines, prioritize your goals and know how much you have now and how much you want to have.

  • There are many purposes and advantages of setting financial goals. For example, it makes you aware of where you are heading and allows you to follow an appropriate strategy.

  • Setting financial objectives also has some drawbacks. These are preventing you from spending money and feeling disappointed when not achieved.

  • There are two types of influences on financial objectives: internal and external.

Frequently Asked Questions about Financial Objectives

Financial objectives are the goals or targets related to the financial performance of a business. They are the goals that enterprises set for success and growth.

There are six types of financial objectives:

  • Revenue objectives,
  • Cost objectives,
  • Profit objectives,
  • Cash flow objectives,
  • Investment objectives
  • Capital structure objectives.

Financial objectives can be set by both enterprises and individuals.

The main financial objectives set by enterprises are:

  • Revenue objectives,
  • Cost objectives,
  • Profit objectives,
  • Cash flow objectives,
  • Investment objectives
  • Capital structure objectives.

The main financial objectives set by individuals can be:

  • Creating a budget,

  • Saving for short-term and long-term plans (trip, retirement, children),

  • Paying off debts, and so on.

Some examples of financial objectives are stated below:

Revenue objectives:

  • Revenue growth - aiming to grow total revenues by 30%, reaching £1 million in annual revenue.

Cost objectives - cutting variable costs to £50 per unit.

Profit objectives - achieving an operating profit of £1 million.

Investment objectives:

  • Level of capital expenditure - investing £1 million or 5% of revenues per year.

Financial objectives are the goals or targets related to the financial performance of a business. They are the goals that enterprises set for success and growth.

Non-financial objectives are objectives that are not related to money.

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Give a definition of financial objectives. Financial objectives are the goals or targets related to the financial performance of a business. List all the six types of financial objectives. Revenue objectives, cost objectives, profit objectives, cash flow objectives, investment objectives and capital structure objectives. What are the three types of revenue objectives? Revenue growth, sales maximization and market share. Give an example of a cost objective. Cutting variable costs to £50 per unit. Give an example of an objective rate of profitability. Achieving an operating profit margin of 15%. What are the ways to improve cash flow? For example, reducing borrowings and inventory.

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Setting, Examples, Aims & Influences (2024)

FAQs

What is an example of setting specific goals? ›

Specific: I want to wake up earlier to have more time for my morning routine. Measurable: I'll track how many times I snooze my alarm and when I finish my morning routine. Attainable: My schedule allows me to go to sleep early, so I can still maintain at least eight hours of sleep.

How do you handle setting goals can you give me an example? ›

Good answer: "I like to set SMART goals - that is, goals that are Specific, Measurable, Achievable, Relevant, and Time-bound. Once I have set a goal, I break it down into smaller, more manageable steps and create a plan for achieving each one. I also track my progress regularly and adjust my approach if necessary."

What is an example of a smart goal setting? ›

An example of a SMART-goal statement might look like this: Our goal is to [quantifiable objective] by [timeframe or deadline]. [Key players or teams] will accomplish this goal by [what steps you'll take to achieve the goal]. Accomplishing this goal will [result or benefit].

What are the 5 components of effective goal-setting? ›

There are many variations of what SMART stands for, but the essence is this – goals should be:
  • Specific.
  • Measurable.
  • Attainable.
  • Relevant.
  • Time Bound.

What is an example of a performance goal setting? ›

For example, yearly goals for employees like “Increase personal sales rate 20% by December 2023” could be subdivided into quarterly targets (“Generate five qualified sales opportunities from leads contacted in Q1”) and monthly targets (“Schedule two demo meetings each week”).

How do you write a good goal setting? ›

Goal statements should be SMART – specific, measurable, achievable, relatable and time-oriented. Although detailed, goal statements should be broad in nature, covering a multi-year period and encompassing objectives or outcomes that will lead to accomplishing it.

What is an example of if then goal setting? ›

If-then planning can lead to new behaviour

If your goal is to be more mindful, a relevant if-then plan might be “If I am brushing my teeth, then I will practice mindfulness”. If your goal is to improve your sleep, a relevant if-then plan might be “If it's after 3pm, then I will have water instead of coffee”.

How do you set your goals and targets in life explain briefly? ›

Set your lifetime goals first. Then, set a five-year plan of smaller goals that you need to complete if you are to reach your lifetime plan. Keep the process going by regularly reviewing and updating your goals. And remember to take time to enjoy the satisfaction of achieving your goals when you do so.

What is an example of a goal statement? ›

Here are some personal goal statement examples to inspire you:
  • “I will become the director of research operations at my company within the next five years. ...
  • “Over the next year, I will develop a reputation as a reliable graphic designer and secure 20 new freelance clients.
Jul 20, 2022

What are examples of goals and objectives? ›

Tangibility. Goals can be intangible and non-measurable, but objectives are defined in terms of tangible targets. For example, the goal to “provide excellent customer service” is intangible, but the objective to “reduce customer wait time to one minute” is tangible and helps in achieving the main goal.

What are the 7 keys in goal setting? ›

Here are seven keys to achieving your goals:
  • Create goals that inspire you. ...
  • Be clear on why the goal is important to you. ...
  • Focus on what you want to learn as much as what you want to do. ...
  • Create a system to support you. ...
  • Find ways to celebrate your progress. ...
  • Consider who you want to bring as a partner on your journey.
Jan 7, 2024

What are the 4 C's of goal setting? ›

Through the 4 C's—Commitment, Courage, Capability, and Confidence—you can create 10x breakthroughs and avoid the traps of complacency and courage-avoidance that many successful entrepreneurs fall into.

What are specific goals examples? ›

To make sure you can achieve them, make sure your goals are specific to what you're working on. For example, instead of creating a goal to raise more money, you might create a goal to raise $20,000 by the end of the year. This is much more specific and gives you a roadmap to work off of.

What is an example of a specific goal NASM? ›

An example of a specific goal would be, “I want to lose 15 pounds in 10 weeks.” Measurable. Goals should be measureable. You should be able to calculate your client's progress in weight, inches, distance and other variables.

What does it mean to set specific goals? ›

• Specific – Objective clearly states, so anyone reading it can understand, what will be done. and who will do it. • Measurable – Objective includes how the action will be measured. Measuring your. objectives helps you determine if you are making progress.

How do you write a specific goal? ›

Writing Goal Statements

Step One: Begin with determining the action verb, “increase, develop, obtain, complete, etc.” Step Two: Answer the question, what it is you will impact? Step Three: Include a time-bound statement of accountability. Step Four: Add a statement about what results will be achieved.

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