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Objectives

Examples of financial objectives in for-profit entities:

 Profitability

e.g. annual 10% improvement in earnings, or earnings per share.

 Dividends

e.g. annual 5% increase in dividends.

 Cash generation

e.g. annual 10% improvement in operating cash flow.

 Gearing

e.g. a maximum [debt to (debt + equity)] ratio of 40%.

In order to assess whether the entity has achieved its financial objectives, ratio
analysis can be used (covered later in this chapter).

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