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April 13, 2013 Algen H.

de dios MM-BM

Financial Management Test I. 1.) What is Finanacial Management? What is the importance? Financial Management means planning, organizing, directing and controlling the financial activities such as procurement and utilization of funds of the enterprise. It means applying general management principles to financial resources of the enterprise. It is largely devoted to the task of creating wealth for the firm's owners or shareholders. The significance of financial management for the economic growth and development through investing decision, financing decision, dividend decision, and risk management decision, better and more economically viable projects are undertaken by companies. The resultant effect on the economy is economic growth and development. Financial management serve as a good guide to online investing.Improved standard of living, growth and development in the economy that is brought about by financial management will ultimately translate into improved standard of living for all. Improved the health, with good economic condition and improved standard of living culminates into improved health as a lot of financial stress related sicknesses will be completely eliminated or reasonably reduced. Financial Managment allows for better financial decision, it creates jobs to those that teach financial management and the jobs that are created as a result of flourishing economy. Better financial decisions will lead to profitability, and profitability will eventually lead to expansion which will in turn mean more jobs. It would alleviate the poverty and preserves our environment.It promotes efficiency because good financial management does not give room for wastes and inefficiencies that characterizes poor financial management and decision making. 2.) Explain each of the roles of the Finance Manager. A financial manager is responsible for providing financial advice and support to colleagues and clients to enable them to make sound business decisions. The role of the financial manager is more than simply accounting; it is multifunctional. Financial managers must understand all aspects of the business so that they are able to adequately advise and support the chief executive officer in decision-making and ensuring company growth and profitability. Many corporations operate multifunctional teams where the financial manager is responsible for a particular division or function, or looks after a range of departments and functions. Financial managers often have specific roles and titles such as; Controllers prepare financial reports and analyses of future earnings or expenses that summarize the organizations financial position. Controllers are also in charge of preparing special reports required by regulatory authoritiesespecially important because of the Sarbanes Oxley Act, designed in part to protect investors from fraud. Treasurers and finance officers direct and oversee budgets, monitor the investment of funds, manage associated risks, supervise cash management activities, execute capital raising

strategies, and deal with mergers and acquisitions. Risk and insurance managers administer programs to minimize risks and losses that could arise from financial transactions and business operations. Credit managers supervise the firms issuance of credit, fix credit-rating criteria, determine credit limits, and monitor the collection of past-due accounts. Cash managers supervise and manage the flow of cash receipts and disbursements to meet business and investment needs. The financial managers role, particularly in business, is changing in response to technological advances that have significantly reduced the time it takes to produce financial reports. Financial managers now perform more data analysis to offer senior management ideas on how to maximize profits. They play an increasingly significant role in mergers and acquisitions and in related financing, and in areas that require wide-ranging, focused knowledge to diminish risks and maximize profit. 3.) What is the basic uses of brerak-Even Ananlysis? The break-even analysis allows the firm to determine at what level of operations it will break even (earn zero profit) and to explore the relationship between volume, costs, and profits.It helps the management that at current costs of products how many number of units must be sold to atleast recover the cost of producing the product. It also helps the management to determine how much of units to be sold to get desired profit on product. Finding break even point of a product or service is an essential tool in choosing the best price per unit of a product and also helping to determine projected sales. Break even analysis can used for a number of different applications. Its basic function is to determine when a product or service will be profitable. This analysis can be applied to many other applications to determine a future forecast in sales, set a unit price and to target the best strategic options for the company. Once the break-even figures are determined, the company can then use this information for other financial projections. The most common break even analysis applications and uses are: a. Determining the point of profitability; b. Finding the break even point for unit pricing; c. Using the analysis information to choose the best company strategy. 4.) Give the purpose of analyzing financial statments. The purpose of financial statement analysis is to examine past and current financial data so that a company's performance and financial position can be evaluated and future risks and potential can be estimated. Financial statement analysis can yield valuable information about trends and relationships, the quality of a company's earnings, and the strengths and weaknesses of its financial position. 5.) Give recommendations to intensify collections of accounts receivable. The key to maintaining control over collection of accounts receivable is the fact the probability of default increases with the age of the account. Thus, control of accounts receivable focuses on the

control and elimination of overdue (past-due) receivables. One common w3ay of evaluating the current situation is ratio analysis. The financial manager can determine whether or not accounts receivables are under control by examining a number of indicators, notably the average collection period, the ratio oof receivables to assets, the ratio of credit sales to receivables (called the accounts-receivable turn over ratio) and the amount of bad debts relative to sales over time. Aging accounts receivable helps determine which customers owe you and for how long, which makes it easier to determine whether a customer needs just a simple reminder or needs their account to be written off as bad debt. In doing so, you can effectively determine who to be wary of lending to and who you can trust to repay you in an orderly fashion. If youre a new business owner, use common sense before you allow a customer to open a charge account. Really look into his credit payment history and if he doesn't have one or has a bad one, make him a cash-only client. 6.) An inventory turm over of X company is 20. Is this a good turn-over? Why or Why not? A measure of how long it takes, on average, for a company to sell and replace its inventory. Inventory turnover can help a company or potential investor determine how well the company manages its inventory. Higher inventory turnover is considered to be desirable. In this given situation, an inventory turn over of X company is 20, but is not mentioned what kind of goods being sold. There are different types of inventory items Inferior goods are goods that are low-quality but high-quantity. Goods from Dilao departments, for example, are generally inferior goods that are bought in high quantities. Goods that are perishable is a single-serve good, such as food and drink. With this kind of goods, it is expected to have a high inventory turn over. Compared to some unperishable and luxury goods, it is somehow expected that they do have a normal to low inventory turn over. Inventory turnover is a measure of the number of times inventory is sold or used in a time period such as a year. The equation for inventory turnover equals the Cost of goods sold divided by the average inventory. Inventory turnover is also known as inventory turns, stockturn, stock turns, turns, and stock turnover. Inventory Turnover =Cost of Goods Sold Average Inventory 7.) Is investment in stocks better that in bonds? Support your answer. When you buy either bonds or stock, you pay money now with the possibility of getting more money later. But a bond represents a debt--the company that issued the bond owes you money to be paid when the bond is redeemed. A stock represents ownership. As a stockholder, you become a part owner of the company. Now, if you ask me which is better? It would basically depend on your investment objectives and tolerence for risk. If you had to pick just one investment, it would depend on how liquid you want your funds and how much risk you are willing to take. Stocks are riskier and therefore give a higher expected return in the long term. Also it is important to take into consideration your stage in life, older folks, with little income, should stay conservative and stick to bonds, while younger people can assume more risk. If I were to choose, I would invest on stocks. First, I would examine the porforlio and Financial Statement of the company that I will be investing, making sure that the company has a good financial stability for many years. I would want my investment to grow with the company I chosed to invest. Also it's very fulfilling to be a part owner of a good standing and dynamic corporation.

Stocks are EQUITY. They represent shares of ownership in a Corporation. A Stockholder is actually one of many owners of a Publicly Owned Corporation. If a Corporation dissolves for any reason owners of Common Stock (the main type of stock issued) receive the value of the sold assets of the Corporation AFTER everyone else is paid, including the IRS, Employees, Bonds, Accounts Payable, etc. Bonds are DEBT. They are sold by the Corporation in order to raise money for various purposes for use by the company. Bonds offer an interest rate to the Bondholder for the period of time that the Bondholder owns the bonds.Since bonds do not represent ownership, the bondholder could lose their investment if the Corporation dissolves, but are paid BEFORE owners of stock. II. Synthesis What have you learned and experienced from the course? I have learned imperative information in this course that had helped me think and make good and profitable fiancial decisions. I am very happy to learn about different terminologies, formula and techniques in accounting. This help me evaluate the Financial forecast I presented to the top management. I learned about the importance of working capital in helping the firm to continuously sustain its opreration especially during quite periods. I have learn to appreciate more the Financial statement of our company and helped me evaluate the past and current financial data. Its deemed important to know the company's performance and financial position can be evaluated and future risks and potential can be estimated. Financial statement analysis can yield valuable information about trends and relationships, the quality of a company's earnings, and the strengths and weaknesses of its financial position. I would greatly recommend the break-even analysis technique to my own organization. I understood now how important tools it is in business decision making. In the resort that I am currently working now, we need to know exactly what the break even occupancy rate is. This break even occupancy rate can be used in the resort advertising strategy: special packages are offered during quite periods to keep occupancy levels above the break-even point.