FINANCIAL MANAGEMENT

TUGAS SESI 1: BAB 1-3

Kelompok 5
Nama : Dewi Amelia
Mirza Zulkarnain
Rieza Sidafril Febianti
Unggul Satriya Anugrah
Kelas : Eksekutif B 39 E

CHAPTER 1: An Overview of Financial Management and the Financial Environment

1-2 Three principal forms of business organization are sole proprietorship, partnership, and
corporation.

Advantages Disadvantages
1. Difficulty in obtaining large sums
of capital
Sole Proprietorship 1. Easily and inexpensively formed 2. Unlimited personal liability for
2. It is subject to few government business debts
regulations 3. Limited life
3. Its income is not subject to 1. Unlimited liability
corporate taxation but is taxed 2. Limited life
as part of the proprietor’s 3. Difficulty of transferring
Partnership
personal income ownership
4. Difficulty of raising large
amounts of capital
1. Limited liability 1. Double taxation of earnings
2. Indefinite life 2. Requirements to file state and
Corporation 3. Ease of ownership transfer and federal reports for registration,
access to capital markets which are expensive, complex
and time-consuming.

1-3 A firm’s fundamental or intrinsic value is the present value of its free cash flows when
discounted at the weighted average cost of capital. If the market price reflects all relevant
information, then the observed price is also the intrinsic price.

CHAPTER 2: Financial Statements, Cash Flow, and Taxes

2-2 Johnson Corporation corporate bond yields 8%. Municipal bond yields 6%.
Equivalent pretax yield Yield on muni
=
on taxable bond (1 − T )
6%
8% =
(1 − T)
0.08 − 0.08T = 0.06
− 0.08T = −0.02
T = 25%.
2-11 a. Income Statement
Sales revenues $12,000,000
Costs except depreciation 9,000,000 (75% of sales revenues)
Depreciation 1,500,000
EBT $ 1,500,000
Taxes (40%) 600,000
Net income $ 900,000
Add back depreciation 1,500,000
Net cash flow $ 2,400,000

b. Depreciation expenses doubled

Income Statement
Sales revenues $12,000,000
Costs except depreciation 9,000,000 (75% of sales revenues)
Depreciation Doubled 3,000,000
EBT $ 0
Taxes (40%) 0
Net income $ 0
Add back depreciation 3,000,000
Net cash flow $ 3,000,000

Menendez would save $600,000 in taxes, thus increasing its cash flow:

∆CF = T(∆Depreciation) = 0.4($1,500,000) = $600,000.

c. Depreciation reduced by 50%

Income Statement
Sales revenues $12,000,000
Costs except depreciation 9,000,000 (75% of sales revenues)
Depreciation halved 750,000
EBT $ 2,250,000
Taxes (40%) 900,000
Net income $ 1,350,000
Add back depreciation 750,000
Net cash flow $ 2,100,000

d. Have higher depreciation charges and higher cash flows are the best option. Net cash
flows are the funds that are available to the owners to withdraw from the firm and,
therefore, cash flows should be more important to them than net income.
CHAPTER 3: Analysis of Financial Statements

3-11
Statement
Partial Income
Information
Sales 450,0004
Cost of goods sold 337,5005
Balance Sheet
Balance Sheet
Information
Cash 27,0007 Accounts payable 90,0005
Accounts receivable 45,0006 Long-term debt 60,000
Inventories 90,0005 Common stock 52,5002
Fixed assets 138,0008 Retained earnings 97,500
Total assets 300,000 Total liabilities and equity 300,000

1. Debt = (0.50)(Total assets) = (0.50)($300,000) = $150,000.

2. Accounts payable = Debt – Long-term debt = $150,000 - $60,000

= $90,000

3. Common stock =Total liabilities,and equity - Debt - Retained earnings

= $300,000 - $150,000 - $97,500 = $52,500.

4. Sales = (1.5)(Total assets) = (1.5)($300,000) = $450,000.

5. Inventory = Sales/5 = $450,000/5 = $90,000.

6. Accounts receivable = (Sales/365)(DSO) = ($450,000/365)(36.5) = $45,000.

7. Cash + Accounts receivable = (0.80)(Accounts payable)

Cash + $45,000 = (0.80)($90,000)
Cash = $72,000 - $45,000 = $27,000.

8. Fixed assets = Total assets - (Cash + Accts rec. + Inventories)

= $300,000 - ($27,000 + $45,000 + $90,000) = $138,000.

9. Cost of goods sold = (Sales)(1 - 0.25) = ($450,000)(0.75) = $337,500.