Name: Jennylyn T.

Lavapie Grade&Section: ABM12Y1-9

ASSIGNMENT 1 (38 PTS)

I. Refer to the following simple Income Statements and Cash Flows

COMPANY A
Income Statement Cash Flow

Sales P 100, 000 Collection from Customers P0

Less: Cost 50, 000 Payment of Expenses 50, 000

Profit P 50, 000 Net Cash Flow (P50, 000)

COMPANY B
Income Statement Cash Flow

Sales P 100, 000 Collection from Customers P 100,000

Less: Cost 150, 000 Payment of Expenses 50, 000

Profit (P 50, 000) Net Cash Flow P50, 000

COMPANY C
Income Statement Cash Flow

Sales P 100, 000 Collection from Customers P 100,000

Less: Cost 70, 000 Payment of Expenses 70, 000

Profit P 30, 000 Net Cash Flow P30, 000

Suppose the above given Income Statements and Cash Flow Statements of companies A, B and C were
presented to you. Which do you think is a more attractive company? Justify your answer. (5PTS)

For me it is Company C. The income statement shows that it earn profit which is 30,000 pesos. And loss
70,000 only. In cash flow statement we see the in and out money of the company it earn net is 30,000.
same with income statement. As what I observe it is balance. The expenses for the product and for the
collection from costumer and the sales is more improvement. Company C is have a low expenses but it have
a high sales which is purchased in outside of the company. That is why for me company C is more attractive.
Also in terms of their collection from customers meaning they have a quality product that can attract many
customer to buy.

II. The following are different factors that may affect the price of stocks. Give your opinion on how each of
them may cause to increase or decrease the stock prices of a company. (3 PTS EACH)

A. Profitability of business operations

Profitability of business increase if you buy more effectively and quality product on your supplier.it make
sense to review your supplier base regularly and see if you can buy some raw materials in cheap price but in good
quality. Profitability of business decrease if they encounter declining margin, it is the first sign of difficult times
for a business. It result in lower net profit and lower wages for staff.
 B. Competent management

Management profile has a significant effect on company success and stock prices. If management consists
of experienced professionals with a proven track record, share prices are likely to be higher. If the management
that takes over a company lacks integrity, share prices tend to fall.
C. Political Instability
For me according to what I saw in some research political instability can increase transaction costs between
exporters and importers and thus reduce incentives to create and maintain business relationships.
Political instability indicate a negative impact to the stock price of a company that cause it to decrease.
Political instability cause a inflation to some business. Unstable political system ultimately leads decline in stock
prices.
D. Having health crisis like pandemic
For having health crisis like pandemic cause to increase to price of stock. It is have a big impact to all business
it cause to have a low stock now a days. The price of all foods or our needs is getting higher price because we
don’t have enough stock to provide. If we can buy a stock it is just limited since we undergo lockdown.
Having health crisis like pandemic is good opportunity in terms of all online selling or small business. We
know that online selling is the trend today. They have a lot of stock of product that we want but we can sell it in
a low price. The more we have a supply the less we have earn.

II. Assume that you are the biggest shareholder of a corporation. Give three objectives that you want to
achieve as owner of the corporation (2 PTS EACH OBJECTIVE)

1. Financial success. It is good to have a high financial rather than to have low financial.
2. Employee and customers satisfaction. Customers and Employee satisfaction is the key to increase
revenue
3. Increase stock value. It is important to a shareholder increase stock value rather than losing money
with less value.

III. Answer the following questions.

1. What defines a shareholder’s wealth? (2PTS)
Shareholder wealth is defined as the present value of the expected future returns to the owners.
Shareholder wealth is measured by the market value (that is, the price that the stock trades in the
marketplace) of the firm's common stock. Shareholder wealth is the collective wealth conferred on
shareholders through their investment in a company.

2. What do you think is the most crucial role of a financial manager? Why do you think so? (2PTS)
The financial manager is responsible for supervising and handling the company's financial reports,
investment portfolios, accounting and all kinds of financial analyses. It is crucial role of an financial
managers because he/she is the one of the decision maker in the organization beside on the owner. Without
the financial manager possible the company will not work well.

3. Given that you have excess funds, where will you invest the funds? Will you opt to buy stocks (an equity-
based financial instrument) or corporate bonds (a debt-based financial instrument)? Explain your answer.
(3PTS)
BUY STOCK. Buying stock as an investment for excess funds. This is the best way for the excess funds. By
buying a stock you will have an income possible that your money that you buy a stock it will become double or
triple. You invest and also you earn. Stocks are far riskier as compared to equity mutual funds. The diversified
equity mutual fund spreads your investment across sectors and industries and hence, reduces the volatility in
your investment.

4. Explain how the following financial institutions can help individuals or firms. (2PTS EACH)

A. Commercial banks
 The commercial bank help some individual or firms by providing a payment service or financial service which
reduce risk element and also commercial bank provide cash needed by some small businesses when they
experiencing liquidity shortage or problem.
B. Investment Bank
The investment bank help in terms in giving advise to how to meet their financial needs and how to come up
their finances. And also they help company or firms to raise money by selling securities.
C. Investment Company
Investment company can help an individual or firms by teach them to buy shares on their company to have
their own cash and funds expanded. Because now a days some companies raise money and investor make money.
D. Brokerage Firms
Brokerage firms help you buy and sell stocks and securities. They can also advise some individual how to
manage their money, based upon their unique financial services. Since brokerage firms is a middle man between
the buyer and seller.