ASSIGNMENT 2 (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)

ANSWER: Base on my analysis the most attractive company is company B because in the every first the
collection of costumers in company B and then company B is higher than A but equal to C and the
payments expenses of company B is higher and the less coast is smaller than company A and company C.

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

ANSWER: Profitability of business operation is the ability to earn profit . profit revenue after to paid all
expenses and it can measure the income expenses

B. Competent management

ANSWER: allow companies to improve the livelihood of their owners, managers and employees.

C. Political Instability

ANSWER: having demonstrations, strikes and various forms of violence, crimes (CR), coups, regime reversals
and government collapse.

D. Having health crisis like pandemic

ANSWER: this pandemic many companies or businesses have dropped profits or closed down due to
pandemics because there are protocols that must be followed.
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)

ANSWER:

 1st is the quality of the product

 2nd is the durability

 3rd is the cheaper price for the product

III. Answer the following questions.

1. What defines a shareholder’s wealth? (2PTS)

ANSWER: defined as the present value of the expected future returns to the owners (that is, shareholders)
of the firm. These returns can take the form of periodic dividend payments and/or proceeds from the sale of
the stock. 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.

2. What do you think is the most crucial role of a financial manager? Why do you think so? (2PTS)

ANSWER: financial manager, particularly in business, is changing in response to technological advances that
have significantly reduced the amount of time it takes to produce financial reports. Financial managers’
main responsibility used to be monitoring a company’s finances, but they now do more data analysis and
advise senior managers on ideas to maximize profits. They often work on teams, acting as business advisors
to top executives.

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)

ANSWER: Equity base financial because It can double your money compared to the dept based financial
instrument

that only lowers your money, while the equity based financial instrument has a chance to decrease, there is

a chance that the value of your money will increase

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

A. Commercial banks

ANSWER: Currently, the majority of large banks offer deposit accounts, lending, and limited financial advice
to both demographics and it is include checking and savings accounts, certificates of deposit (CDs), personal
and mortgage loans, credit cards, and business banking accounts.

B. Investment Bank

ANSWER: do not take deposits; instead, they help individuals, businesses and governments raise capital
through the issuance of securities
C. Investment Company

ANSWER: traditionally known as mutual fund companies, pool funds from individuals and institutional
investors to provide them access to the broader securities market. Robo-advisors are the new breed of such
companies, enabled by mobile technology to support investment services more cost-effectively and provide
broader access to investing by the public

D. Brokerage Firms

ANSWER: assist individuals and institutions in buying and selling securities among available investors.
Customers of brokerage firms can place trades of stocks, bonds, mutual funds, exchange-traded funds
(ETFs), and some alternative investments.