Financial Management

NDEJJE UNIVERSITY
FACULTY OF EDUCATION- KAMPALA CAMPUS
END OF SEMESTER EXAMS
NAME: TUNGWAPE MIRIAM
REG NO.: 19/2/358/W/022
COURSE: BECE
COURSE UNIT: FINANCIAL MANAGEMENT
COURSE UNIT CODE: DIM 1202
YEAR: 1
SEMESTER: 11
PROGRAM: WEEKEND
QUESTIONS ANSWERED: 1, 2, 3, 5
TUNGWAPE MIRIAM (19/2/358/W/022)

1.(a)
Financial Management refers to planning, organizing, directing

and financial activities such as procurement and utilization of funds of an
enterprise.
It means applying general management principles to financial resources of the

enterprise.
The important tasks of financial management, as related to the above, may be

categorized as follows:
Financial Analysis, which is largely a study of the relationship among the various
financial factors in a business as disclosed by a single set of statements and a
study of the trend of these factors as shown in a series of statements.
Planning and Control, where planning sets the goals for the organization
and controlling ensures their accomplishment.
Other tasks include; analysis of financial condition and preference, profit

planning, financial forecasting financial control.

(b)
Estimating financial requirements
The first task would be to estimate short term and long term financial requirements
for the school. For that, I would prepare a financial plan for present as well as for
future, putting into consideration the position where I intend the nursery school to
be a few years down the road. The amount required for purchasing fixed assets
such as land as well as needs for working capital for buying materials and paying
stuff will have to be ascertained.
Deciding capital structure
Capital structure refers to kind and proportion of different securities for raising
funds. After deciding the quantity of funds required for the school, I would then
decide which type of securities should be raised. An option would be to finance
fixed assets through long term debts. This leaves ample time for the money to be
paid off from the dividends of the school once it is standing on its two feet to do
business. Even if the gestation period is longer than share capital it may be the
most suitable. A decision about various sources for funds should be linked to the
cost of raising funds.
Selecting a source of finance
An appropriate source of finance for the nursery school intended for set up is
selected after preparing a capital structure which includes share capital,
debentures, financial institutions, public deposits etc. If finance is needed for short
term periods then banks, public deposits and financial institutions may be the
appropriate. On the other hand, if long term finance is required then share capital

and debentures may be the useful. Since the school would take a longer
gestation period, it would then be advisable to take on long term financing. This
is because the school would take a longer period of time maybe 5-10 years
before it can fully finance itself on its own.
Selecting a pattern of investment
When funds for the nursery school set up have been procured then a decision
about investment pattern is to be taken. A decision will have to be taken as to
which assets are to be purchased like land to set up the school, a school bus,
materials like chalk, white boards, desks and chairs aprons for the teachers
among other necessities. The funds will have to be spent first on fixed assets like
land and then an appropriate portion will be retained for working capital and for
other requirements needed for running the school.

2(i)
A budget is seen as representing a list (a document) which is placed face to face

predictable revenues and expenditures of a particular economic entity, for a
specified period.
Purposes of a budget in an educational institution include;
Planning operations
These ensure the institution’s strategic objectives realisation. Budgeting process

stimulates the institution management to predict all the problems before their
appearance and thereby avoid making hasty decisions in the event of certain
undesirable situations in the future. We can say that budgeting "guarantees" that
they will plan future operations depending on how it was accomplished the
previous budget, taking into account all the factors that have influenced
changes regarding previous budget indicators.
Coordinating various activities
Coordination of each employee and student interests. Each subdivision of an

institution such as colleges, departments, have their own objectives and this can
lead to situations in which these goals are contradictory in relation to other
responsibility centers. So, the budget has the role to reconcile and regulate these
contradictions in favor of the economic entity so that these situations can be
prevented.
Stimulation of the different institution heads

This is in order to achieve predetermined goals of each one’s responsibility. This
budget feature strongly manifests in case of participative budgeting when
responsibility of budgeting is tasked to different institution section heads. It eases
analysis of problem areas that need urgent allocation of funds since it is done by
those interacting with the issues.
Control of current activity
Budgeting also ensures discipline according to the business plan. Careful drafting
of budgets ensures the optimum standard to compare undertaken activity
achievements, to determine deviations and to take measures to eliminate them.
This prevents the institution from outrageously spending on activities that they can
do without, hence saving finances in the long run.
Evaluation of plans fulfillment by each stake holder in the institution.
Management performance can be appreciated by comparing the results with

those expected to be achieved. Once a budget is made, comparison at the end
of an academic year with what was stipulated enables determining of overruns,
short falls and audit can be done to make things better in future.
Budgeting is also helpful in paying back loans taken from financial institutions. This
is so because a particular amount is set aside for repaying these. This enables the
institution fully furnish its loans and start to stand on its feet to do business with its
own working capital.

2(ii)
Budget preparation
This is the first stage of the cycle and would involve drafting a budget for the
secondary school. It would not necessarily predict future, but would be a good
start may be done by headteacher, a few deputies and school accountants. The
various necessities for running the school would be noted and their corresponding
expected expenditures aligned with them.
Different sources of finances for the school would also be noted and areas for use
of the funds identified as well.
Preparing a budget is a helpful and useful tool that the school can utilize to help
anticipate future performance and help make appropriate decisions for the
financial growth of the secondary school. Examples of items that would appear
in the budget at preparation stage include; water bills, electricity bills, staff salaries
and wages, meals, fuel for school bus, stationary like chalk, files, dusters, note
books, among others.
Budget approval
This stage is a process where the budget estimates and expenditures made in the
preparation stage are reviewed and scrutinised. It may be done by the Board of
Directors and a few other stakeholders of the school. Here, they ensure that
finances are well allocated and there is no wastage as well as making sure that
no important aspect is left out. Once they are satisfied with the budget, they
accept it to be passed and release revenue for financing it.

Budget excecution
Under this stage of the cycle, the released funds are then used to implement the
different tasks that they were allocated for. This stage is tricky in that the
expenditures may unintendedly shoot higher than what was planned or be less.
Ways of handling these must have been catered for in the preparation stage. It is
always very important to have an amount for contingencies that can cover costs
in such instances.
Budget review
This is the final stage of the budget cycle that involves comparing what was
planned with what is executed. Overheads, under expenditures and any other
important deviations from the project. This stage is also done by the Board of
Directors, head teacher, accountants and other stake holders. Reviews form a
base and reference for the making of future budgets,

3.
Fixed Deposits
This is long term source of financing which is a great way to grow savings with
utmost safety. It is one of the most preferred avenues that enables you to deposit
a lump sum amount with a financier, and choose a tenure as per your
convenience. On completion of the pre-decided tenure, your deposit starts
earning an interest, throughout the chosen duration, as per the interest rate at
which you locked in your deposit. An example of a fixed deposit is, if 1,000,000/=
invested for 3 years at 9% interest rate, if withdrawn after a year, will get interest
at the rate applicable at that time, which will be lesser than 9%. The loss of interest
becomes the penalty that you pay for a premature withdrawal.
Features of a fixed deposit include;
The returns on your deposit are assured and remain unaffected by market
fluctuations.
Interest rates offered by None Bank Financial Companies are higher than rates
offered by banks.
Fixed Deposit can be easily renewed, and you can also reap additional rate
benefits on renewing your deposits.
Tax is deducted at source, from interest on Fixed Deposit as applicable.
Capital Markets

Capital market may be defined as on organised mechanism for effective and
efficient transfer of money-capital or financial recourses from the individuals or
institutional savers to industrialist.
The development of an effective capital market depends upon the availability of

savings, well organised financial system and the entrepreneurship quantities of its
people.
Capital market is a market for long-term funds, just as the money market is the
market for short-term funds. It refers to all the facilities and the institutional
arrangements for borrowing and lending term funds (medium-term and long-term
funds).
It does not deal in capital for purpose of investment. The demand for long-term
money capital comes predominantly from private sector manufacturing
industries and agriculture and from the government largely for the purpose of
economic development.
Shares
This is the ownership securities also called as capital stock. Ownership capital
consists of the following types of securities.
Equity Shares, also known as ordinary shares, which means, other than preference
shares. Equity shareholders are the real owners of the company. They have a
control over the management of the company.
Preference Shares, which are the parts of corporate securities. It is the shares,
which have preferential right to get dividend and get back the initial investment
at the time of winding up of the company. Preference shareholders are eligible
to get fixed rate of dividend and they do not have voting rights.

No par stock, which is when the shares are having no face value. The company
issues this kind of shares which is divided into a number of specific shares without
any specific denomination.
Deferred Shares, also called as founder shares because these shares were
normally issued to founders. The shareholders have a preferential right to get
dividend before the preference shares and equity shares. According to
Companies Act, no public limited company or which is a subsidiary of a public
company can issue deferred shares. These shares were issued to the founder at
small denomination to control over the management by the virtue of their voting
rights.
Debentures
A Debenture is a document issued by the company. It is a certificate issued by

the company under its seal acknowledging a debt. According to the Companies
Act, “debenture includes debenture stock, bonds and any other securities of a
company whether constituting a charge of the assets of the company or not.”
Types of Debentures
Debentures may be divided into the following major types;
Unsecured debentures. Here debentures are not given any security on assets of
the company. It is also called simple or naked debentures. This type of debentures
are treaded as unsecured creditors at the time of winding up of the company.
Secured debentures which are given as security on assets of the company. It is

also called as mortgaged debentures because these debentures are given
against any mortgage of the assets of the company.

Redeemable debentures. These debentures are to be redeemed on the expiry of
a certain period. The interest is paid periodically and the initial investment is
returned after the fixed maturity period.
Irredeemable debentures: These kinds of debentures cannot be redeemable

during the life time of the business concern.
Convertible debentures are the debentures whose holders have the option to get
them converted wholly or partly into shares. These debentures are usually
converted into equity shares. Conversion of the debentures may be: non-
convertible debentures, fully convertible debentures and partly convertible
debentures
Head teacher as a financial manager
In this case, the headteacher would play one of the important roles in the field of
the finance function, dealing in finance related activities. He would need to have
knowledge in the area of accounting, finance, economics and management.
His role as a finance manager would be highly critical and analytical to solve
various problems related to finance.
Under his role as a financial manager, the headteacher would play the following
roles;
Forecasting Financial Requirements
He would be responsible for estimating the financial requirement of the

education institution. He would estimate, how much finances required to acquire
chalk, desks, food for students, pay bills among other necessities and forecast the
amount needed to meet the working capital requirements in future.
Acquiring Necessary Capital After deciding the financial requirement

The finance manager would concentrate how the finance is mobilized and where
it will be available. He would consider whether all the dues have been cleared
by learners and all services provided by the different service providers.
Investment Decision
Here, the headteacher would carefully select best investment alternatives and
consider the reasonable and stable return from the investment for the education
institute. For example, he would suggest the school takes on farming to provide
fresh and less costly food to the school while equipping students with skills. He
would also have to be well versed in the field of capital budgeting techniques to
determine the effective utilization of investment.

5
Analysis of financial status
With college costs soaring, more people are accumulating mountains of debt to
pay for their education. However, that debt can affect your future in all sorts of
ways, from what kind of car you can afford, how much you can save for
retirement to whether you buy a home or rent. Minimizing your debt now will make
life much easier once you're out of school.
Where do you see yourself in 10 years? Chances are your vision includes some
degree of financial security vacations to Europe, perhaps, or a nice car. At the
very least, you'll want enough room in your budget to go out to dinner or buy a
concert ticket without financial angst. As college costs have risen, so have the
debt loads of young adults.
Managing Your Money
The basics of financial planning sound deceptively simple: Spend less than you
earn and save for the future. Basic though this advice may be, living within your
means is easier said than done. Just ask the huge percentage of adults who say
they have no emergency savings and no retirement nest egg. As a college
student, you can either rely on your parents and your credit cards to fund your
lifestyle or take control of your money.
If you choose the latter option which may be more difficult but ultimately more
rewarding your college years can provide a crash course in financial
responsibility.
Managing your money

Open a checking account. Many banks and credit unions offer no-fee checking
accounts to college students.
Track your spending. Set up a budget and try to follow it. Every night, record what
you spent that day.
Define financial "needs" vs. "wants." You need basic food, clothing, and shelter.
Most other things are wants so don't have to buy them.
Saving and Investing
Young investors have a huge benefit of time. Thanks to the compound interest,
even a small investment each month can grow impressively. Say you put away
30,000/= a month and get a return of 5 percent a year. You shall have over 5
million for a start.
It's never too early to start saving and investing. However, high college costs may
make this unrealistic for most college students. "Just because you're not saving
doesn't mean you're doing anything wrong". But the earlier you start the better.
Here are some tips on how to save as a student:
Create a budget
Figure out how much you can spend each week or month.
Track your spending
A budget isn't much good if you ignore it.
Build an emergency fund
Try to build a small cushion for unexpected car repairs or other expenses.
Take advantage of your school's resources
Students often have free access to computers and fitness facilities.

Skip full-price textbooks
Buy used, or share with a friend.
Skip on transportation
If you need a car, buy a used vehicle, not a new one.
Student loans
For most college students, student loans have turned into a necessary evil. Most
students graduate with a loan to pay off. For many students, borrowing is the only
way to pay for college. Student loans can make perfect sense but it's crucial that
if you do borrow, you do so wisely and responsibly.
Get Insured
You need insurance, and it's not just for old folks. Look around for the best deal.
Using your parents' or guardian’s policy might help you qualify for discounts. If they
do not have, you may as well be the first one to start out.
Health insurance is also important. You're unlikely to face hefty medical bills, but
hospitalization is so costly that it can be financially devastating for you and your
parents. Most hospitals offer these at subsidized prices, more so if it is for a long
period of time. They're typically not as generous as insurance from a private
carrier, but the premiums tend to be affordable, so the plan might make sense for
you.
Save on Housing
If you live in the dorms or rent an apartment, your living arrangement will be one
of your biggest expenses. So, if possible, consider cutting it completely and keep
living with your parents until you graduate and get a full-time job. If that’s not an
option, consider living with additional roommates or in a more budget-friendly
neighborhood.

Use Student Discounts
Whether you like your photo on it or not, your student card is a beautiful thing. It
gets you lots of discounts from movie theatre and restaurants to travel
opportunities.
Check with your campus which companies have partnered with it, don’t be shy
to ask about student discounts whenever you’re buying something from other
companies as well. Some companies don’t officially partner with universities, but
still, like to support students by giving them discounts.
Monetize Your Skills
Most personal finance tips for college students focus on saving money, but you
also need to get creative about increasing your income. A great way to do it is
to monetize skills you already have for opportunities that pay more than minimum
wage.
For example, if you know how to play the guitar, you can teach others how to do
it, and you can perform at parties. Distribute flyers on campus, or look for websites
that connect people who can teach with people who want to learn. This can
earn you some extra money.
If you can monetize a skill that can further your career, do your best to prioritize
it. For example, if you study computer science, but already know how to code,
don’t work in fast food. Get a coding job.
Utilize a checking account.
Checking accounts are an easy way to keep track of your funds, your budget
and you’re spending. It also makes it easy to access cash, too. Ensure your
account is with a bank that has ATM's in locations that are convenient for you to
access so you will avoid unnecessary ATM transaction fees.

Never take out more loans than necessary.
It can be tempting to take out additional loans to pay for living expenses so you
don’t have to scrape by but do not do it. Remember, it’s better to scrape by in
college than when you graduate from college. Once you graduate, you will be
expected to pay back all of those loans and, even though you will have a job,
your money will be going towards payments. Wouldn't you rather have some of
your hard-earned money than all of it going towards what you spent during
college?
Always know your debt amount.
Be aware of the amount of debt you will have at graduation so there are never
any surprises. It’s not a number you should ignore because you’re afraid or don’t
want to know.
If you’re a student or recent graduate who wants to start investing, but you’re
low on funds and high on nerves, try these tips for getting started stress-free.
Get a Head Start on Your Peers with a High Savings Rate
Most youth are terrible at saving money. The average only saves around 2% of
their income. Do not expect to build wealth with a savings rate anywhere near
that low.
Instead, start by creating a budget. It doesn’t need to be fancy or complicated.

In the beginning, keep it as simple as possible.
Map out your monthly expenses and your irregular expenses.
Set aside some of that income for a small emergency fund and split the rest
between expenses and investments.
Automate Your Savings

It is important to have good behaviors like saving money and working out. The
truth is that discipline will fail you sooner or later, so you want to rely less on
discipline and willpower to do the right thing.
If your income is regular, you can set up automated money transfers to your
savings account or brokerage account.
Another option is asking your employer to split your direct deposit between your
checking and savings account or brokerage account.
Regardless of how you do it, look for ways to automate your savings and
investments so that building wealth doesn’t require active work from you every
month.
Start Simple with Stocks
As a young person, stocks are a perfect place for you to start investing. They
come with high volatility, which is one measure of risk. But over time, they offer
strong returns, and since you won’t be retiring for many years, you can simply
park your money and ride out the occasional stock market correction.
If you’ve never invested in the stock market before, it looks overwhelming from
the outside. You hear analysts talking about PE ratios and dividend yields,
concepts that may be a bit fuzzy for you. And there’s always someone pointing
to some obscure technical indicator “proving” that the market is about to crash.
Take the risk
House Hack
As a first real estate investment, and a way to live for free, consider house
hacking.
The traditional model for house hacking is buying a small multifamily property,
moving into one of the units, and renting out the others. Your tenants’ rent covers

the mortgage, and you get to live for free while building equity in an investment
property.
Housing is the largest expense most of us incur, so if you can live for free, it frees
up an enormous portion of your budget to go toward other investments. The
trick, of course, is to make sure you actually save and invest that money, rather
than spend it.
If you’re wondering how you can afford to buy a property, one option is to have
your parents help you. As partners in your first real estate investment, they can
co-sign the mortgage to help you qualify. They may also help you with the down
payment. For your part, you should volunteer to manage and maintain the
property, from screening tenants and collecting rents to handling repairs.
Invest in Crowdfunding
If you’re not ready to buy a property for yourself but like the idea of investing in
real estate, one option is crowdfunding websites. They provide loans for other
real estate investors, and you provide funding for those loans.
Start a Side Hustle
No one says you have to invest in someone else’s projects. You can also invest
in your own.
One advantage of building a side hustle as a student is that it can grow and
develop into a full-time business into your retirement days.
Focus on Staying out of Debt
While you are in college, the long-term goal is landing a good job so that you will
have the extra money to put away each month. You should also make it your
primary focus to stay out of debt. The less debt that you have when you graduate,
the sooner you will be able to pay it off and begin focusing on retirement.

Some college students will take their loan money or grant money and invest it in
mutual funds because the rate of return is generally higher. But it's never a good
idea to use borrowed money to play the stock market—you may set yourself up
for a financial disaster later on.
Learn More About Finances
If you are still in college, you may want to take a course on investing or money
management while you are there. This is a great time to get acquainted with how
the market works and how to choose a good investment. It will also give you the
opportunity to watch the stocks and mutual funds without risking your own money
right away. When it is time to invest, you will be comfortable and confident in the
decisions that you are making.
You will not need to play catch-up on your retirement savings as long as you
begin investing as soon as you land your first job out of school. That is a great time
to start investing—when you are suddenly making a lot more money than you are
used to making. If you have to wait to contribute to your 401(k), then you can
open a Roth IRA and start there.
Preparation for Retirement
Invest in Your Earning Potential
It is important to realize that your education is one of the biggest investments that
you are making in your future. It will increase your earning power and allow you
to save more toward retirement after you graduate.
While you are in school, your first priority should be your studies and the
experiences that will prepare you to be competitive in the job market. It may
mean taking a low- or no-pay internship instead of putting money toward
retirement. It may mean focusing on your connections and networking instead of

on your retirement. If you are planning on going to graduate school, then earning
top grades will benefit you more in the long run.
Consider Funding Retirement
If you are working while you are in school and you can pay cash for your tuition
and still have some left over, you may consider putting aside money for your
retirement. Before you do this, though, make sure you have an emergency
fund of three to six months of expenses set aside, and no credit card debt. Once
you do this, you can begin investing. Be sure that you have enough available to
cover unexpected expenses or that you are saving money to cover the time you,
when you may not be earning as much.
Factor in Social Security
Social Security is yet another component of retirement that students should get
familiar with early on. "Social Security is more than a retirement program,". "It is
important for young people to know that Social Security is here for them right now
in the form of disability and survivor’s insurance."
Social Security payments are based on the average of the 35 years when you
have the most reported earnings. Zeros are averaged in if you don't work for 35
years. Current students can expect to claim full Social Security benefits at age 67,
although partial benefits become available at age 62. Keeping track of your
income over time will help ensure full benefits will be available upon retirement.
However, Social Security isn't the only source of retirement income students should
plan to rely on. "A person will need other savings, investments, pensions or

retirement accounts to make sure they have enough money to live comfortably
when they retire," Anderson says.
Save At Least 6% of your Income into a Company Retirement Plan.
Begin saving into the company retirement plan when you become eligible
(usually after six months on the job). The 6% figure will give you a good start and
allow you to meet most company’s matching provisions. Contributing up to the
company’s match allows you to take advantage of the “free money” they are
willing to incent you to save with. Also, sign up for a percentage contribution, not
a specific dollar amount, as your contribution will then increase automatically as
years pass! As for investments, pick a low-cost Retirement Target Date Fund or an
aggressive pre-allocated portfolio within your plan. Pay close attention to the
expense ratios of the funds you choose.
Look at the Big Picture
While you are in school, focus on getting good grades and making connections
so you can land a good job once you graduate. Then you can start planning for
the future with things such as homeownership and retirement, as well as other
priorities such as starting a family.
Remember that things will work out in good order. School first, then your job, and
the rest of your life. While you should focus on being frugal while in school, it is
okay to put off saving for retirement until you graduate. After all, the best
retirement plan is a good degree that will earn you a high-paying job.

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NDEJJE UNIVERSITY

FACULTY OF EDUCATION- KAMPALA CAMPUS

END OF SEMESTER EXAMS

NAME: TUNGWAPE MIRIAM

REG NO.: 19/2/358/W/022

COURSE UNIT: FINANCIAL MANAGEMENT

COURSE UNIT CODE: DIM 1202

TUNGWAPE MIRIAM (19/2/358/W/022)