dividual Assignment on Financial Management

1. What are the various methods and tools used for financial management?
2. Discuss the role of a finance manager?
3. What are some actions that stockholders can take to ensure that management’s and
stockholders’interests are aligned?
4. The president of Southern Semiconductor Corporation (SSC) made this statement in
thecompany’s annual report: “SSC’s primary goal is to increase the value of our
commonstockholders’ equity.” Explain the stamen of the president.
5. Describe the different ways in which capital can be transferred from suppliers of capital
tothose who are demanding capital.
6. Is an initial public offering an example of a primary or a secondary market transaction?
Explain.
7. Are there any concerns and/or cautions when using financial ratios?
8. What is the difference between book value and market value and how does it affect financial ratio
analysis?
9. What aspects of operating performance and financial condition do financial ratios
evaluate?
10. From the standpoint of managerial finance, what is the basic goal of capital budgeting?
11. What is the common characteristic shared by all projects contained in a corporation’s
capital budget?
12. What are the different types of procedures in the capital-budgeting process?
13. What are the advantages and disadvantages of the payback criterion?
14. How is negative NPV coefficient interpreted?

15. Workout Questions:

ABC Co
Balance Sheet
June 30
Balance Sheet 1995 1994 1992 1991 1990

Assets
Cash and equivalents $181 $189 $184 $233 $169
Accounts receivable 182 129 344 316 481
Inventories 24 28 118 163 246
Other current assets 37 37 57 110 187
Total current assets $425 $383 $702 $822 $1,082

4
Depreciable assets, net$134 $80 $316 $495 $732
Intangible assets, net 274 198 0 0 4
Other assets 26 26 47 101 129
Total assets $859 $686 $1,065 $1,418 $1,946
Liabilities
Current liabilities $381 $288 $716 $727 $872
Long-term liabilities 32 2 453 500 556
Other liabilities 81 79 184 139 103
Total liabilities $494 $369 $1,352 $1,365 $1,531
Shareholders’ equity 366 317 —286 53 415
Total liabilities and equity$859$686 $1,066 $1,418 $1,946

5
 ABC Co.
Income Statement
For the year ended, June 30
1995 1994 1992 1991 1990
Revenues $946 $644 $1896 $2,092 $2498
Cost of goods sold 656 408 1,003 1,016 1,212
Gross profit $290 $237 $893 $1,075 $1,286
Other operating expenses353 225 938 1,186 1,410
Operating income —$63 $12 —$45 —$111 —$124
Interest expense 4 5 45 44 76
Other income or expense13 —22 —305 —208 —378
Income tax expense 4 10 12 9 46
Net income —$58 —$24 —$407 —$372 —$624

Using ABC’s balance sheet and income statement for the year ending June 30, 1995, make the
following calculations assuming a 360-day year, all sales and purchases are on credit, and that the
financial data is in hundreds of thousands:
a. Current ratio
b. Quick ration
c. Inventory turnover ratio
d. Total asset turnover ratio
e. Gross profit margin
f. Operating profit margin
g. Net profit margin
h. Debt-to-asset ratio
i. Debt-equity-ratio
j. Return on assets
k. Return on equity

6
 16. Stocks X and Y have the following probability distributions of expected future returns:
Probability X Y0.1 (4%) (20%)0.2 4 10.4 12 200.2 20 250.1 36 40A.Calculate the
expected rate of return for stocks A and B. Calculate the standard deviations of expected
returns and coefficient of variations for stocks A and B. Is it possible that most investors
might regard stock Y as being less risky than stock A? Explain
17. Compute the NPV for each of the following proposed investment, using the discount rate
indicated for each and rank them in order of their desirability.
Project A Project B
Net initial investment: Br. 250,000 Br. 400,000
Discount rate: 10% 14%
Cash flows:
Year 1 Br. 70,000 Br. 80,000
Year 2 70,000 90,000
Year 3 70,000 100,000
Year 4 70,000 100,000
Year 5 70,000 100,000
Year 6 70,000 100,000

NB: This assignment will be submitted on the date of final exam.