ADL 13 Financial Management V4

April 2, 2018 | Author: solvedcare | Category: Working Capital, Option (Finance), Investing, Inventory, Revenue


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Contact www.solvedcare.com for best and lowest cost solution or email solvedcare @gmail.com Financial Management V4 Assignment A 1 . Explain why debt is usually considered the cheapest source of financing available? 2 . Differenciate between financial and business risks? 3 . Discuss the different approaches of financing of working capital require ments? 4 . Describe any two methods of incorporating risk in capital budgeting deci sions? 5 . Explain the merits of using market value weights in computing weighted a verage cost of capital? 6 . Explain any two methods of cash management? 7 . State with illustration the practical application of time value of money ? 8 . Critically explain the factors affecting dividend decisions? Assignment B Case Detail : Working capital Do you have enough? Lending institutions are scrutinizing an operation s working capital status as par t of the lending decision. Now more than ever, it s time to do a little scrutinizi ng yourself. When I hit the road to speak, one of the most important slides I r egularly use highlights how lending criteria has changed since the financial cri sis. To illustrate that point, the slide includes a quote from Nick Parsons, hea d of research with the National Australia Bank: "So capitalism has changed the own er or the custodian of capital [i.e. lending institutions] is much more careful about where they use that capital. To that end, most readers have likely experienced increased scrutiny from their lenders in this post-crisis world. And one of the key criteria that lenders use to make decisions revolves around availability of working capital within any ope ration; working capital being a function of current assets less current liabilit ies. It s a measure of an operation s buffer to meet its short-term obligations, hen ce the importance to lenders. Perhaps equally important, it s a key indicator of cash reserve availability to me et unexpected emergencies. Thus, it is an important component of risk management to ensure business continuity within the operation without the need to borrow a dditional funds. As an example, albeit simplified, a pickup is typically a criti cal operational asset for most cow-calf operations. What if it catches on fire a nd suddenly needs to be replaced, else the cows don t get fed? After insurance pro vides some portion towards replacement, does the operation have sufficient worki ng capital to meet the remainder of the obligation? This type of assessment has become more important to lenders since the financial crisis. This week s graph highlights USDA s updated aggregate working capital estimates in a griculture. Clearly, as last week s illustration depicts, declining revenue has ta ken a big hit out of working capital reserves for agriculture. Working capital h as declined nearly 50% - the loss exceeds $82 billion in just three years. That s a concerning trend and if it continues, will clearly have implications in the co ming years. What are you doing to maintain strong cash and working capital reserves amidst d eclining revenue? What new expectations do you your lenders have during the past several years and going into 2017? How will you adjust going forward? Leave you r thoughts in the comments section below. Question 1. Provide the brief summary of the case in your own words? 2. What new expectations do your lenders have during the past several ye ars and going into future? 3. What should be done to maintain strong cash and working capital reser ves amidst declining revenue? Assignment C Question No. 1 Dividend has no relationship with the value of the firm as per Walter Model. Options Yes No Can't say Sometimes Question No. 2 Wealth management and profit maximisation are the concepts. Options Yes Sometimes No Can't say Question No. 3 Traditionally the role of finance manager was restricted to . Of funds. Options Use Procurement Management Administration Question No. 4 The sales of a business or other form of revenue from operations of the business is called as . Options Profit Margin Contribution Turnover Question No. 5 Implicit cost is the cost of using the funds. Options TRUE FALSE None Sometimes False Question No. 6 The process of calculating present value of projected cash flows. Options Discounting Brokerage Benefit Budgeting Question No. 7 A part of the organisation where the manager has responsibility for generating r evenues, controlling costs and producing a satisfactory return on capital invest ed in the division. Options Brekarage Brokerage Division Recasting Question No. 8 Business practices designed by companies to make production and delivery systems more competitive in world markets by eliminating or minimizing waste, errors, a nd costs. Options Reengineering Restructuring Revaluation Recasting Question No. 9 Cash in hand and cash at bank are examples of . Assets. Options Current Fixed Working Permanent Question No. 10 Baumol model and the Miller-Orr model belong to . Management. Options Cash Credit Inventory Purchase Question No. 11 Current assets /Current liabilities describes . Ratio. Options Fixed Asset Quick Liquidity Asset Turnover Question No. 12 Inventory and receivables are both current assets. Options FALSE Can't Say Sometimes TRUE Question No. 13 Credit analysis, or the assessment of creditworthiness, is undertaken by analysi ng and evaluating information relating to a customer s history? Options Non-Financial Non-Monetary Financial Monetary Question No. 14 The objective of liquidity ensures that companies are able to meet their liabili ties as they fall due, and thus remain in business. Options Rare TRUE Sometimes FALSE Question No. 15 Funds held in the form of cash do not earn a return. Options TRUE Sometimes FALSE Rare Question No. 16 Holding costs can be . by reducing the level of inventory held by a company. Options minimised control increased reduced Question No. 17 Which technique brings inventory and cash requirment drastically down? Options LIFO Baumal ABC JIT Question No. 18 Which model belongs to cash management? Options LIFO Miller Orr HIFO ABC Question No. 19 JIT stands for just in . . Options totality technical tenure time Question No. 20 The factors to be considered in formulating a trade receivables policy relate to credit analysis, credit control and receivables collection. Options TRUE Sometimes Rare FALSE Question No. 21 Companies with the same business operations may have levels of investment in workin g capital as a result of adopting different working capital policies. Options lower higher different Same Question No. 22 Receibles management is all about? Options Cash Management Loan Management Credit Management All Question No. 23 The main reason that companies fail, though, is because they run out of . Options Customers Inventory Cash Stock Question No. 24 Is it right to say that good cash management is an essential part of good workin g capital management. Options Sometimes never Always Can't say Question No. 25 Optimum cash balance must reflect the expected need for cash in the next budget period. Options never Always Can't say Sometimes Question No. 26 The cash operating cycle is the average ... of time between paying trade payables an d receiving cash from trade receivables. Options Lag period length gap Question No. 27 The length of the cash .. depends on working capital policy in relation to the level investment in working capital, and on the nature of the business operations of a company. Options requirement Operating Cycle disbursal Management Question No. 28 Liquid funds, for example cash, earn no return and so will not increase profitab ility. Options TRUE FALSE rare Sometimes Question No. 29 .. are your business scores that come from your Income Statement and Balance Shee e Cash Flow Statement. Options Marks Financial Scores Points Ratios Question No. 30 Working capital investment policy is concerned with the level of investment in asse ts, with one company being compared with another. Options Permanent Temporary Current Fixed Question No. 31 .. can also be used to cover some of the risks associated with giving credit to fore gn customers. Options Locking Awards Insurance Rewards Question No. 32 Aggressive working capital finance means using more . term finance Options Credit Short Medium Long Question No. 33 Short-term finance is more flexible than long-term finance. Options TRUE FALSE Never Sometimes Question No. 34 Short-term finance tends to be more .. than long-term finance. Options Softer Rigid Flexible harder Question No. 35 Sales made but not collected is known as .? Options A/Cs Payables A/Cs Receivables Both None Question No. 36 . Interest rate depends upon an index and increases or decreases. Options Stationary Variable Stable Fixed Question No. 37 Short-term finance is more risky than long-term finance. Options FALSE Never Sometimes TRUE Question No. 38 Rate risk refers to the fact that when short-term finance is renewed, the rates may vary when compared to the .. rate. Options Current Previous Accounting Industry Question No. 39 The . principle suggests that long-term finance should be used for long-term investm ent. Options Matching Traditional Dual Aspect Monetary Question No. 40 Money paid (cost of credit) for the use of money. Options Interest Dividend Usage Money Principal Contact www.solvedcare.com for best and lowest cost solution or email solvedcare @gmail.com
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