## Financial Management Quiz

Get a Custom Essay Paper that meets your expectations by clicking ORDER

### Financial Management Quiz

ABC Corporation currently has an inventory turnover of 15.7, a payables turnover of 9.6, and a
receivables turnover of 8.4.
a. How many days are in the cash cycle?
b. How many days are in the operating cycle?

Compute the Accounts Payable Period based on the following information:
ABC Products provides the following information.
Average Accounts Payable Balance is as follows: \$800,000
Annual Cost of Goods sold is as follows: \$9,000,000
Assume 365 days.
Compute the Accounts Payable period.

Compute the Operating Cycle based on the following information:
ABC Products provides the following information.
Average Collection Period 45 days
Accounts Payable Period 45 days
Average age of inventory 60 days
Compute operating cycle

Consider the following financial statement information for ABC Corporation.
Assume all sales are on credit.
a. How long is the cash cycle?
b. How long is the operating cycle?

Financial Management Quiz

The ABC Corporation has the following estimated quarterly sales for next year.
The average collection period is 30 days. Purchases are equal to 64 percent of the following
quarter’s sales. Suppliers are normally paid in 60 days. Determine the
a. Cash received from customers in Quarter 2
b. Ending Accounts Receivables Balance in Quarter 2
c. Cash paid to suppliers in Quarter 2
d. Ending Accounts Payable Balance in Quarter 2
e. Cash received from customers in Quarter 3
f. Ending Accounts Receivables Balance in Quarter 3
g. Cash paid to suppliers in Quarter 3
h. Ending Accounts Payable Balance in Quarter 3

Solve next four questions based on the following information:
Month Sales Month Sales
Jan \$15,306 July \$21,083
Feb \$15222 Aug \$25,000
Mar \$20,121 Sept \$25,400
Apr \$22,400 Oct \$18,950
May \$19,220 Nov \$19,220
June \$20,212 Dec \$19,088
The company has estimated expenses as follows:
General and Administrative Expenses per month: \$5,500
Material Purchases (are paid in the month following the purchase): 11% of sales
Interest Expense per month: \$250
Rent expenses per quarter starting March: \$950
Sales are collected as follows:
In the month of sales: 20%
In the next month: 5%
After 2 months: 30%
After 3 months: Remaining Balance

Find the cash outflows for February

Calculate the cash outflows for June

Calculate the collection from sales for December

Calculate the collection from sales for June

Financial Management Quiz

The actual sales and purchases for White Inc. for September and October 2006, along
with its forecast sales and purchases for the November 2006 through April 2007, follow.
Year Month Sales Purchases
2006 September \$310,000 \$220,000
2006 October 350,000 250,000
2006 November 270,000 240,000
2006 December 260,000 200,000
2007 January 240,000 180,000
2007 February 280,000 210,000
2007 March 300,000 200,000
2007 April 350,000 190,000

The firm makes 30 percent of all sales for cash and collects 35 percent of its sales in each of the two months following the sale. Other cash inflows are expected to be \$22,000 in September and April, \$25,000 in January and March, and \$37,000 in February. The firm pays cash for 20 percent of its purchases. It pays for 40 percent of its purchases in the following month and for 40 percent of its purchases two months later.

Wages and salaries amount to 15 percent of the preceding month’s sales. Lease expenses of \$30,000 per month must be paid. Interest payments of \$20,000 are due in
January and April. A principal payment of \$50,000 is also due in April. The firm pays cash dividend of \$30,000 in January and April. Taxes of \$120,000 are due in April. The firm also intends to make a \$55,000 cash purchase of fixed assets in December.

Assuming that the firm has a cash balance of \$25,000 at the beginning of November and its desired minimum cash balance is \$25,000, prepare a cash budget for November through April and determine the cash surplus/deficit for each month.

Financial Management Quiz

Get a Custom Essay Paper that meets your expectations by clicking ORDER

## Goals of Financial Management

### Assets

A company must satisfy its customers in order to succeed. A company also needs to sell products and services at a profit. (Non-profit and public organizations are not covered in this course.)

Companies have both tangible and intangible assets and need both of these types.

### Goals of Financial Management

Should financial managers focus only on long-term sustainable value or should they account for the short-term demands of shareholders seeking immediate gain? Let us look at an example. A relatively new company without actual profits or a solid business strategy called V.A. Linux (ticker symbol LNUX) went public December 9,1999, at an initial price of \$30 per share, and its stock hit \$320 per share the same day. In the year 2000, its stock hit a low of 6.

There are numerous stories just like V.A. Linux. In general, maximizing value is a short-term proposition and one that does not always fit every situation in the short term.

Working to maximize shareholder wealth is a simple and obvious management mandate. Complications surface when managers try to balance short-term and long-term goals, sustainable performance, social responsibility expectations, ethical and legal behavior, and sometimes personal objectives. This course will touch on all of these complicating factors.

Goals of Financial Management

##### Financial Environment

Financial managers are not independent operators. Financial institutions make their decisions in larger financial environments.

Financial managers need to understand the environment within which their businesses operate. You will look at the markets in which capital is raised and securities are traded and priced, and you will examine institutions that operate in these markets. In the process, you will also explore the principal factors that determine the level of interest rates.

People and organizations with borrowing needs often use the services of different financial intermediaries. This involves analyzing different existing types of financial markets such as primary and secondary markets, equity and bond markets, money markets and capital markets, and some of the recent trends in the financial markets.

It is important to consider different financial intermediaries, which not only efficiently transfer money between borrowers and savers, but essentially create new financial products. There are major types of intermediaries with highly specialized functions in our financial environment.

Goals of Financial Management

##### Financial Statement Analysis

There are four basic financial statements: the balance sheet, the income statement, the statement of retained earnings, and the statement of cash flows. These statements contain a lot of information that should be dissected and analyzed to help managers to draw conclusions regarding the overall financial performance of the company.

##### Ratio Analysis

It is useful to anticipate future conditions and to plan actions that will improve a firm’s future performance. The primary method used to analyze financial statements is ratio analysis. The most important ratios to analyze can be grouped into liquidity ratios, asset management ratios, debt management ratios, profitability ratios, and market value ratios.

##### Financial Statement Forecasting Techniques

This assessment will focus on some of the techniques used to forecast financial statements as a critical part of the overall financial planning process. Financial forecasting usually starts with a forecast of the firm’s projected sales based on projected or pro forma financial statements. These statements can also provide ratios to be used in evaluating alternative business plans and strategies. Consider the uses and limitations of the additional funds needed (AFN) formula, which is used to estimate additional funds needed to support a higher projected level of sales, as well as the need for a comprehensive approach to forecasting and an understanding of financial and non-financial factors in the financial environment.

• Assets.
• Goals of financial management.
• Financial environment.
• Financial statement analysis.
• Ratio analysis.
• Financial statement forecasting techniques.

Question to Consider

To deepen your understanding, you are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.

• Examine a large department store company that has stable sales and a well-established product line (for example, Macy’s). Imagine the following: The store does not foresee growth in future sales, and the company’s target markets are primarily in the United States. If this company plans to move product overseas at a lower cost, what financial and social factors should they be concerned with?
##### Library Resources
• Brigham, E. F., & Houston, J. F. (2016). Fundamentals of financial management (14th ed.). Boston, MA: Cengage.