Financial Management Assignment
Balance sheet Problem
A. Identify the criteria of the following items (Assets, Liabilities or Owner Equity): Create Balance Sheet from Following items
1) Notes payable 22,400
2) Inventory 55,000
3) Account receivable 9,600
4) Capital 72,000
5) Account payable 43,200
6) Building, Land and Equipment 96,000
7) Short Term Loan or Short term debt 5,000
8) Office supplies 12,000
9) Retained earnings 34,800
10) Cash 4,800
B. Indicate which of the following statements is True or False:
1) it is better for the company to own assets greater than the liabilities and owner-equity False
2) the accounting is identical to the finance F
3) The start of any company done by the Financing activity, then the investing then the operation. F
4) If you decided to buy a car, this considers expenses. T
5) It is better to have short and profitable operating cycle. T
6) The ineffective collection function can affect the operating cycle True
7) One of the function of the supply chain management may interfere to the financial management T
8) The cash flow statement contain the finance and investing activities only F
9) The liquidity ratio indicate the capacity of the company to pay long term obligation F
10) If you have a profitable project and have shortage in the finance, it’s better to raise funds by invite new partners T
` Problem Three:
According to the above income statement:
Comment on the following points according to you own opinion:
• What is the main reason for increase Sales increase?
First of all, to increase the company wealth.
Second main reason, because of high outflow ratio of cost goods sold comparing to net sales as the high sales doesn’t mean high profit and to increase the net income.
• The reason behind increase the percentage of cost of goods sold from sales revenue from one year to another.
Because of the supplier services increase and the interest expenses increase from one year to another.
• Do you think that the company should continuous with its market strategy?
No I don’t think that, marketing activity should be increase and expand marketing to increase the net sales and net income.
• Comment on the distribution cost and the reason for its decrease as a percentage.
The distribution cost is increase from one year to year maybe because of high number of shareholders or increase profit dividend.
The reason of percentage decrease in distribution is the high net sales through the time year of period :
Distribution/ ? Net sales = ? distribution %
What could be the reason for the fluctuation in the Administrative Expenses?
Increase in sales volume causing a decrease in the proportion of both production and nonproduction costs (management salaries, office rent) due to economies of scale.
• Interest expenses increase due to extend the credit facilities, what do you recommend?
-Find another sources of fund as inviting new partners who their cost lower than the credit cost .
-Reduction of goods sales cost will increase profit margin that help owners to pay the accrual credit.
• According to the above financial ratios:
Comment on the liquidity and the assets efficiency and the profitability