Evaluation(Financial Management) PDF

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Financial management learning guide...

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Name: Rodelyn A. Galino BSA-II September 3, 2020 Schedule: 08:00am-09:00am (TTHS)

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EVALUATION DISCUSSION: 1. What is the goal of financial management? Explain the role of financial manager in achieving such goal. The main goal of finance management is to maximize shareholder wealth. For public companies this is the stock price, and for private companies this is the market value of the owner’s equity. In order to achieve such goal financial manager must maximize the value of the firm to its owners through considering both short and long-term consequences of the firm’s actions. The role of financial manager is to maximize proper allocation of funds, effective and efficient use of funds available to the firm, keeping in view the objectives of the firms and expectation of the providers of funds. The financial manager is the one who take necessary actions by making decisions that increase the value of the firm or the value of the stock and having a proper finance management to help firms so through these, goal of profit maximization will be achieve. 2. Explain the consequences the firm will suffer if a financial manager fails to come up with right decisions in a. Investing The financial manager is in charge of investing the firms accumulated cash, choosing the safe investments that has a potential economic benefit and that can increase the value of the stock. But having a bad decision it will lead to risk of loss of principal in a stock market downturn. Also, the firm earning will be less on its investments since the allocation of funds is not use wisely that will result to a great loss. b. Financing In funding the growth of business, if funding the firm with debt it must be repaid that can end up being a bad decision if the firm does not generate enough cash to make loan payments. If taking more to equity capital that necessary it will greatly affect that will lead to the firm to give up a large ownership in order to finance its investment. If financial manager will not be able to forecast the funding rightly the consequences will affect greatly. c. Operating A financial manager at times may torn with difficult choices because the firm doesn’t have sufficient cash available to pay for the expenses. For example, making a tax payment on time or making a loan payment in time. Missing the tax payment can result in the firm being charged of penalties and charges. Missing the loan payment can result in the firm’s relationship with the lender that will interfere with the strategy of obtaining loan for the future. Financial manager come up with wrong decision the firm will be at stake.

QUESTIONS: 1. What is the primary goal of financial management? a. Increase earnings c. Maximizing cash flow b. Maximizing shareholder’s wealth d. Minimizing risk of the firm 2. Proper-risk return management means that a. The firm should take as few risks as possible. Consistent with the objectives of the firm, an appropriate trade-off between risk and return should be determined. b. Consistent with the objectives of the firm, an appropriate trade-off between risk and return should be determined. c. The firm should earn highest return possible. d. The firm should value future profits more highly than current profits. 3. Which of the following is not a major area of concern and emphasis in modern financial management? a. Inflation and its effect on profits c. Changing international environment b. Stable short-term interest rates d. Increased reliance on debt 4. Which of the following is not a major area of concern and emphasis in modern financial management?

a. Marginal analysis c. Commodity trading b. Risk return trade-off d. Changing financial institutions 5. A financial manager’s goal of maximizing current or short-term earnings may not be appropriate because a. It fails to consider the timing of the benefits. b. Increased earnings may be accompanied by unacceptably higher levels of risk. c. Earnings are subjective; they can be defined in various ways such as accounting or economic earnings. d. All of the given choices. 6. All of the following are functions of the financial manager, except a. Analyzing and planning the company’s performance b. Anticipating the company’s financial needs c.

Assigning the market price of the company’s stock

d. Allocating funds to the most profitable asset. 7. Which of the following statements is false? a. The financing decision involves the process of allocating funds for investment in competing assets. b. The treasurer would be responsible for activities such as managing cash balances, granting credit to customers and managing the process of issuing new securities. c. The optimal capital structure is the best combination of long-term debt and equity. d. It is necessary to determine the appropriate risk-return trade-off to maximize the market value of the firm for its stockholders. 8. Regine is a financial manager who has discovered that her company is violating environmental regulations. If her immediate superior is involved, her appropriate action is to – a. Do nothing since she has a duty of loyalty to the organization. b. Consult the audit committee c. Present the matter to the next higher managerial level. d. Confront her immediate superior. 9. Integrity is an ethical requirement for all financial managers. One aspect of integrity requires – a. Performance of professional duties in accordance with applicable laws. b. Avoidance of conflict of interest. c. Refraining from improper use of inside information. d. Maintenance of an appropriate level of professional competence. 10. A financial manager discovers a problem that could mislead users of the firm’s financial data and has informed his/her immediate superior. He/she should report the circumstances to the audit committee and/or the board of directors only if – a. The immediate superior, who reports to the chief executive officer, knows about the situation but refuses to correct it. b. The immediate superior assures the financial manager that the problem will be resolved. c. The immediate superior reports the situation to his/her superior. d. The immediate superior, the firm’s executive officer, knows about the situation but refuses to correct it....