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Workbook Financial Management
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Working out workbook financial management. + answers of the week assignments
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Hogeschool van AmsterdamWorkbook Financial
Management
18-10-2018
,Inhoudsopgave
P1–3 Cash flows..............................................................................................................................5
P1–5 Identifying agency problems, costs, and resolutions.............................................................5
Week 1: Introduction to managerial finance (p2)...................................................................................7
Learning Goals....................................................................................................................................7
Assignments P2-4: Interest versus dividend income......................................................................8
Assignments.....................................................................................................................................10
P3–22 Cross-sectional ratio analysis.............................................................................................13
Week 3: Time value of money..............................................................................................................15
Learning Goals..................................................................................................................................15
Assignments.....................................................................................................................................16
P5–58 Number of years to equal future amount..........................................................................18
Week 4: Cash flow and financial planning............................................................................................19
Assignments.....................................................................................................................................19
P4–6 Finding operating and free cash flows.................................................................................21
Week 5: Capital budgeting techniques.................................................................................................23
Learning Goals..................................................................................................................................23
Week 6: Capital budgeting of cash flows..............................................................................................26
Learning Goals..................................................................................................................................26
Assignments.....................................................................................................................................28
P11–1 Classification of expenditures............................................................................................28
1
, Week 1: Introduction to managerial finance (P1)
Learning Goals
Define finance and the managerial finance function.
Finance can be defined as the science and art of managing money. This means that it virtually affects
all aspects of business. It also describes the term of how money is managed. It is often separated in
three categories such as Public finance, Private finance and Corporate finance. Public finance
includes all the policies that a government pay for the services they provide to the public. Corporate
finance refers to the activities relate to running a corporation. Personal/private finance supplies to
individual consumers and the way they manage their money. In the case of Private finance this
concludes how much of their earnings individuals spend, how much they save or how much they
invest their money(houses, stocks & knowledge). Finance is all about decision making. In a firm this
could be about how they raise money from investors and how they choose to spend given money in
order to raise even more money. It could also be about how they decide to reinvest profits or
distribute them back to investors(we have to keep them happy too). It all comes down to making the
right decisions to get rich.
Managerial finance is concerned with the duties of the financial manager working in a business.
Financial managers administer the financial affairs of all types of businesses—private and public,
large and small, profit seeking and not for profit. They are also responsible for the financial health of
the organization they work for. In order to keep the financial health in check they perform a series of
tasks such as developing a financial plan or budget, extending credit to customers, evaluating
proposed large expenditures, and raising money to fund the firm’s operations. In other words, a
financial manager is responsible for providing financial guidance and support to clients and
colleagues so they can make solid decisions regarding their finance.
Because of the globalization financial managers have become even more important for businesses
now than ever before. Everyday there are millions of overseas transactions that have to be managed
in different currency’s. Financial managers have become some sort of insurance that the transactions
are being managed safely for the businesses.
Describe the legal forms of business organization.
There are three legal forms of business organizations: The legal forms of business organizations are:
Sole proprietorship.
Partnership.
Corporations.
The Sole proprietorship or solo trader is an enterprise that is owned and run by one person. It is the
simplest business to set up and is very popular among small business owners, consultants and self-
contractors varying from personal trainers to plumbers. There are benefits and disadvantages to this
form of business organization. The benefits and disadvantages are mentioned below.
Benefits:
More independency.
Direct income from profits.
The owners pay personal income tax on profits earned from the business instead of
corporate taxes.
2
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