1.

Answers :
Financial management is concerned with the efficient acquisition and
deployment of both short and long term financial resources, to ensure the
objectives of the enterprise are achieved.
Major decisions as financial manager are:
Investment should proposed investments (including potential acquisitions)
be undertaken?
Finance from what sources should funds be raised?
Dividend how should cash funds be allocated to shareholders?

2. Answers :
(a) Quoted high-growth company
A large amount of time devoted to statutory and listing requirements,
particularly if the company is growing by acquisition.
Strong focus on management and accounting, for example, evaluation
of strategic opportunities including mergers and acquisitions.
Strong treasury skill to secure both the short- and long-term financing
for the company.
Development of management information and accounting systems to
meet the needs of the business.

(b) Quoted low-growth company
Focus on improvement of profit by means of cost control, and
therefore the financial management must be able to select and
implement appropriate budgetary and cost control systems and to
provide management information in a concise and relevant form.
The department must be capable of dealing efficiently with the
statutory and listing requirements.
If the slower rate of growth means that the company generates cash,
the financial management will be concerned with the best ways in
which to use the funds, for example, investment in new business
opportunities or repayment to shareholders in the form of dividends
or buy-back of shares.

(c) Unquoted company aiming for a stock exchange listing.
If the flotation is being made due to the need for access to a wider pool
of funds to finance expansion.
The financial management must understand the listing requirements
and be able to liaise with the banks and institutions advising on the
flotation.
If the purpose of the flotation is to enable the owners to realise the
value of their investment then the financial managers must be able to
persuade potential investors that the company will be as successful
under a new ownership and control structure as it was a private
company.
The managers must be good at communicating information about the
company to the wider public, and must be able to present financial
information in a clear and accessible format.

(d) Small family-owned business.
The financial manager must be able to communicate effectively with a
wide range of people, including the owners of the business, providers
of finance, tax officers and shop floor workers.
In a small company, the financial manager must be able to turn his
hand to a much wider range of activities than in a large company. He
must therefore be much of a generalist and understand the details of a
wider range of financial specialisms.

(e) Non-profit-making organisation, for example, a charity.
The main difference between a non-profit-making organisation and
commercial business is that resources are allocated not on the basis of
cash-flow generation, but on the basis of value to those providing the
funds. Thus, the financial manager will be more concerned with
providing an appropriate way of measuring value in the context of
the aims of the organisation than with measuring cash flow.
Since funds are donated, there is likely to be a strong emphasis on cost
control and the efficient use of allocated resources.
The financial manager will need to be involved in the fund-raising
process. This is quite different from the way in which a commercial
organisation raises funds in the form of equity and debt.

(f) Public sector, for example, a government department.
In terms of expenditure, the work of the financial manager is likely to
be similar to that in a non-profit-making organisation, the emphasis
being on value rather than cash flow. This is likely to demand an
understanding of the techniques of cost-benefit analysis.






3. Answers:
(a)
Manipulation
Accounting profits can be manipulated to some extent by
choices of accounting policy.

Risk
Profit does not take account of risk
Shareholders will be very interested in the level of risk,
maximising profit may be achieved by increasing risk to
unacceptable levels.

Volume of investment.
Profits on their own take no account of the volume of
investment that it has taken to earn the profit.

Short-term performance.
Profit is short-term historic performance.
Companys performance should be judged over a large term
and future prospects.


(b)
Managers and owners may have different interests because
ownership and management are separated.
Managers may be tempted to act in his or her own interest rather
than to the principals.
Examples of possible conflicts include:
Paid higher compensation to managers.
Managers may not expect to stay with the firm for long term.
Maximising the short-term profit.
Managers may be reluctant to support the takeover, ever that
the take over may be more benefit to the firms.

(c)
Many of the techniques used in financial decision-making are
based on the assumption of shareholder wealth maximisation.
This might be the main objective of shareholders, but it is
unlikely to be the only objective.
CSR is important for an organisations success because:
To enhance reputation of company
Building competitive advantage
Creating win-win situations through synergistic value
creation
Reducing cost and risk
o To realise tax benefits and avoid stick regulation

4. Answers:
Public Sector
Public sector organizations are generally set up with a prime objective which is not
related to making profits. These organizations exist to pursue non-financial aims,
such as providing a service to the community.
Not-for-profit organization should seek to get value for money from use of the funds:
Economy
Efficiency getting the best use out of what money is spend on
Effectiveness spending funds so as to achieve the organizations objective
Private Sector
Primary objective maximize the market value of company.
Sufficient profits to provide a satisfactory return to owners and keep the business
operating.
Finance manager to ensure that investments earn a return, for the benefit of
shareholders.


5. Answers :
MEMO
To: Managing Director
From: Finance Director
Date: XX September 2014
Subject: Maximization of the share price

Further to our recent discussions, I agree fully with your desire to seek the
maximization of the companys share price and therefore its market capitalization.

I believe that some of the current proposals could damage the position of some of the
groups of stakeholders in the firm and could even have a negative impact to the share
price.






(i) Minimize capital investment to reduce depreciation charges.

The value of the company will be lower that it could be impact badly on the share
price. It could also adversely affect the position of other stakeholders such as
employees and suppliers.

(ii) Increase wages and salaries by less than the level of inflation and sell the land
that is currently used as a staff sports field.

Reducing real wages and employee benefits is likely to damage:
Morale of the employees, and could result in good employees being lost.
Harder to recruit the right people.
If morale is badly affected, this could also affect both quality and the
efficiency of production.

(iii) Reduced overdraft charges by delaying payments to creditors.

Valuable discounts may be lost and credit charges incurred.
The credit rating of the company could be damaged making it difficult to
obtain further credit from new suppliers in the future, or from other sources
of finance.
Suppliers of materials could be jeopardized if the companys orders are
moved down the priority list or even placed on stop.

(iv) Delay expenditure on new equipment that will reduce pollution levels from the
companys factory.

Delay expenditure to reduce pollution
Liable from financial penalties
Bad image in the local community.
If the problems are severe, then the company could come under pressure
from environmental pressure groups which could result in more widespread
damaging publicity.

I would be pleased to discuss these issues with you further, and to consider some
alternative approaches to increasing the share price.