Financial Management
ABS -MBA
| STUDENT ID |
| UNIT TITLE | UNIT CODE |
Name (in Full) __________________________________________________________ |
- All assignments are to be submitted on 24th July 2022 to assignmentsubmission123@gmail.com and cc afatima@atmsedu.org
- If a program participant submits the assignment late, but within 1 week after the submission date a 20% penalty will be applied.
E.g.: If a student scores 90 in an assignment, the final mark will be 76 after penalty is imposed.
- Any Assignment submission extension request must come to Azra Fatima (Head: Examination | Academic) – afatima@atmsedu.org 5 days before the date of submission with a valid reason and supported documentary evidence.
- Similarity between student’s work is strictly not accepted, any student found with similar work will be graded Zero and fail for the course. However, Plagiarism is an academic offence and will not be tolerated.
- Any reevaluation request should come in 5 days of grade release. Any late request will not be obliged. (Form and other details shall be shared based on request)
- Re evaluation cannot be requested for plagiarized assignments as the assignment stands as an academic misconduct.
- Re evaluation request is only applicable for any failed courses provided the mark range from 59 to 69. Any grade which is below the range is however not applicable for this request.
- Any rescheduling request should come and fulfilled within one week after the actual date of the assessment. Any late request will not be obliged.
Total Marks: _______ / 100
Answer all the questions,
Question: 1
- Sandersen, Inc., sells minicomputers. The firm’s taxable income is $1,225,000. Calculate the corporation’s tax liability.
| Corporate Tax Rates | |
| 15% $ 0–$50,000 25% $ 50,001–$75,000 34% $75,001–$10,000,000 35% over $10,000,000 Additional surtax: •5% on income between $100,000 and $335,000. •3% on income between $15,000,000 and $18,333,333. |
- “Originally, the sole objective of the federal government in taxing income was to generate financing for government expenditures. Although this purpose continues to be important, social and economic objectives have been added.” Substantiate the statement with enough explanations.(500 Words)
Question: 2
- Friedman Manufacturing, Inc. has prepared the following information regarding two investments under consideration. Which investment is better, based on risk (as measured by the standard deviation) and return?
| Common Stock A | Common Stock B | ||
| Probability | Return | Probability | Return |
| .20 | 12% | .10 | 4% |
| .50 | 18% | .30 | 6% |
| .30 | 27% | .40 | 10% |
| .20 | 15% |
- “ More can be said about risk, especially as to its nature, when we own more than one asset in our investment portfolio.” Define risk and explain how risk is affected if we diversify our investment by holding a variety of securities? (500 Words)
Question 3:
- J and S Corporation is evaluating its financing requirements for the coming year. The firm has only been in business for 1 year, but its CFO predicts that the firm’s operating expenses, current assets, net fixed assets, and current liabilities will remain at their current proportion of sales.
Last year J and S Corp. had $15 million in sales with net income of $1.5 million. The firm anticipates that next year’s sales will reach $18 million with net income rising to $3 million. Given its present high rate of growth, the firm retains all its earnings to help defray the cost of new investments.
The firm’s balance sheet for the year just ended is found below:
| J and S Corporation | ||
| Balance Sheet 12/31/2000 % of Sales Current assets $6,000,000 40% Net fixed assets 9,000,000 60% Total $15,000,000 Liabilities and Owners’ Equity Accounts payable $3,750,000 25% Long-term debt 4,250,000 NAa Total liabilities $8,000,000 Common stock 2,000,000 NA Paid-in capital 2,800,000 NA Retained earnings 2,200,000 Common equity 7,000,000 Total $15,000,000 | ||
| aNot applicable. This figure does not vary directly with sales and is assumed to remain constant for purposes of making next year’s forecast of financing requirements. |
Estimate J and S corp. total financing requirements (i.e., total assets) for 2001 and its net funding requirements (DFN).
- Give a brief summary of forecasting to determine additional (discretionary) funding (financing) needed. (500 Words)
Question 4:
The balance sheet and income statement for the McDonald’s are as follows.
| McDonald’s Corporation 2016 Income Statement ($ Millions) | ||
| Sales $11,508 Cost of goods sold 6,537 Gross profits $ 4,971 Marketing expenses and general and administrative expenses $ 1,832 Depreciation expense 345 Total operating expenses $ 2,177 Operating profits $ 2,794 Interest expenses 387 Earnings before taxes $ 2,407 Income taxes 765 Net income before preferred stock dividends $ 1,642 Preferred stock dividends 25 Net income available to common stockholders $ 1,617 |
| McDonald’s Corporation December 31, 2016 Balance Sheet ($ Millions) Assets | ||
| Cash $ 341 Accounts receivables 484 Inventories 71 Prepaid expenses 247 Total current assets $ 1,143 Gross fixed assets $20,088 Accumulated depreciation 5,127 Net fixed assets $14,961 Investments 702 Other assets 1,436 Total assets $18,242 Liabilities and Equity Liabilities (debt): Short-term notes payable $ 1,629 Accounts payable 651 Taxes payable 53 Accrued expenses 652 Total current liabilities $ 2,985 Long-term debt 6,325 Total liabilities $ 9,310 Equity: Preferred stock $ 80 Common stock: Par value and paid in capital $ 708 Retained earnings 11,927 Treasury stock (3,783) Total common equity $ 8,852 Total equity $ 8,932 Total liabilities (debt) and equity $18,242 |
- Calculate the following ratios:
| RATIO | INDUSTRY NORM |
| Current ratio | 0.70 |
| Inventory turnover | 90 |
| Average collection period | 6.5 days |
| Debt ratio | 50% |
| Total asset turnover | 1.5 |
| Fixed asset turnover | 2 |
| Operating profit margin | 21% |
| Return on common equity | 15% |
- Calculate the future sum of $5,000 given that it will be held in the bank 5 years at an annual interest rate of 6 percent.
- Knutson Products, Inc., is involved in the production of airplane parts and has the following inventory, carrying, and storage costs:
- Orders must be placed in round lots of 250,000 units.
- The carrying cost for 1 unit of inventory is $ 10
- The ordering cost is $100 per order.
- Determine the optimal EOQ level.
- Determine the average inventory when the safety stock is 2000 units.
Question 5:
“Some of the financial techniques and strategies are necessary for the efficient operation of an international business. Problems inherent to these firms include multiple currencies, differing legal and political environments, differing economic and capital markets, and internal control problems. The difficulties arising from multiple currencies are stressed here, including the dimensions of foreign exchange risk and strategies for reducing this risk.” Elucidate. (1000 Words)
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