FM - Essay Example

Download file to see previous pages Practicing managers are interested in this subject because among the most crucial decisions of the firm are those which relate to finance, and an understanding of the theory of financial management provides them with conceptual and analytical insights to make those decisions skillfully1.
Financial management, as an academic discipline, is concerned with decision-making in regard to the size and composition of assets and the level and structure of financing. To make wise decisions a clear understanding of the objectives, which are sought to be achieved, is necessary. The objective provides a framework for optimum financial, decision-making. In other words, they are concerned with designed a method of operating the internal investment and financing of a firm. These all are done in a systematic way if financial management is studied 2.
Financial management is related to profit maximization as a decision criterion. According to profit maximization goal, actions that increase profits should be undertaken and those that decrease profits are to be avoided. In specific operational terms, as applicable financial management, the profit maximization criterion implies that the investment, financing and other decisions of the problem should be oriented to the maximization of profits.
Though in our specific proble...
In specific operational terms, as applicable financial management, the profit maximization criterion implies that the investment, financing and other decisions of the problem should be oriented to the maximization of profits.
Though in our specific problem, financial goal is set up in such a way that of not operating at a loss, financial management is needed at all as the main objective of financial management is profit maximization.
Workings for setting up financial goal:
Fixed cost:
Refurbishment cost 3: 8000
Building fixed overheads: 2000 per month
2000 6 months=12000 for 6 months
So total fixed cost= 8000+12000
=20000
Fluctuation of Personnel Contingent 4
100
150
200
250
300
Cost of Goods sold 5
108000
162000
216000
270000
324000
Advanced stock
Purchased for
2 weeks
3600
5400
7200
9000
10800
Total variable
Cost 6
111600
167400
223200
279000
334800
Total revenue:
Spend of customers/
Revenue of the store 7
150000
225000
300000
375000
450000
Total cash inflow
Considering
Fluctuations:
3000 8
153000
228000
303000
378000
453000
Total cash inflow
Considering
Fluctuations:
4000:
154000
229000
304000
379000
454000
Net cash inflow
(Considering starting
Cash as 3000) 9
21400
40600
59800
79000
98200
Remark 10
So to operate the store at not operating loss the minimum financial goal have to be 153000 for six months.
Requirement 2:
Tools to analyze a project:
Ratios provide very useful tools for the manager to assess the organization by making two basic types of comparisons. First, the analyst can compare a present ratio with past (or expected) ratios for the organization to determine if there has been an improvement or ...Download file to see next pagesRead More