What are the traditional methods of evaluation

Assignment Help Financial Management

Reference no: EM132914683

Answer the following questions.

Question 1 Financial Planning is paramount for the success of any organization. Discuss the merits of this Statement.

Question 2 What is the importance of Budgeting in the Business world? Discuss the merits and demerits. Also, elaborate on the Budget cycle that an organization needs to follow.

Question 3 If you plan to invest $15,000 annually for 5 years and the discount rate is 15%. Required: i) Calculate what is the future value ?
ii) Briefly explain the time value of money.

Question 4 Prepare a Cash budget for the Quarter April To June based on the following data and additional information.

Month	Sales($)	Purchase($)	Wages($)	Overheads($)

Jan	70,000	38,000	7,000	12,000

Feb	52,000	40,000	8,000	5,500

Mar	59,000	42,000	10,000	13,500

Apr	63,000	44,000	11,500	7,400

May	56,000	46,000	9,000	9,500

Jun	65,000	48,000	8,000	9,000

Additional Information :
Cash balance at 1st April is $720,000
Sales is 30% cash sales and 70% is collected in the following month.
All purchases of a month are paid after 2 months.
Land was purchased in April for $105,000

Wages of a month are paid the following month. All overheads are paid the same month.
Loan repaid in May $56,000

Question 5

Kwality Industries is considering two projects to develop. The expected cash inflows are as follows :

follows:	Project A	ProjectB
Year1	140,000	130,000
Year2	175,000	250,000
Year3	135,000	320,000
Year4	250,000	50,000
Year5	200,000	170,000

Each Project requires an investment of $750,000. A rate of 10% has been selected for the Net Present Value (NPV) Analysis.

Required :
Calculate through the NPV and the Payback method and suggest which project should be recommended based on each method.

Question 6
Explain in detail the Performance Management cycle with suitable examples.

Question 7
What is the importance of Break Even Analysis ?
Banana Republic Company, a producer of specialty cards, wants you to complete several calculations based on the information given :
Selling Price/Unit = $9.50 Variable Cost/Unit = $5.50 Total Fixed Costs = $45,500

Required to calculate the following :
Break Even point in units
Sales Volume necessary to produce a net income of $25,500
Total Units required to be sold to earn a Net Income of $32,480

Question 8:

Ivory Company, a sole proprietorship, sells only one product. The regular price is $185. Variable costs are 60% of this selling price, and fixed costs are $12,500 a month.

Management decides to decrease the selling price from $185 to $170 per unit. Assume that the cost of the product and the fixed operating expenses are not changed by this pricing decision.

At the original selling price of $185 a unit, what is the contribution margin ratio?
- - - - - - - %
At the original selling price of $185 a unit, what dollar volume of sales per month is required for Diana Company to break-even? $_ _ _ _ _ _ _

At the original selling price of $185 a unit, what dollar volume of sales per month is required for Diana Company to earn a monthly operating income of $15,500?
$_ _ _ _ _ _ _

At the reduced selling price of $170 a unit, what is the contribution margin ratio?
- - - - - - - %
At the reduced selling price of $170 a unit, what dollar volume of sales per month is required to break-even? $_ _ _ _ _ _ _

Explain the significance of Contribution Analysis with special reference to the example above.

Question 9:

What are the traditional methods of evaluation in Financial Planning? Explain also the Interrelationships between the different Financial Statements.

Question 10:

In the Budgeting exercise of any company, what is the significance of a Sales and a Production Budget. What are the inputs required to prepare these Budgets?

Attachment:- Financial Planning and Budgeting.rar

Reference no: EM132914683

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