Financial objectives of the organisation, Financial Management

Assignment Help:

A brief scenario for each of two different organisations is presented. You are advised to read both scenarios before answering the questions that follow. Use the scenario details to assist your answer wherever possible.

Public Sector Organisation:

This organisation's legal status is a Trust. It has been created with the object of providing specialised ENT (Ear-Nose-Throat) care in the public sector. It has just started its operations and the total budgeted revenue for the current fiscal year is expected to be Rs150 million.

The Board of Directors is appraising an investment proposal, which is the construction of a new building to be funded through the Private Finance Initiative (PFI). The amount of debt to be raised to fund the capital expenditure is estimated to be Rs 200 million. The loan will be amortised over 15 years at a variable rate of interest; the current interest rate being 8% per annum.

The Trust's sole financial objective is "To achieve financial balance during the year". Its other objectives are of a qualitative nature such as "providing high quality care".

Private Sector Organisation:

This company is listed with the Mauritius Stock Exchange and is in the hospitality industry. Its stated financial objectives are:

? "To achieve a 20% return on investment (ROI) per annum".
? "To achieve an annual growth rate of 5% in earnings per share (EPS)".

The company has an equity market capitalisation of Rs 500 million and it has several debt instruments trading at a total value of Rs 110 million.

Required:

(a) Discuss the reasons for the difference in the financial objectives of the two types of organisation given above.

(b) Outline the main differences in the business risks involved in the achievement of their financial objectives.

(c) Describe the rationale for PFI in the financing of public sector infra- structure. What are the pre-conditions for the successful and sustainable public-private-partnership (PPP). Is PPP worth the trouble?


Related Discussions:- Financial objectives of the organisation

State the example to calculate the present value, State the Example to calc...

State the Example to calculate the present value 2, 00,000 $ is the amount which you require after 20 years for your retirement. How much must you invest now at 5% per annum co

Setting budget goals and objectives, Setting Budget Goals and Objectives: ...

Setting Budget Goals and Objectives: Having collected and analysed all relevant information, and made general forecasts as to the key areas of concern / opportunity and special

Working capital, applicablility of operating cycle of broilers[poultry] in ...

applicablility of operating cycle of broilers[poultry] in uganda

Financial bootstrapping, Briefly describe the major differences between a s...

Briefly describe the major differences between a sole proprietorship and a corporation. Under which form would you choose for a business, and why? Describe the meaning of financi

Calculation of variances, a) Distinguish among standard costing and budgeta...

a) Distinguish among standard costing and budgetary control.  (b)"Calculation of variances in standard costing is not an end in itself, but a means  to an end" Brief discussion

Compare the ifrs and gaap revenue recognition policies, SUPERVALU INC . ...

SUPERVALU INC . , a large US retail grocer, had $36.1 billion in sales for its fiscal year ended February 25, 2011. SUPERVALU currently reports using US GAAP. The controller of

Cash forecasting and budget, Cash Forecasting and Budget: It is used t...

Cash Forecasting and Budget: It is used to get an idea of what a cash forecasted budget any might expect to earn in a fiscal year. You take last year's expenses, increased by

Define the term- earnings per share, Define the term- Earnings per share (E...

Define the term- Earnings per share (EPS) EPS = Profit available to ordinary shareholders (PAT) / Weighted average number of shares in issue(p per share) This ratio illustra

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd