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ASSIGNMENT QUESTION Question 1 The utmost goal of Board of Directors and Managers of any corporation 1 answer below » ASSIGNMENT QUESTION Question 1 The utmost goal of Board of Directors and Managers of any corporation is to maximize the wealth of the stockholders. Even so, there will be undoubtedly be times when management goals are pursued at the expense of the stockholders. In such cases, there is a possibility of conflict of interest between the principal (stockholders) and the agents (the Management). This problem is common in corporate management, where the principal is shareholders and the agent is managers. It is also common in government, where the principal is the public and the agent is elected View complete question » ASSIGNMENT QUESTION Question 1 The utmost goal of Board of Directors and Managers of any corporation is to maximize the wealth of the stockholders. Even so, there will be undoubtedly be times when management goals are pursued at the expense of the stockholders. In such cases, there is a possibility of conflict of interest between the principal (stockholders) and the agents (the Management). This problem is common in corporate management, where the principal is shareholders and the agent is managers. It is also common in government, where the principal is the public and the agent is elected leaders. Describe and discuss main reasons that agency problems arise in corporate form of organisation. How do you think agency problems can be controlled and reduced? Question 2 In the era of competitive and complex business environment, understanding the financial statements is becoming an integral part of most non financial managers of many corporations. Statement of Cash Flows is one of the most important financial statements that indicate the actual cash position of a corporation at any given period. From your understanding, explain: a. What is Statement of Cash Flows and how do you determine the sources and uses of cash? b. What are some of the problems associated with financial statement analysis? Note: You may choose to use your own sample of financial statements to explain the above. Question 3 a. With aid of diagram explain what you understand on “Higher the risk, higher the return” concept. (12m) b. Briefly explain one of the smart decisions which should make by the financial manager to create value for a company. (3m) Question 4 KanaksBhd plans to initiate a new product to the market in March 2014. To ensure the planning goes smoothly, she decides to prepare a three months cash budget from the following information: a. Present cash balance is RM1500 b. Estimated cash sales in March is RM 10, 000 and he estimate that the sales will increase by 15% every month compare to previous month. c. Monthly wages to staffs will be RM5, 200. d. KanaksBhd intends to purchase a lorry in April for RM60, 000 with paying down payment for RM10, 000 and monthly installments RM800 starting May. e. Rent on premise is paid RM500 per month. f. KanaksBhd applied bank loan for RM10, 000 and estimated to receive in May 2013. g. Estimated cash purchases are RM4000, RM3500 and RM5000 for the months March, April and May respectively. You are required to prepare a three months Cash Budget ending 31st May 2014. Question 5 Satesh Corporation needs RM3 million for its long-term expansion projects. As the financial manager of the company, you are required to evaluate the costs of the following financing alternatives: a. Issue common stock. The price of the existing shares of the company is RM45. The expected dividend for the next year is RM5.50 and the growth rate will remain at 8%. The flotation cost is 5% of the market price. View less » Oct 07 2015 10:57 PM
