Learning Unit 1

Question 1

Explain the primary roles the of financial manager

Answer 1

Financial planning and analysis
Investment decisions
Financing decisions
Cash management
Relationship management
Dividend decisions
Risk management

Question 2

Explain financial planning and analysis

Answer 2

Forecasting and budgets
Available funds and future funding
Understand the key areas for sale and profit
Financial risks
Capital investment
Future investments

Financial forecast
Use historical information to predict what will happen

Question 3

Explain investment decisions

Answer 3

Short term: ensue money is available for working capital
Medium and long term: for non-current assets

Decisions:

• take on new projects
• invest or sell ppe
• embark on research and development
• investments
• embark on mergers

Question 4

Explain financing decisions

Answer 4

Make decisions on now to fund the financial activities

Question 5

Explain cash management

Answer 5

Ensure that sufficient cash funds we available as needed

Question 6

What are the relationships the financial manager needs to take into account

Answer 6

• Shareholders who provide funding
• creditors
• employee
• government
• customers
• community

Question 7

Evaluate the ethical considerations that underlie a financial manager’s conduct

Answer 7

What impact decisions have on shareholders rights, how shareholders rights will be remedied if they are violated. The effect on the mutual shareholder wealth maximization and relationships with shareholders as well as other stakeholders

Question 8

Explain the agency relations and problem

Answer 8

Agency relationship describes the relationship between management and the shareholders, where by shareholders have delegated the authority ro manage the business to managers
The problem arises when the objectives of the financial manager we not aligned with that of the business

Question 9

Explain the difference between profit maximization and shareholder wealth maximization

Answer 9

Profit maximization is where profit is measured by EPS they do not only materialise into cash flows ignores time value of money. Can understate cost and overstate revenue, it does nor take risk into account

Shave holder wealth maximization measures the current share price