讲义文稿成果a1 financial management function

FinancialmanagementfunctionThenatureandpurposeoffinancialmanagement1Whatisfinancialmanagement?Financialmanagementcanbedefinedasthemanagementof ofanorganisationinordertoachievethefinancialobjectivesoftheorganisation.Theusualassumptioninfinancialmanagementforthe isthattheobjectiveoftheis iseshareholders'FinancialmanagementdecisionsThefinancialmanagermakesdecisionsrelatingtoinvestment,financinganddividends.Themanagementofriskmustalsobeconsidered.isationofshareholderwealth

CompareFMwithFR&MAFinancialManagementFinanciallongtermraisingoffinanceandtheallocationandcontrolofprovidinginformationforthemoreday-to-dayfunctionsofcontrolanddecisionvidinginformationaboutthehistoricalresultsofpastnsanddecisionsAdvisingoninvestmentinnon-currentassets/aparticularnewCashflowProducingmonthlymanagementManagementaccountsincorporatenon-monetarymeasuresProducingannualCashflowInrelationtothefinancialmanagementofa ,whichofthefollowingprovidesthebestdefinitionofafirm’sToachievelong-termgrowthin isethelevelofannual isethewealthofitsordinary isethelevelofannualWhichofthefollowingaretheTHREEkeyareascoveredbyfinancialmanagementdecisions? Cash 2016/09Q10Whichofthefollowingwouldyouexpecttobetheresponsibilityoffinancialmanagement?AProducingannualBProducingmonthlymanagementCAdvisingoninvestmentinnon-currentDDecidingpayratesfor2Financialmanagementobjectives Earningsper Shareholderwealth isationAshareholder'sreturnoninvestmentisobtainedintheformDividendsCapitalgainsfromincreasesinthemarketvalueoftheirisameasurewhichcombinestheincreaseinsharepriceanddividendspaidandcanbecalculatedas:

P0isthesharepriceatthebeginningoftheP1isthesharepriceattheendofD1isthedividendEx-2016/12Q9GreenCo,alisted ,hadthefollowingsharepricesduringtheyearended31December20X5:Duringtheyear,GreenCopaidatotaldividendof$0.15perWhatisthetotalshareholderreturnfor AnswerTSR=100×3.00-2.50+0.15/2.50=Ex-2014/12Q1TKQCohasjustpaidadividendof21centspershareanditssharepriceoneyearagowas$3·10pershare.Thetotalshareholderreturnfortheyearwas19·7%.WhatisthecurrentshareProfit isationProfitdoesnottakeaccountofrisk.Shareholderswillbeveryinterestedinthelevelofrisk,and isingprofitsmaybeachievedbyincreasingrisktounacceptablelevels.ProfitsontheirowntakenoaccountofthevolumeofAccountingprofitscanbemanipulatedtosomeextentbychoicesofaccountingpolicies.Someexamplesofmanipulatingaccountingprofits: Capital&Revenue Ex-2014/12Q12WhichofthefollowingstatementsconcerningprofitareAccountingprofitisnotthesameaseconomicProfittakesaccountofAccountingprofitcanbemanipulatedby1and31and22and31,2andEarningspersharegrowthEarningspershareiscalculatedbydividingthenetprofitorlossattributabletoordinaryshareholdersbytheweightedaveragenumberofordinaryshares.LastyearABCComadeprofitsbeforetaxof$2,628,000.Taxamountedto$788,000.ABCCo'ssharecapitalwas$2,000,000(2,000,000sharesof$1)$4,000,0006%preferenceWhatwastheearningspershare(EPS)fortheAnswer$ProfitbeforeLessProfitafterLesspreferencedividend(6%×EarningsattributabletoordinaryNumberofordinaryEPS=1,600,000/2,000,0003StakeholdersStakeholdersareindividualsorgroupswhoareaffectedbytheactivitiesofthefirm.Theycanbeclassifiedasinternal(employeesandmanagers),connected(shareholders,customersand rs)andexternal(localcommunities,pressuregroups, üOrdinary(equity) Whichofthefollowingisanexampleofaninternalstakeholderinafirm?FinanceLocal，利润最大化的观点有其主要表现在：(1)没有考虑利润的取得时，利润最 入的资本联系起来，用每股收益（或权益净利率）来 股东最大化的观点认为，增加股东是财务管理 股东创办公司的目的是增加。如果公司不能为股东股东可以 股Encouragingshareholderwealth isationAgencytheoryinalisted associatedwiththeagencyproblem,whichhasthreemaincauses：thereisaseparationbetweenownershipandSelf-interest:theobjectivesofshareholdersanddirectorsmaybethereisasymmetryofDiscussthereasonswhysmallandmedium-sizedentities(SMEs)mightexperience betweentheobjectivesofshareholdersanddirectorsthanlargelistedcompanies.(4marks) betweentheobjectivesofshareholdersanddirectorsina isassociatedwiththeagencyproblem,whichhasthreemainFirst,theobjectivesofshareholdersanddirectorsmaybeSecond,thereisasymmetryofinformation,sothatshareholdershaveaccesstolessinformationaboutthe thandirectors,makingithardforshareholderstomonitortheactionsanddecisionsofdirectors.Third,thereisaseparationbetweenownershipandcontrol,asshareholdersanddirectorsaredifferentpeople.Onereasonwhysmallandmedium-sizedentities(SMEs)mightexperiencelessbetweenshareholdersanddirectorsthanlargerlistedcompaniesisthatinmany forexamplein .Wherethatisthecase,thereisnoseparationbetweenownershipandcontrol,thereisnodifferencebetweentheobjectivesofshareholdersanddirectors,andthereisnoasymmetryofinformation.betweentheobjectivesofshareholdersanddirectorswillthereforenotAnotherreasonwhytheremaybeless betweentheobjectivesofshareholdersanddirectorsinSMEsthaninlargerlistedcompaniesisthatthesharesofSMEsareoftenownedbyasmallnumberofshareholders,whomaybeinregularcontactwiththe anditsdirectors.Inthesecircumstances,thepossibilityof isverymuchreduced.FOURwaystoencouragemanagerstoachievestakeholderobjectivesExinwaysinwhichthedirectorsofDarnCocanbeencouragedtoachievetheobjectiveof isationofshareholderwealth.(6marks)DiscussFOURwaystoencouragemanagerstoachievestakeholderobjectives.(8marks)Corporate ernancecodesofbestpractice ernancecodesofbestpractice,suchastheUK ernanceCode,seektoreducecorporaterisk(Minimisationofrisk)andincreasecorporateaccountability. Appointingindependentnon-executivedirectorstocreateboardof Separationof andCEO Establishmentofaudit,nominationandremunerationEx-2014/12Q11WhichofthefollowingisLEASTlikelytofallwithinfinancialThedividendpaymenttoshareholdersisFundsareraisedtofinanceaninvestmentSurplusassetsaresoldNon-executivedirectorsareappointedtotheremunerationStockexchangelistingregulationsTheseregulationsseektoensureafairandefficientmarketfortradingsecuritiessuchassharesandloannotes.Theyencouragedisclosureofprice-sensitiveinformationinsupportingpricingefficiencyandhelptodecreaseinformationasymmetry,oneofthecausesoftheagencyproblembetweenshareholdersandmanagers.Decreasinginformationasymmetryencouragesmanagerstoachievestakeholderobjectivesasthequalityand tyofinformationavailabletostakeholdersgivesthemaclearerpictureoftheextenttowhichmanagersareattendingtotheirobjectives.ManagerialrewardschemesAsagentsofthe ’sshareholders,thedirectorsmaynotalwaysactinwayswhichincreasethewealthofshareholders,aphenomenoncalledtheagencyproblem.Theycanbeencouragedtoincrease iseshareholderwealth.such .Throughthesemethods,thegoalsofshareholdersanddirectorsmayincreaseincongruence.Performance-relatedpayPerformance-relatedpaylinkspartoftheremunerationofdirectorstosomeaspectofcorporateperformance,suchaslevelsofprofitorearningspershare.Oneproblemhereisthatitisdifficulttochooseanaspectofcorporateperformancewhichisnotinfluencedbytheactionsofthedirectors,leadingtothepossibilityofmanagersinfluencingcorporateaffairsfortheirownbenefitratherthanthebenefitofshareholders,forexample,focusingonshort-termperformancewhileneglectingthelongerterm.【dysfunctionalbehaviour】ShareoptionschemesShareoptionschemesbringthegoalsofshareholdersanddirectorsclosertogethertotheextentthatdirectorseshareholdersthemselves.Shareoptionsallowdirectorstopurchasesharesataspecifiedpriceonaspecifiedfuturedate,encouragingthemtomakedecisionswhichexertanupwardpressureonshareprices. y,ageneralincreaseinsharepricescanleadtodirectorsbeingrewardedforpoorperformance,whileageneraldecreaseinsharepricescanleadtomanagersnotbeingrewardedforgoodperformance.Whichofthefollowingisnotcharacteristicsofacarefullydesignedremunerationpackage?Balanceshort-termandlong-termperformancerelatedMatchingofmanagers'timehorizonstoshareholders’timePossibilityofmanipulationbyEncouragementformanagerstoadoptthesameattitudestoriskasWhichofthefollowingaretypicalcriticismsofexecutiveshareoptionschemesWhendirectorsexercisetheiroptions,theytendtosellthesharesalmostimmedia ytocashinontheirprofitsAgeneralincreaseinsharepricescanleadtodirectorsbeingrewardedforpoorIfthesharepricefallswhenoptionshavebeenawarded,andtheoptionshavenovalue,theycannotactasanincentiveDirectorsmaydistortreportedprofitstoprotectthesharepriceandthevalueoftheirshareoptions11and32and31,2,3andMeasuringtheachievementoffinancialobjectivesRatio ysisFinancialobjectivesshouldbe tativesothattheirachievementcanbemeasured ysisisoftenusedbystakeholderstoassesstheperformanceofa .Ratiosarenormallysplitinto4categories:Profitability–importanttoassessmanagerialDebt–importanttoLiquidity–important rsandShareholderinvestorratios–importanttoProfitabilityratiosROCE=Profitfrom CapitalROCE=Profitfrom

CapitalemployedProfit Asset2016/09Q14PeachCo’slatestresultsareasProfitbeforeinterestandProfitbeforeProfitafterInaddition,extractsfromitslateststatementoffinancialpositionareasfollows:Non-current

2016/09Q14WhatisPeachCo’sreturnoncapitalemployedABCD2016/09Q14AnswerOperatingprofit/(D+E)=100x2,500/(10,000+2,500)=Debtratiosinclude: Interest

Bookvalueofdebt Bookvalueofequity LiquidityratiosCurrent Currentassets:CurrentAcidTest/Quickratio=Currentassetslessinventory:CurrentShareholderinvestorratiosDividendyield Dividendper MarketpriceperPriceearnings(P/E)ratio MarketpriceperDividendpayoutratio=Dividendper DividendCoverEarningspershare ProfitsdistributabletoordinaryNumberofordinarysharesEx-2015/06Q3Thefollowinginformationrelatesto: 123Earningspershare Dividendspershare Sharepriceatstartofyear WhichofthefollowingstatementsisThedividendpayoutratioisgreaterthan40%ineveryyearintheMeangrowthindividendspershareovertheperiodisTotalshareholderreturnforthethirdyearisMeangrowthinearningspershareovertheperiodis6%per1 Ex–2017/09GeehCopaidaninterimdividendof$0.06perordinaryshareon31October20X6anddeclaredafinaldividendof$0.08on31December20X6.TheordinarysharesinGeehCoaretradingatacum-divpriceofWhatisthedividendyield(toone AnswerDividendyieldiscomparesdividendpaidoverayeartothecurrentex-divshareprice.Dividendfortheyearis$0.08+$0.06=$0.14Exdivshareprice(representingtheamountofmoneybeinginvestedintheshare)=$1.83-$0.08=$4/1.75x100=Non-financialobjectivesThewelfareofemployeesandisationofmarketAchievingatargetlevelofcustomerThefulfilmentofresponsibilities ThewelfareofsocietyasaEx-2015/06Q4WhichofthefollowingstatementsisOneoftheproblemswith isingaccountingprofitasafinancialobjectiveisthataccountingprofitcanbemanipulatedAtargetforaminimumlevelofdividendcoverisatargetforaminimumdividendpayoutratioThewelfareofemployeesisafinancialOnereasonshareholdersareinterestedinearningspershareisthataccountin