Mb0045 Solved Assignments Spring 2012 Smef

 

he different 3 0 company ma>ing for stoc> in the first uarter of the year 2! is assisted by its ban>erswith overdraft accommodation. he following are the relevant budget figures

:

*ale Cr.= &s. +urchases Cr.= &s. Dages 5):penses Cr.= &s.,ovember 2!9 !828 ;38 !8%ecember 2!9 !82;8 E98 !8anuary 2! 28 !8928 !!86ebruary 2! !8!98 !8948 !81arch 2! ;48 48 !28Given the following further information you are reuired to prepare a ash Budget for theuarter anuary to 1arch 2!8 showing the budgeted amount of ban> facilities reuired8if any8 in each month end<a= Budgeted cash at ban> on !st anuary 2! &s. 28b= redit terms of sales are payment by the end of the month following the month of supply. /n average one half of sale are paid on due date8 while the other half are paidduring the ne:t month. reditors are paid during the month following the month of supply.c= Dages and e:penses are paid twice a month on !st and !9th respectively.

$rom the abo!e information prepare a Cash %udget for the uarter &anuar' to March *+#showing the budgeted amount of ban, facilities reuired# if an'# in each month end.

0ssignment *et -2! ! ton of material input yields standard output of !88 units. he standard price of material is &s. 2 per >g. he actual uantity of material use is ! tons and the actual pricepaid is &s. 2! per >g. 0ctual output obtained is E88 units. ompute 1aterial(ariances.6rom the above find<i= 1aterial ost (arianceii= 1aterial +rice (arianceiii= 1aterial sage (ariance0nswer

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omputation of 1aterial (ariancesBudgeted C!= *tandard CE= 0ctual CE=

"on Rate-mount "on Rate-mount "on Rate -mount **/***

Ci= 1aterial ost (ariance

It is the difference between the standard cost of materials allowed for the actual output and theactual cost of materials used. It ma' be expressed as:

 

Q1. Why wealth maximization is superior to profit maximization in today¶s context?Justify you answer?Answer:

Superiority of Wealth Maximization over Profit Maximization:1.

It is based on cash flow, not based on accounting profit.

2.

T

hrough the process of discounting it takes care of the quality of cash flows. Distantuncertain cash flows into comparable values at base period facilitates better comparison of projects.

T

here are various ways of dealing with risk associate withcash flows.

T

hese risk are adequately considered when present values of cash of any project.

3

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In today¶s competitive business scenario corporate play a key role. In company fromof organization, shareholders own the company but the management of the companyrests with the board of directors. Directors are elected by shareholders and henceagents of the shareholders. Company management procures funds for expansion anddiversification from Capital Markets. In the liberalized set up-, the society expectscorporate to tap the capital market effectively for their capital requirements.

T

hereforeto keep the investors happy through the performance of value of shares in the market,management of the company must meet the wealth maximization criterion.

4.

W

hen a firm follows wealth maximization goal, it achieve maximization of marketvalue of share.

W

hen a firm pact wealth maximization goal, it is possible only when procedures quality goods at low cost. On this account society gains became of thesociety welfare.

5.

Maximization of wealth demands on the part of corporate to develop new products or render new services in the most effective and efficient manner.

T

his helps theconsumers all it will bring to the market the products and services that consumer¶sneed.

6.

A

nother notable features of the firms committed to the maximization of wealth is thatto achieve this goal they are forced to render efficient service to their customers withcourtesy.

T

his enhance consumer and hence the benefit to the society.

7

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F

rom the point of evaluation of performance of listed firms, the most remarkablemeasure is that of performance of the company in the share market. Every corporateaction finds its reflection on the market value of shares of the company.

T

herefore,shareholders wealth maximization could be considered a superior goal compared to profit maximization.

8

.

S

ince listing ensures liquidity to the shares help by the investors shareholders can reapthe benefits arising from the performance of company only when they sell their shares.

T

herefore, it is clear that maximization of the net wealth of shareholders.

T

herefore we can conclude that maximization of wealth is the appropriate of goal of financialmanagement in today¶s context.

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