Question 1:
Explain the goal of financial management (10). Refer to the UPS Case Study provided at the end of the assignment to illustrate your answer (10).
Discuss the purpose of liquidity, and how it can be attained, as a short-term financial goal for a firm. (7)
A shareholder can also be classified as a “stakeholder” of a business. Is this statement true or false? (1). Motivate your answer (2)
Question 2:
Refer to the abstract of an Income Statement for a logistics company provided here and then answer the following questions.
| Year | ||
| 2022 | 2021 | |
| Income Statement [Abstract] | R million | R million |
| Revenue | 737,160 | 694,980 |
| Operating Expenses: | ||
| Compensation and benefits | 344,610 | 342,150 |
| Repairs and maintenance | 19,035 | 18,270 |
| Depreciation and amortization | 22,890 | 21,915 |
| Purchased transportation | 134,775 | 130,335 |
| Fuel | 43,755 | 25,830 |
| Other occupancy | 13,665 | 13,020 |
| Other expenses | 56,640 | 53,115 |
| Total Operating Expenses | 635,370 | 604,635 |
| Operating Profit | 101,790 | 90,345 |
| Other Income and (Expense): | ||
| Investment income and other | 9,720 | 59,415 |
| Interest expense | -5,175 | -5,160 |
| Total Other Income and (Expense) | 4,545 | 54,255 |
| Income Before Income Taxes | 106,335 | 144,600 |
| Income Tax Expense | 23,670 | 32,580 |
| Net Income | 82,665 | 112,020 |
Write down the formula for the Operating Profit margin (2), calculate the operating profit margin for both years showing your answer to two decimal places (4), and then comment on the result of your calculations for this firm(2).
Write down the formula for the Net Profit margin (2), calculate the net profit margin for both years showing your answer to two decimal places (4), and then comment on the result of your calculations for this firm (2).
Write down the formula for the Net Profit margin (2), calculate the net profit margin for both years showing your answer to two decimal places (4), and then comment on the result of your calculations for this firm (2).
Refer to the abstract of the Income Statement provided above and then restate this income statement for the two years by common sizing the values (express them as percentages to two decimal places) (12), and then comment on the items “Compensation and Benefits” (2) and “Fuel” (2).
Question 3:
A logistics company has employed a warehouse manager. His basic annual salary is R390 000 and he is entitled to an annual bonus of R30 000. The company operates a 40-hour week and employees are entitled to four weeks’ annual leave. There are 13 public holidays annually. Idle time is equal to 2% of available productive time.
The company contributes 7,5% and 1% of the basic salary towards the pension fund and UIF, respectively. Assume that there are 52 weeks in the year.
Calculate the following:
- Annual productive hours
- Total annual labour cost
- Hourly recovery rate
Question 4
CREATE (Pty) Ltd sold 2,880 units during the year for a total amount of R 3,225,600 and had total variable costs of R1,756,800. Total fixed costs amounted to R916,800.
Calculate the following:
4.1 The total contribution
4.2. Break even quantity (BEQ)
4.3 Break even value (BEV) (4)
Total contribution if production was increased to 3,500 units
Answers to Above Question on Finance Management
Answer 1:
The primary goal of financial management is to enhance the wealth of shareholders by way of maximising the entire profitability of the organisation. In the given case study of UPS, it is evaluated that there are a number of decisions undertaken by the management in order to enhance the overall financial performance of the company and achieve maximum shareholder wealth. For example, it aims to achieve growth in its revenue and earning per share, by undertaking several strategic decisions such as enhancing investment in technology, providing new and innovative solutions to its customers, establishing connectivity in its broad portfolio of solutions with the global network etc.
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