0 evaluări0% au considerat acest document util (0 voturi)
66 vizualizări15 pagini
The conflict that fre$uently happens between managers and owners are generally %nown as agency problem. An agency problem exists when management and stoc%holders have conflicting ideas on how the company should be run. Through the following four types we can perform the functions of +gency costs.
The conflict that fre$uently happens between managers and owners are generally %nown as agency problem. An agency problem exists when management and stoc%holders have conflicting ideas on how the company should be run. Through the following four types we can perform the functions of +gency costs.
The conflict that fre$uently happens between managers and owners are generally %nown as agency problem. An agency problem exists when management and stoc%holders have conflicting ideas on how the company should be run. Through the following four types we can perform the functions of +gency costs.
From the introductory chapter we have learned that always the goal of a corporation
should be wealth maximization objective rather than profit maximization. Because
profit maximization objective does not consider Time Value of Money longevity of project maximization of !hare "rice and corporate social responsibility. #e also learned that the conflict that fre$uently happens between managers and owners are generally %nown as agency problem. !o in order to minimize this agency problem usually the following procedures are ta%en. These are& (1) Market Forces : 'nder this approach firstly we need to elect the Board (f )irectors and then give them the empowerment to hire or fire. *n addition they also have the power to expel under performing management as well as providing threat of hostile ta%eover to the management to perform in the best interest of the shareholders otherwise the owner may thin% about the possibility of a hostile ta%eover. (2)Agency Costs& + conflict of interest arising between creditors shareholders and management because of differing goals. *t is defined by the costs borne by stoc%holders to prevent or minimize agency problem. For example an agency problem exists when management and stoc%holders have conflicting ideas on how the company should be run. Through the following four types we can perform the functions of +gency costs. (i) Monitoring Expenses These outlays give for audits , control procedures that are used to asses and limit the managerial behavior to those actions tends to be in the best interest of the owners. (ii)Bonding Expenses This approach helps to protect against the potential conse$uences of dishonest acts by managers. Typically the owners pay a third party bonding company to obtain a fidelity Bond. This bond -fidelity. is a contract under which the bonding company agrees to reimburse the firm for up to a stated amount if a bonded managers dishonest act results in financial loss to the firm. -iii. (pportunity costs& +ctually this type of costs developed from the difficulties that large organizations typically have in responding to new opportunities. The firms needed organizational construction choice hierarchy and organize mechanisms may cause profitable opportunities to be forgone because of managements inability to seize up on them $uic%ly. -iv. The most popular powerful , expensive agency costs incurred by firms are !tructuring /xpenses. *t includes providing managerial compensation and incentive plans that tend to tie management compensation to share price. The most popular incentive plan is the yielding stoc% of options to administration.
-a. + stoc% option enables employees to purchase shares of a given class in consideration for a pre0determined amount referred to as the exercise price. The employees profit from a rise in the price of the shares since the exercise price is pre0 determined but they have not yet paid for the shares. (bviously options already have an economic value when they are allotted since they award employees the right to buy shares for a fixed exercise price but they are not committed to such payment unless they choose to exercise them. 1iving way of !toc% options to management permit managers to purchase stoc% at the mar%et price set at the time of the grant. They will be pleased by being able to resell the shares subse$uently at the higher mar%et price if the mar%et price rises. (n the other hand there are also problems in granting stoc% options to employees. For instance a decline in the value of the options due to daily mar%et fluctuations may lower the employees2 motivation. *n addition the decision of who will be compensated may cause problems with non0compensated employees -including good middle management.. *n practice almost all companies now grant options to all employees in managerial positions and it is not uncommon to see companies in which all employees junior and senior receive options. *n addition some restrictions are imposed by the securities laws on the distribution of securities to employees and the distribution of options or other securities to employees involves a They are some times criticized because positive management performance can be mas%ed in a poor stoc% mar%et in which share prices general have declined due to economic and 3behavioral mar%et forces outside of management4s control.
-b. "erformance plans& This type of approach includes the use of routine plan has mature in popularity in recent years due to their relative independence from mar%et forces. + performance appraisal is a process in which a rater or raters evaluate the performance of an employee. More specifically during a performance appraisal period rater-s. observe interact with and evaluate a person4s performance. Then when it is time for a performance appraisal these observations are documented on a form. The rater usually conducts a meeting with the employee to communicate performance feedbac%. )uring the meeting the employee is evaluated with respect to success in achieving last year4s goals and new goals are set for the next performance appraisal period. /ven though performance appraisals can be $uite effective in motivating employees and resolving performance problems in reality only a small number of organizations use the performance appraisal process to its full potential. *n many companies a performance appraisal ta%es the form of a bureaucratic activity that is mutually despised by employees and managers. The problems a poor appraisal process can create may be so severe that many experts including the founder of the total $uality movement /dward )eming have recommended abolishing appraisals altogether. These plans reimburse managers on the basis of their confirmed performance measured by earning per share and other ratios of return. *n addition another form of performance based compensation is cash bonuses where cash payments united to the accomplishment of certain performance goals. !o by following the above mentioned way we can easily minimize our corporation4s agency problem. 5esponsibility of finance manager& +lmost every firm government agency and organization has one or more financial managers who oversee the preparation of financial reports direct investment activities and implement cash management strategies. +s computers are increasingly used to record and organize data many financial managers are spending more time developing strategies and implementing the long0term goals of their organization. The duties of financial managers vary with their specific titles which include controller treasurer or finance officer credit manager cash manager and ris% and insurance manager. 6ontrollers direct the preparation of financial reports that summarize and forecast the organization2s financial position such as income statements balance sheets and analyses of future earnings or expenses. 6ontrollers also are in charge of preparing special reports re$uired by regulatory authorities. (ften controllers oversee the accounting audit and budget departments. Treasurers and finance officers direct the organization2s financial goals objectives and budgets. They oversee the investment of funds and manage associated ris%s supervise cash management activities execute capital0raising strategies to support a firm2s expansion and deal with mergers and ac$uisitions. 6redit managers oversee the firm2s issuance of credit. They establish credit0rating criteria determine credit ceilings and monitor the collections of past0due accounts. Managers specializing in international finance develop financial and accounting systems for the ban%ing transactions of multinational organizations. 6ash managers monitor and control the flow of cash receipts and disbursements to meet the business and investment needs of the firm. For example cashflow projections are needed to determine whether loans must be obtained to meet cash re$uirements or whether surplus cash should be invested in interest0bearing instruments. 5is% and insurance managers oversee programs to minimize ris%s and losses that might arise from financial transactions and business operations underta%en by the institution. They also manage the organization2s insurance budget. Financial institutions such as commercial ban%s savings and loan associations credit unions and mortgage and finance companies employ additional financial managers who oversee various functions such as lending trusts mortgages and investments or programs including sales operations or electronic financial services. These managers may be re$uired to solicit business authorize loans and direct the investment of funds always adhering to Federal and !tate laws and regulations. Branch managers of financial institutions administer and manage all of the functions of a branch office which may include hiring personnel approving loans and lines of credit establishing a rapport with the community to attract business and assisting customers with account problems. Financial managers who wor% for financial institutions must %eep abreast of the rapidly growing array of financial services and products. *n addition to the general duties described above all financial managers perform tas%s uni$ue to their organization or industry. For example government financial managers must be experts on the government appropriations and budgeting processes whereas healthcare financial managers must be %nowledgeable about issues surrounding healthcare financing. Moreover financial managers must be aware of special tax laws and regulations that affect their industry. Financial managers play an increasingly important role in mergers and consolidations and in global expansion and related financing. These areas re$uire extensive specialized %nowledge on the part of the financial manager to reduce ris%s and maximize profit. Financial managers increasingly are hired on a temporary basis to advise senior managers on these and other matters. *n fact some small firms contract out all accounting and financial functions to companies that provide these services. The role of the financial manager particularly in business is changing in response to technological advances that have significantly reduced the amount of time it ta%es to produce financial reports. Financial managers now perform more data analysis and use it to offer senior managers ideas on how to maximize profits. They often wor% on teams acting as business advisors to top management. Financial managers need to %eep abreast of the latest computer technology in order to increase the efficiency of their firm2s financial operations *n the second chapter we have learned about the capital structure. 6apital structure is the ratio of using e$uity and debt in the organization. #hen a company use more debt in 6apital structure then the ris% will be higher. The Board of )irectors or the financial manager of a company should always endeavor to develop a capital structure that would lie beneficial to the e$uity shareholders in particular and to the other groups such as employees customers creditors society in general. #hile developing an appropriate capital structure for its company the financial manager should aim at maximizing the long0term mar%et price per share. This can be done only when all these factors which are relevant to the company4s capital structure decisions are properly analyzed and balanced. *n finance capital structure refers to the way a corporation finances its assets through some combination of e$uity debt or hybrid securities. + firm2s capital structure is then the composition or 2structure2 of its liabilities. For example a firm that sells 789 billion in e$uity and 7:9 billion in debt is said to be 89; e$uity0financed and :9; debt0financed. The firm2s ratio of debt to total financing :9; in this example is referred to as the firm2s leverage. *n reality capital structure may be highly complex and include dozens of sources. 1earing 5atio is the proportion of the capital employed of the firm which come from outside of the business finance e.g. by ta%ing a short term loan etc. 6apital structure suitable for the new firm & *n case newly introduced firm it is always recommended that the firm should finance its fund from only e$uity capital. 6ontrary to widely held beliefs that startup companies rely heavily on funding from family and friends a <auffman Foundation research paper released today reported that external debt financing such as ban% loans are the more common sources of funding for many companies during their first year of operation. +ccording to the study nearly => percent of most firms2 startup capital is made up in e$ual parts of owner e$uity and ban% loans and?or credit card debt underscoring the importance of li$uid credit mar%ets to the formation and success of new firms. 6apital structure suitable for the growing firm & *n case growing firm it is always recommended that the firm should finance its fund from both e$uity capital and debt capital %eeping in mind that the portion of debt capital obviously less than maturing firm. !ituation will determine about how much debt and e$uity capital are re$uired to finance for that type of firm. 6apital structure suitable for the mature firm & *n case of mature firm it is always recommended that the firm should finance its fund from both e$uity capital and debt capital. *n that case the portion of debt capital is the highest than that of growing and newly introduced firm. *n general we should remember that optimum capital structure -where weighted average cost of capital is the lowest. is always suitable for firm. *f the firm4s business ris% is higher and at the same time financial ris% is lower it is suggested that the firm should use more e$uity capital and small portion of debt capital. (n the other hand if the firm4s business ris% is lower and at the same time financial ris% is higher it is recommended that the firm should use more debt capital and small portion of e$uity capital. For example in case of "etro0Bangla business ris% is higher and at the same time financial ris% is lower. !o it is suggested that the firm should use more e$uity capital and small portion of debt capital. +gain if we consider in case of T@T here we see that the firm4s business ris% is lower and at the same time financial ris% is higher. That4 it is recommended that the firm should use more debt capital and small portion of e$uity capital. !imilarly if the firm4s tax position is higher the firm is more li%ely suitable to use more debt since interest on debt is tax deductable item. (n the other hand if the firm is low tax brac%et the firm need to use low debt capital in order to minimize the ris%. +part from this financial flexibility is another factor that also affect the capital structure decisions.#here interest rate is higher li%e developing countries-for example Bangladesh. it is said that there is less financial flexibililty exists in that countries. *t happens because of higher demand in compare to the lower supply. (n the contrary where is less interest rate li%e developed countries-for example Aapan. it is said that there is more or high financial flexibility exists in that countries. *t is just as a result of lower demand in comparison to the total supply. *n addition managerial attitude is another one of the important factors that determine capital structure decisions. *f the managers are aggressive in nature they are more li%ely to ta%e debt capital. But if the managers are conservative in nature they are less li%ely to finance their firm4s capital from debt capital. The various factors affecting the capital structure decision are Management Attitudes: Management4s attitude concerning control of enterprise and ris% involved determine the debt or e$uity in the capital structure and any analysis of capital structure planning can hardly afford to ignore this factor. *n fact every addition of e$uity unit in the capital structure presents management to participate in the company affairs to that extent. Therefore while planning capital structure firms may prefer debt to be assumed of continued control. Cash fo! a"iity of the company: #hen considering the appropriate capital structure it is extremely important to analyze the cash flow ability of the firm to serve fixed commitment charges. The fixed commitment charges include payment of interest on debentures and other debts preference dividend and principal amount. Thus the fixed charged depend upon both the amount of senior securities and the terms of payment. The amount of fixed charges will be high if the company employs a large amount of debt or preference capital with short0term maturity. *t is therefore prudent that for servicing fixed charges at proper time the management must ensure the availability .of cash because inability on the part of management may result in financial insolvency. Therefore cash flow analysis is essential to consider while planning appropriate capital structure. (bviously the greater and more stable the expected future cash flows of the firm the greater the debt capacity and vice0versa. To be on a safe side the cash flow ability must be determined in the period of depression very carefully.
Assets #tructure: 6omposition and li$uidity of assets may also influence the capital structure decision of the firm. Firms with long lived fixed assets especially when demand for their output is relatively assured utilities for example B use long0term debt extensively similarly greater the li$uidity the more debt that generally can be used all other factors remaining constant. The less li$uid the assets of firm the less flexible the firm can be in meeting its fixed charged obligations $e%erage or &rading on e'uity: Trading on e$uity or leverage refers to the financial process. This enables the owners of a company to enhance their return on e$uity by borrowing funds for one rate of interest and using the money to earn a higher rate of return %eeping the different for themselves. *t is thus called ma%ing money by using other people4s money. !ome of the main conclusions regarding the leverage in the capital structure such as use of fixed cost or fixed return sources of finances may be reemphasized. )ebts and pre share capital results4 into magnifying the earnings per share -/"!. prevailed the firm earns more on the assets purchased with these funds than the cost of their use. /arnings before interest and taxes -/B*T. and /"! relationship are the means to examine the effect of leverage. (ut of per share capital and debt4 the leverage impact is felt more in the case of debt because their source of finance costs lower than per share capital and also the interest payable on debt is tax deductible. The use of fixed cost sources of finances also adds to the financial ris% of the company and therefore it should not be used beyond a point where the amount of fixed commitment charges e$uals the level of /B*T. To give up because of its effect on /"! financial leverage is one the important consideration in planning the capital structure for the company. Then we learned the topic on C#or%ing capitalD. #or%ing capital is that part of company4s capital which is used for purchasing raw material and involve in sundry debtors. #e all %now that current assets are very important for proper wor%ing of fixed assets. !uppose if you have invested your money to purchase machines of company and if you have not any more money to buy raw material then your machinery will no use for any production without raw material. From this example you can understand that wor%ing capital is very useful for operating any business organization. #e can also ta%e one more li$uid item of current assets that is cash. *f you have not cash in hand then you can not pay for different expenses of company and at that time your many business wor%s may delay for not paying certain expenses. *f we define wor%ing capital in very simple form then we can say that wor%ing capital is the excess of current assets over current liabilities. #or%ing 6apital is the money used to ma%e goods and attract sales. The less #or%ing 6apital used to attract sales the higher is li%ely to be the return on investment. #or%ing 6apital management is about the commercial and financial aspects of *nventory credit purchasing mar%eting and royalty and investment policy. The higher the profit margin the lower is li%ely to be the level of #or%ing 6apital tied up in creating and selling titles. The faster that we create and sell the boo%s the higher is li%ely to be the return on investment. Thus when we have been using the word investment in the chapter on pricing we have been discussing #or%ing 6apital. +fter that we had learned the concept on C6urrent +ssets investment policyD. (ptimal investment in current asset is part of the wor%ing capital management policy within an organization. +n effective wor%ing capital management re$uires right amount of investment in current assets and appropriate level of short0term financing. /xcessive investment in current assets means lac% of funds to invest elsewhere which shall effect the li$uidity aspect of the company while too little investment means inability to service the growing demand for the goods which will erode the profitability of the company. Therefore it is a matter or finding that e$uilibrium or optimal level of investment in current asset and a right mix of financing -either short0term or long0term. to support the investment. 6ompany2s decision of selecting a short0term investment policy must be based upon maximizing the firm value in the long run while %eeping a balance between the profitability and li$uidity goals of the company. 1rowth companies should focus on %eeping stoc% of inventory to service the predicted growth in demand as well as to compete with the local wholesalers. +lthough the investment in asset will not provide better return as compared to long0 term investment options however the opportunity cost of a sale foregone due to unavailability of stoc% can %eep the company out of business forever. Eence finding the right level of investment re$uires a trade0off between minimizing cost without hindering the li$uidity of business. 6ompany might select an aggressive short0term financing policy whereby it will fund both its temporary and permanent current assets with the help of short0term finance if the demand of goods fluctuate and access of short0term finance is readily available. Manager2s prediction about the movement in short0term interest rate as compared to long0term interest rate will also affect the decision. Eowever if a company short0term financing policy were restrictive it would be better off with a conservative action by funding permanent current asset and part of temporary current assets with long0term finance. By ta%ing this approach company can loc% in the cost of funds and avoid any short0term interest rate fluctuations. (n one hand companies carrying cost components such asF interest expenses insurance , taxes material handling expenses damage and obsolescence cost will increase with the increase in inventory investment. (n the other hand its shortage cost components such asF stoc% out cost lost contribution due to shortage of supply and customer goodwill foregone will decrease with the increase in investment in inventory you hold. +fter that we had studied the most important concept and that is nothing but 6ash management. 6ash management consists of ta%ing the necessary actions to maintain ade$uate levels of cash to meet operational and capital re$uirements and to obtain the maximum yield on short0term investments of pooled idle cash. + good cash management program is a very significant component of the overall financial management of a municipality. !uch a program benefits the city or town by increasing non0tax revenues improving the control and superintendence of cash increasing contacts with members of the financial community and lowering borrowing costs while at the same time maintaining the safety of the municipality4s funds. Businesses must understand cash management for it to be effective. Financial goals will be harder to achieve without a proven structure. *t is possible that goals are not achieved and it can be seen that cash management may have ta%en part in it one way or another. *t2s the fundamental building bloc% of financial planning. There are various methods of short term financing can also be essential to a successful businesses. This paper will describe cash management and short term financing. !ome of the points that will be brought up are managing your wor%ing capital managing business ris%s and monitoring costs. #or%ing capital is an essential part of cash management. The level of wor%ing capital of a business is directly related to the flow of cash into and out of a business. #or%ing capital is needed to setup a business pay operating costs and continue to operate until the receivables arrive. )epending on the amount of wor%ing capital the business uses things 6ash can be effected li%e paying suppliers buying materials and even salaries. * can be seen that maintaining and managing a particular level of wor%ing capital allows the business to flex during hard times. @ot understanding and forecasting the need for the correct amount of wor%ing capital can be devastating to a business. !hort0term financing can be used to ma%e business purchases that can allow the company to purchase fixed assets or help a company with less than expected wor%ing capital. + line of credit can be created with the company2s financial institution and is normally done before the need should arise to be effective. There are many ris%s involved in running a business and serious challenges should be expected at some time in the future. *t is possible to reduce the ris% of possible capital issues by planning ahead and having a more diversified client base. Eaving the business depend on the heath of another business is not good practice. Finally manager should ta%e all the step to receive the money $uic%ly and delay in the case of disbursement. #e had also gathered %nowledge on the most important concept 6ommon !toc% that are fre$uently used in the field of finance. 6ommon !toc% is a security representing a legal claim to a percentage of a company2s earnings and assets. Eolders of common !toc% have some input into choosing company management but do not generally have much say in the day to day operations. *f the common stoc% is publicly traded the company will generally be re$uired to meet regulatory obligations such as filing audited financial reports. Eolders of common stoc% are also offered the chance to participate in an annual meeting where the company may share its vision for the future. *nvestors may purchase common stoc% if they believe a company will be worth more in the future than it is valued at in the present. 6ommon stoc% does not always pay a dividend. *f the company goes ban%rupt common stoc%holders generally lose their entire investment. The advantages of issuing common stoc% are 1iven below& 6ommon stoc% has the potential for delivering very large gains +nnual returns0on0investment -5(*s. of over G99; have occurred on a somewhat regular basis. The potential loss from stoc% purchased with cash is limited to the total amount of the initial investment. This is considerably better than that of some leveraged transactions where the maximum loss can well exceed the total of the funds invested. !toc%s offer limited legal liability. "assive stoc%holders are protected against any liability stemming from the company4s actions beyond their financial investment in the company. Most stoc%s are very li$uidF in other words they can be bought and sold $uic%ly at a fair price. +lthough past performance is not a guarantee of future performance stoc%s have historically offered very high returns in relation to other investments. !toc%s offer two ways for their owners to benefit by capital gain and with dividends. +s previously stated each share of stoc% represents partial ownership in a company. *f the company becomes more valuable so will the ownership interest represented by each share of stoc%. This appreciation of the stoc%4s value is %nown as a capital gain. !ometime manager ta%e the decision to issue bond in the mar%et for financing. #hen a company issue bond instead of common stoc% get some extra benefits. There are several advantages of issuing bonds or other debt instead of stoc% when ac$uiring assets. (ne advantage is that the interest on bonds and other debt is deductible on the corporation4s income tax return. )ividends on stoc% are not deductible on the income tax return. + second advantage of financing asset with bonds instead of stoc% is that the ownership interest in the corporation will not be diluted by adding more owners. Bondholders and other lenders are not owners of the assets or of the corporation. Therefore all of the gain in the value of the assets belongs to the stoc%holders. The bondholders will receive only the agreed upon interest. This is related to the concept of leverage or trading on e$uity. By issuing debt the corporation gets to control a large asset by using other people4s money instead of its own. *f the asset ends up being very profitable all of its earnings minus the interest will enhance the owners4 financial position !o the decision depends on the manager. Ee may issue common stoc% or issue bond to the investor. *nventory management& *nventory management is primarily about specifying the size and placement of stoc%ed goods. *nventory management is re$uired at different locations within a facility or within multiple locations of a supply networ% to protect the regular and planned course of production against the random disturbance of running out of materials or goods. The scope of inventory management also concerns the fine lines between replenishment lead time carrying costs of inventory asset management inventory forecasting inventory valuation inventory visibility future inventory price forecasting physical inventory available physical space for inventory $uality management replenishment returns and defective goods and demand forecasting. Balancing these competing re$uirements leads to optimal inventory levels which is an on0going process as the business needs shift and react to the wider environment. /conomic order Huantity& /(H is the point where the carring cost and the storing cost will be minimum. /very company wants to ma%e the order in a /(H point. *n this stage company can save their cost.!o as a manager all the time should order at /(H point. *n this way company could able to survive in the competition. The aim of the /conomic (rder Huantity is to minimize Total *nventory 6ost. This occurs where the total holding costs are e$ual to the costs of ordering. This is logical because there is a trade0off between holding costs and ordering costs. *f you have no inventory your ordering costs would be exponentialIyour suppliers would charge for delivery each time bul% discounts would not be available and staff would be very active in receiving regular orders. Eowever if you maintain too much inventory you would incur significant holding costs. This is because the business might need more staff e$uipment and storage space to handle high inventory levels. *nventory control is important to ensure $uality control in businesses that handle transactions revolving around consumer goods. #ithout proper inventory control a large retail store may run out of stoc% on an important item. + good inventory control system will alert the retailer when it is time to reorder. *nventory control is also an important means of automatically trac%ing large shipments. For example if a business orders ten pairs of soc%s for retail resale but only receives nine pairs this will be obvious upon inspecting the contents of the pac%age and error is not li%ely. (n the other hand say a wholesaler orders G99999 pairs of soc%s and G9999 are missing. Manually counting each pair of soc%s is li%ely to result in error. +n automated inventory control system helps to minimize the ris% of error. *n retail stores an inventory control system also helps trac% theft of retail merchandise providing valuable information about store profits and the need for theft0prevention systems. +n in%entory contro system is a process for managing and locating objects or materials. *n common usage the term may also refer to just the software components. There are three *nventory 6ontrol !ystem. G. 5ed Jine Method & +n inventory control procedure where a red line is drawn around the inside of an inventory Bstoc%ed bin to indicate the reorder point level. K this procedure wor%s well for many items in retail businesses 8. 6omputerized *nventory 6ontrol !ystem + system of inventory control in which a computer is used to determine reorder points , to adjust inventory balances.
L. Aust0 in BTime & + system of inventory control in which a manufacturer coordinates production with suppliers so that raw materials of components arrive just as they are needed in the production process. #hich one is more suitable for the organization that depends on the nature of the organization. !o manager use the system base on condition. + financia panner or persona financia panner is a practicing professional who helps people deal with various personal financial issues through proper planning which includes but is not limited to these major areas& cash flow management education planning retirement planning investment planning ris% management and insurance planning tax planning estate planning and business succession planning -for business owners.. The wor% engaged in by this professional is commonly %nown as personal financial planning. *n carrying out the planning function he is guided by the financial planning process to create a financial planF a detailed strategy tailored to a client2s specific situation for meeting a client2s specific goals. The %ey defining aspect of what the financial planner does is that he considers all $uestions information and advice as it impacts and is impacted by the entire financial and life situation of the client. Financial 6ontrol is a %ey form of state control. Financial control focuses on monetary values rather than physical units. *n capitalist countries financial control is a limited bureaucratic process concerned primarily with the use of budgetary funds and the financial activities of ministries departments and state0run enterprises and institutions. )espite its appearance of strict legality financial control is an instrument for protecting the interests of the bourgeoisie. *n socialist countries financial control is the control by the state over public finances in the production and distribution of the social product and national income. Financial control is designed to improve the $uantitative and $ualitative performance indicators of enterprises associations ministries and departments. The primary tas% of financial control is to monitor the formation and use of centralized and decentralized monetary resources. Financial control is used to facilitate the fulfillment of national economic and financial plans preserve socialist property ensure that material labor financial and natural resources are used rationally and efficiently and reduce losses and nonproductive expenditures. *t also helps to reduce mismanagement and wastefulness and to identify reserves for increasing the efficiency of social production. (ne of the most important tas%s of financial control is to see that all legislation on financial $uestions is carefully followed and that all financial commitments to the state budget to ban%s and to other enterprises and organizations are promptly and fully met. The "reake%en point in economics is the point at which cost or expenses and income are e$ual 0 there is no net loss or gain one has Mbro%en evenM. The point at which a firm or other economic entity brea%s even is e$ual to its fixed costs divided by its contribution to profit per unit of output which can be shown by the following formula& 0 Brea%even point in unitsNFixed cost?6ontribution margin per unit Brea%even point in valuesNFixed costs?"?V ratio #e all %now that the Brea%even "oint in a business is when it2s not ma%ing a profit or losing money. !ounds simple rightO #ell can you tell me what your exact Brea%even "oint isO "robably not. Most business owners either don2t %now it or thin% they %now it with neither exactly %nowing. Brea%even can be expressed as a )ollar amount or 'nit !ales and once determined you have a Target to reach through a carefully thought out Business "lan. #ithout an established Brea%even Target your !trategic "lan is floundering. *t is very important to understand that increased !ales do not always translate into increased "rofits. Many companies have gone out of business by ignoring the importance of Brea%even +nalysis thin%ing increased !ales will lead to certain "rofitability. 'nfortunately more often than not the company2s Variable 6osts or those directly derived from sales levels get exponentially larger as !ales Volume 1rows. @ot %nowing the Variable 6osts is a silent %iller for many companies. #hen calculating the Brea%even "oint a person will have to ma%e certain assumptions and estimates. /rror on the side of conservative numbers by using more pessimistic sales and margin thresholds while overstating your projected costs. Pou want the Brea%even "oint to be in the safe zone 0 a worst case threshold. * will present some Brea%even formulas which err on the simple side you can get very complicated with different Brea%even Formula variations. The point * am ma%ing here is providing some simple formulas you can $uic%ly calculate your Brea%even and understand where you are presently and what it loo%s li%e projected. (nce you have a handle on that then maybe more sophisticated Brea%even +nalysis is warranted and advantageous Brea%even +nalysis is an excellent process to determine the effect of different unit costs for expected sales for each unit type. 'nderstanding which your most profitable units are and how they relate to Brea%even and "rofit 1oals is the heart of your Mar%eting !trategy and !trategic and !ales "lan. *n business terminology a high degree of operating leverage other things held constant means that a relatively small change in sales will result in a large change in operating income .!o it should be recommended that the lower the operating leverage the more better result will come. Financial leverage considers the impact changing operating income has on earnings per share or earnings available to common stoc%holders. (perating Jeverage affects the operating section of the income statement whereas financial leverage affects the financing section of the income statement. The three important concepts )(J )FJ and )TJ are very much important for any business organizations in order to measure their performance. From my point of view it is better for all of these three terms to become lower. Because as lower the value the more these are better. 6onclusion & +t last * want to say that we the students of regular MB+ course really learned lot of valuable things in our intermediate financial management course. <nowledge of these financial concepts will certainly bring benefits for our future professional life.
Q.1 Short Notes: A. Impact of Management Style On Management Controls: Ans: The Internal Factor That Probably Has The Strongest Impact On Management Control Is
(East Central and Eastern Europe in the Middle Ages, 450-1450_ vol. 21) Paul Milliman-_The Slippery Memory of Men__ The Place of Pomerania in the Medieval Kingdom of Poland-Brill Academic Publishers (.pdf