SURIGAO EDUCATION CENTER MIDTERM ACTIVITY/ QUIZ 2 – FINANCIAL MGMT.

II
Accountancy Program Instructor: Jean Pearl I. Millones, CPA

Instruction: Discuss with your group of five people the situation below. Do not leave anyone behind . Write your
final answers in a one-fourth sheet of paper with all your names.

Poccoyoloco Company has determined several factors relative to its asset and financing mix.

 The firm earns 10 percent annually on its current assets.

 The firm earns 20 percent annually on its fixed assets.
 The firm pays 13 percent annually on its current liability.
 The firm pays 17 percent annually on its long-term liability.
 The company’s policy finances its permanent current asset with long-term liabilities.
 In its conservative policy, the company finances all its seasonal needs with long-term liabilities while
current liabilities will finance all these in their aggressive policy.
 The firm’s monthly current, fixed and total asset requirements for the previous year are summarized in
the table below.

MONTH CURRENT ASSETS FIXED ASSETS TOTAL ASSETS

January P 45,000 P 100,000 P 145,000
February 40,000 P 100,000 140,000
March 50,000 P 100,000 150,000
April 55,000 P 100,000 155,000
May 60,000 P 100,000 160,000
June 75,000 P 100,000 175,000
July 75,000 P 100,000 175,000
August 75,000 P 100,000 175,000
September 60,000 P 100,000 160,000
October 55,000 P 100,000 155,000
November 50,000 P 100,000 150,000
December 50,000 P 100,000 150,000

Compute (5 points per item)

1. The firm’s monthly average permanent fund requirement.
2. The firm’s monthly average seasonal fund requirement.
3. The firm’s annual financing costs of the aggressive financing strategy.
4. The firm’s annual financing costs of the conservative financing strategy.
5. The firm’s annual profits on total assets for the previous year.
6. The net working capital if the firm’s current liabilities in December were P40,000.

Possible Answers
100,000 17,500 29,750 21,175
57,500 60,000 22,775 26,075
140,000 10,000 24,475 20,000
157,500 75,000 23,625 2,275
40,000 175,000 25,750 5,950