Question

1. What should be the goal of the financial manager of a corporation? Why?

2. If the corporate form of business organization has so many advantages over the corporate form, why is it so common for small businesses to initially be formed as sole proprietorships?

3. One thing lender sometimes require when lending money to a small corporation is an assignment of the common stock as collateral on the loan. Then, if the business fails to repay its loan, the ownership of the stock certificates can be transferred directly to the lender. Why might a lender want such an assignment? What advantage of the corporate form of organization comes into play here?

4. Burlington Exterminators Inc. has sales of $734,000, costs of $315,000, depreciation expense of $48,000, interest expense of $35,000, a tax rate of 35 percent and paid out $85,000 in cash dividends. The common stock outstanding is 110,000 shares. Calculate Statement of Comprehensive Income for the company.

5. Carman Inc. has net working capital of $2,710, current liabilities of $3,950 and inventory of $3,420. Calculate Current Asset Ratio and Quick Ratio.

Answer 1

1. There should be various goals of a financial managers of the company .They should be as follows-

A. Maximization of the value of the firm-financial manager should always be looking for the maximization of the value of the overall firm in order to maximize the the profits and long-term sustainability of the firm

2 financial manager should always be looking for investing into such project which will help in earning maximum rate of return for the company and which will yield into the profit maximization of the company.

3. He should always selecting some products which helps in the long-term sustainability of the companies and should always try to generate a higher rate of return for the stakeholders

4 .He should always be looking for following up with the proper rules and regulation in order to avoid any kinds of litigation issues

5. He should always be working in the interest of the shareholders and protection of the interest of the shareholders.

6. He should always be following up with the agency principles and you should always act like an agent of the shareholders because they are the principles of the company