1.three major functions of financial manager?

how are they related to the

goal of a business organization?
Financial managers play a critical role in a business organization, and their
functions are closely related to the overall goals of the company. Here are the
three major functions of financial managers and their relationship to the goals of
a business organization:

1. **Financial Planning and Analysis**:

- *Function*: Financial managers are responsible for developing financial
plans and budgets for the organization. They analyze historical financial data,
market trends, and other relevant information to forecast future financial
performance.
- *Relationship to Business Goals*: This function helps the organization set
financial objectives and create a roadmap to achieve them. It ensures that the
business has the necessary resources (capital, funds, etc.) to support its
operations and growth initiatives.

2. **Investment Decision-Making**:
- *Function*: Financial managers evaluate investment opportunities and make
decisions about where to allocate the company's financial resources. This
includes decisions about capital investments, projects, and acquisitions.
- *Relationship to Business Goals*: Effective investment decisions are
essential for achieving the organization's long-term growth and profitability
goals. Financial managers must assess potential risks and returns to ensure that
investments align with the company's strategic objectives.

3. **Financial Risk Management**:

- *Function*: Financial managers are responsible for identifying and
managing financial risks that the organization faces, such as interest rate risk,
currency risk, and credit risk. They use various tools and strategies to mitigate
these risks.
- *Relationship to Business Goals*: Managing financial risks is crucial to
safeguarding the financial health and stability of the organization. By
minimizing the impact of adverse financial events, financial managers help
ensure that the company can achieve its financial objectives and protect
shareholder value.

These functions are interrelated and serve the overarching goal of a business
organization, which is typically to maximize shareholder value and achieve
sustainable growth and profitability. Financial managers help the company
achieve this goal by ensuring that financial resources are allocated efficiently,
risks are managed effectively, and financial performance is monitored and
improved over time. Their decisions and actions have a direct impact on the
organization's ability to generate profits, create value, and achieve long-term
success.

2.As an investor,do you think some managers are paid too much? do their
reward come at your expense?
As an investor, I believe that some managers are paid too much, especially
CEOs and other top executives. In recent years, CEO compensation has grown
much faster than the average worker's salary, and this trend is concerning.

There are a few reasons why I think some managers are paid too much. First,
there is a lot of competition for top talent, and companies are willing to pay a
premium to attract and retain experienced and qualified managers. Second,
managers often have a lot of power and influence, and they can negotiate for
higher salaries and bonuses. Third, there is a lack of transparency around
executive compensation, which makes it difficult to hold companies
accountable for overpaying their managers.

I do believe that some managers' rewards come at the expense of investors.

When companies pay their managers too much, there is less money available to
invest in the business, grow revenue, and reward shareholders. Additionally,
overpaying managers can lead to poor corporate governance and a lack of
accountability.

Here are some specific examples of how overpaying managers can hurt
investors:

• Companies with high CEO pay tend to underperform the stock market.
 • Companies that pay their CEOs more than their workers are more likely
to engage in risky financial practices.
• Companies that have excessive executive pay are more likely to
experience accounting scandals.

Of course, not all managers are overpaid. There are many excellent managers
who deserve to be paid well. However, I believe that there is a need for greater
transparency and accountability around executive compensation. Investors
should be able to see how much their portfolio companies are paying their
managers and whether that compensation is justified.

What can investors do?

There are a few things that investors can do to address the issue of overpaid
managers:

• Invest in companies with transparent and accountable compensation

practices.
• Support shareholder proposals that call for greater oversight of executive
pay.
• Vote against directors who approve excessive executive compensation
packages.

By taking these steps, investors can help to ensure that their portfolio companies
are using their resources wisely and that executive pay is aligned with the
interests of shareholders.

3.why evaluate financial statements

There are many reasons why it is important to evaluate financial statements,

including:

• To assess the financial health of a company. Financial statements provide

a snapshot of a company's assets, liabilities, income, and expenses. By
evaluating these statements, investors can get a better understanding of a
company's financial position and its ability to generate profits.
 • To identify trends and patterns. By comparing financial statements over
time, investors can identify trends and patterns in a company's
performance. This information can be used to assess the company's
management team and to make predictions about its future performance.
• To compare companies to their peers. Financial statements can also be
used to compare companies to their peers within the same industry. This
information can be used to identify companies that are performing well or
poorly relative to their competitors.
• To make informed investment decisions. Financial statement analysis is
an essential tool for making informed investment decisions. By
understanding a company's financial condition and performance,
investors can make better decisions about which companies to invest in
and how much money to invest.

In addition to the above reasons, financial statement evaluation is also important

for creditors, lenders, and other stakeholders. Creditors and lenders use financial
statement analysis to assess a company's creditworthiness and to make decisions
about whether to lend money to the company. Other stakeholders, such as
employees and suppliers, also use financial statement analysis to assess the
stability and viability of the company.

Here are some specific examples of how financial statement evaluation can be
used:

• An investor can use financial statement analysis to identify companies

that are growing rapidly and that have the potential to generate high
returns.
• A creditor can use financial statement analysis to assess a company's
ability to repay its debts.
• A lender can use financial statement analysis to determine whether to
approve a loan to a company.
• A supplier can use financial statement analysis to assess a company's
ability to pay its bills.
• An employee can use financial statement analysis to assess the stability of
their company and the likelihood of job losses.
Overall, financial statement evaluation is an essential tool for anyone who wants
to understand the financial health and performance of a company.

4.Amin manufacturing company has a curruent ratio of 4 to 1 but

is unable to pay. why?

A current ratio of 4 to 1 means that Amin Manufacturing Company has four

times more current assets than current liabilities. This is generally considered to
be a good current ratio, as it indicates that the company has enough liquidity to
meet its short-term obligations.

However, there are a few reasons why Amin Manufacturing Company may be
unable to pay its bills even with a high current ratio:

• The company's current assets may not be easily convertible to cash. For
example, the company may have a large inventory of finished goods or a
significant amount of accounts receivable. These assets are considered
current assets because they are expected to be converted to cash within
one year. However, it may take the company some time to sell its
inventory or collect its accounts receivable. In the meantime, the
company may not have enough cash on hand to pay its bills.
• The company may have a large amount of accrued expenses. Accrued
expenses are expenses that have been incurred but not yet paid. For
example, the company may accrue wages for its employees at the end of
each month. Accrued expenses are considered current liabilities because
they are expected to be paid within one year. However, the company may
not have enough cash on hand to pay all of its accrued expenses at once.
• The company may be experiencing seasonal fluctuations in its sales.
Some companies experience seasonal fluctuations in their sales, with
higher sales during certain times of the year and lower sales during other
times of the year. This can lead to cash flow problems, even if the
company has a high current ratio.

If Amin Manufacturing Company is unable to pay its bills, it may need to take
steps to improve its cash flow. For example, the company may need to sell
inventory, collect accounts receivable, or borrow money. The company may
also need to reduce its expenses.
Here are some specific things that Amin Manufacturing Company can do to
improve its cash flow:

• Offer discounts to customers who pay their bills early.

• Implement a more efficient inventory management system.
• Negotiate longer payment terms with suppliers.
• Reduce unnecessary expenses.
• Sell non-core assets.
• Seek additional financing from investors or lenders.

By taking these steps, Amin Manufacturing Company can improve its cash flow
and avoid the risk of defaulting on its obligations.

5.if the corporate tax rate were cut in half what would be the effect on debt
financing?

If the corporate tax rate were cut in half, it would make debt financing more
attractive to companies. This is because companies would be able to deduct
interest payments on their debt from their taxable income, which would reduce
their overall tax burden.

There are a few reasons why companies might choose to use debt financing
over equity financing. First, debt financing can be a less expensive way to raise
capital. Second, debt financing does not dilute the ownership of the company.
Third, debt financing can be used to finance a wider range of projects than
equity financing.

A cut in the corporate tax rate would make all three of these benefits of debt
financing more attractive to companies. As a result, companies would be more
likely to use debt financing to raise capital, and this would lead to an increase in
the overall level of debt financing in the economy.

Here are some specific effects of a cut in the corporate tax rate on debt
financing:

• Companies would be able to borrow money at lower interest rates.

 • Companies would be more likely to issue corporate bonds.
• Banks would be more likely to lend money to businesses.
• Companies would be able to use more debt to finance their growth.
• The overall level of debt in the economy would increase.

It is important to note that there are also some potential risks associated with an
increase in debt financing. For example, if companies become too reliant on
debt financing, they may be more vulnerable to economic downturns.
Additionally, an increase in the overall level of debt in the economy could lead
to higher interest rates and slower economic growth.

Overall, the effect of a cut in the corporate tax rate on debt financing would
depend on a number of factors, including the overall state of the economy and
the financial health of individual companies. However, it is likely that a cut in
the corporate tax rate would lead to an increase in the overall level of debt
financing in the economy.

6.what are the three types of financial management decisions? for each type
of decision ,give an example of business transaction that would be relative

The three types of financial management decisions are:

1. Investment decisions: These decisions involve allocating the company's

resources to different types of investments, such as new plant and
equipment, research and development, and marketing campaigns. An
example of an investment decision would be a company deciding whether
to build a new factory.
2. Financing decisions: These decisions involve determining how to finance
the company's operations and investments. This could involve issuing
debt, selling equity, or using retained earnings. An example of a financing
decision would be a company deciding whether to issue bonds or borrow
money from a bank.
3. Dividend decisions: These decisions involve determining how much of
the company's profits to distribute to shareholders in the form of
dividends. The remainder of the profits are typically retained by the
company to finance future growth. An example of a dividend decision
would be a company deciding whether to pay out half of its profits to
 shareholders as dividends or to retain all of its profits to finance a new
product launch.

Here is a table that provides an example of a business transaction for each type
of financial management decision:

Decision type Example business transaction

Investment
A company decides to build a new factory.
decision

Financing A company issues bonds to raise capital to finance the

decision construction of the new factory.

Dividend A company decides to pay out half of its profits to

decision shareholders as dividends.

It is important to note that these three types of financial management decisions

are interrelated. For example, an investment decision to build a new factory will
likely require the company to make a financing decision about how to finance
the construction of the factory. Additionally, the company's dividend decision
may be affected by its investment and financing decisions.

Financial managers must carefully consider all of these factors when making
financial management decisions. The goal of financial management is to
maximize the value of the company for its shareholders. By making sound
investment, financing, and dividend decisions, financial managers can help their
companies achieve this goal.

7.why should financial managers choose the capital structure that

maximizes the value of the firm?

Financial managers should choose the capital structure that maximizes the value
of the firm because it is in the best interests of the shareholders. The value of a
firm is equal to the present value of its future cash flows. By choosing a capital
structure that minimizes the firm's weighted average cost of capital (WACC),
financial managers can increase the present value of the firm's future cash flows
and maximize its value.

The WACC is the average cost of capital that a firm pays to finance its
investments. It is calculated as a weighted average of the firm's cost of debt and
its cost of equity. The cost of debt is the interest rate that the firm pays on its
debt. The cost of equity is the return that shareholders require to invest in the
firm.

By choosing a capital structure that minimizes the WACC, financial managers

can reduce the cost of financing the firm's investments. This will increase the
firm's free cash flow, which is the amount of cash that is available to
shareholders after all expenses and investments have been paid. A higher free
cash flow will lead to a higher valuation of the firm.

In addition to maximizing the value of the firm, choosing the optimal capital
structure can also have other benefits, such as:

• Reducing the risk of bankruptcy: A firm with a lower WACC is less

likely to default on its debt, which can lead to bankruptcy.
• Signaling to investors: A firm's capital structure can also be used to signal
to investors about its management team and its future plans. For example,
a firm with a high debt-to-equity ratio may be signaling to investors that
it is confident in its future prospects and that it is committed to growth.
• Increasing flexibility: A firm with a flexible capital structure is better able
to adapt to changes in the economic environment. For example, a firm
with a lot of equity capital may be able to weather a recession better than
a firm with a lot of debt capital.

Of course, there is no one-size-fits-all answer to the question of what the

optimal capital structure is. The optimal capital structure will vary depending on
a number of factors, such as the firm's industry, its stage of growth, and its risk
tolerance. However, financial managers should always strive to choose a capital
structure that maximizes the value of the firm for its shareholders.

8.discuss the impact of financial leverae on stockholders

Financial leverage is the use of debt to finance investments. It can be used to
amplify returns, but it also comes with increased risk.

Impact on stockholders

Financial leverage can have both positive and negative impacts on stockholders.
On the positive side, it can help to increase earnings per share (EPS). This is
because the interest payments on debt are deducted from taxable income, which
reduces the company's tax burden. As a result, more of the company's earnings
are available to shareholders in the form of dividends or retained earnings.

Another positive impact of financial leverage is that it can help to boost the
company's stock price. This is because investors often view companies with
high EPS as being more attractive investments. As a result, they are willing to
pay a higher price for the company's stock.

However, financial leverage also comes with increased risk. If the company's
earnings decline, the interest payments on debt can become a burden. This can
lead to a decrease in EPS and a decline in the company's stock price.
Additionally, if the company is unable to make its debt payments, it could go
bankrupt. In this case, shareholders would lose all of their investment.

Overall, the impact of financial leverage on stockholders depends on a number

of factors, including the company's earnings and risk profile. Companies with
strong earnings and a low risk of bankruptcy are better able to use financial
leverage to their advantage. However, companies with weak earnings or a high
risk of bankruptcy should be more cautious about using financial leverage.

Here are some specific examples of how financial leverage can impact
stockholders:
• A company with a high debt-to-equity ratio is more likely to have volatile
earnings. This is because even a small change in the company's earnings
can have a large impact on its EPS. As a result, stockholders of
companies with high debt-to-equity ratios may experience more volatility
in their returns.
• A company that uses financial leverage to invest in new projects is more
likely to have higher EPS. However, this increased EPS comes at the cost
of increased risk. If the new projects do not succeed, the company's
 earnings could decline and its EPS could fall. This could lead to a decline
in the company's stock price and losses for stockholders.
• A company that uses financial leverage to reduce its tax burden is likely
to have higher EPS. This is because the company is able to keep more of
its earnings after taxes. As a result, stockholders of companies that use
financial leverage to reduce their tax burden may experience higher
returns.

However, it is important to note that financial leverage can also backfire. If the
company's earnings decline or if interest rates rise, the company's debt burden
could become a problem. This could lead to a decrease in EPS and a decline in
the company's stock price. In some cases, it could even lead to bankruptcy.

Overall, financial leverage can be a powerful tool for stockholders, but it is

important to use it wisely. Companies should carefully consider their earnings
and risk profile before using financial leverage. Stockholders should also
carefully consider the risks involved before investing in companies that use
financial leverage.

Short question:

Time interest earned ratio

The times interest earned ratio, also known as the interest coverage ratio, is a
financial ratio that measures a company's ability to meet its debt obligations. It
is calculated by dividing the company's earnings before interest and taxes
(EBIT) by its interest expense.

Formula:
Times Interest Earned Ratio = EBIT / Interest Expense

The higher the times interest earned ratio, the better able the company is to meet
its debt obligations. A ratio of 2.0 or higher is generally considered to be good,
while a ratio of 1.5 or lower is generally considered to be risky.

Interpretation:
The times interest earned ratio can be used to assess a company's
creditworthiness and to make investment decisions. It is also used by lenders to
determine how much money to lend to a company and at what interest rate.

A higher times interest earned ratio indicates that a company has more income
available to pay its debt obligations. This makes the company less likely to
default on its debt, which makes it more attractive to lenders and investors.

A lower times interest earned ratio indicates that a company has less income
available to pay its debt obligations. This makes the company more likely to
default on its debt, which makes it less attractive to lenders and investors.

Limitations:

The times interest earned ratio is a useful tool for assessing a company's
financial health, but it has some limitations. For example, it does not take into
account the company's cash flow or its debt maturity schedule. Additionally, the
ratio can be skewed by non-operating items, such as one-time gains or losses.

Overall, the times interest earned ratio is a valuable tool for investors and
lenders to assess a company's ability to meet its debt obligations.

common size income statement

A common size income statement is an income statement that expresses each

line item as a percentage of a base figure, typically revenue or sales. This makes
it easier to compare the profitability and performance of companies of different
sizes and industries.

To create a common size income statement, divide each line item on the income
statement by the base figure and multiply by 100. For example, to calculate the
percentage of revenue that is spent on cost of goods sold, divide the cost of
goods sold by revenue and multiply by 100.

Here is an example of a common size income statement:

Line Item Amount Percentage of Revenue

 Revenue $100,000 100.0%

Cost of Goods Sold $60,000 60.0%

Gross Profit $40,000 40.0%

Operating Expenses $20,000 20.0%

Operating Income $20,000 20.0%

Interest Expense $2,000 2.0%

Pre-Tax Income $18,000 18.0%

Income Taxes $3,600 3.6%

Net Income $14,400 14.4%

This common size income statement shows that the company spends 60% of its
revenue on cost of goods sold, 20% of its revenue on operating expenses, and
2% of its revenue on interest expense. The company's net income margin, which
is the percentage of revenue that is left over after all expenses and taxes have
been paid, is 14.4%.

Common size income statements can be used to compare a company's

profitability and performance over time, as well as to compare the company's
profitability and performance to other companies in the same industry.

Benefits of using common size income statements

Common size income statements offer a number of benefits, including:

• Easy comparison of companies: Common size income statements allow

investors and analysts to easily compare the profitability and performance
 of companies of different sizes and industries. This is because each line
item on the statement is expressed as a percentage of a common base
figure, typically revenue or sales.
• Trend analysis: Common size income statements can be used to track a
company's profitability and performance over time. By comparing
common size income statements from different periods, investors and
analysts can identify trends in the company's business.
• Industry comparison: Common size income statements can be used to
compare a company's profitability and performance to other companies in
the same industry. This can help investors and analysts to identify
companies that are performing better or worse than their peers.
Limitations of using common size income statements

Common size income statements also have some limitations, including:

• Different accounting practices: Companies may use different accounting

practices, which can make it difficult to compare common size income
statements from different companies.
• Non-operating items: Non-operating items, such as one-time gains or
losses, can skew the results of a common size income statement.
• Focus on revenue: Common size income statements focus on revenue as
the base figure. This may not be the best base figure for all companies,
especially companies that have significant non-operating revenue.

Overall, common size income statements are a valuable tool for investors and
analysts to assess a company's profitability and performance. However, it is
important to be aware of the limitations of common size income statements and
to use them in conjunction with other financial analysis tools.

the interest tax shield

The interest tax shield is the tax savings that companies receive when they
deduct interest payments on their debt from their taxable income. This tax
reduction can help to offset the cost of debt financing and make it more
affordable for companies to borrow money.
The interest tax shield is calculated by multiplying the interest expense by the
company's tax rate. For example, a company with an interest expense of
$100,000 and a tax rate of 25% would have an interest tax shield of $25,000.

The interest tax shield is a valuable tool for companies that need to raise capital
to finance growth or investment opportunities. It can also be used to reduce the
company's overall tax burden and improve its profitability.

However, it is important to note that the interest tax shield is not a risk-free way
to finance a company. If interest rates rise or if the company's earnings decline,
the cost of debt financing could become too high and the company could be at
risk of default.

Here are some examples of how companies can use the interest tax shield:

• A company that is investing in a new product launch could use debt

financing to fund the investment and then deduct the interest payments on
its debt from its taxable income. This would help to reduce the overall
cost of the investment and make it more likely to be profitable.
• A company that is expanding into a new market could use debt financing
to fund the expansion and then deduct the interest payments on its debt
from its taxable income. This would help to reduce the overall cost of the
expansion and make it more likely to be successful.
• A company that is facing a temporary decline in earnings could use debt
financing to bridge the gap until earnings improve. The interest payments
on the debt could then be deducted from the company's taxable income,
which would help to reduce its overall tax burden.

Overall, the interest tax shield is a valuable tool for companies that need to raise
capital or reduce their tax burden. However, it is important to use debt financing
responsibly and to be aware of the risks involved.