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MODULE
TUTORIAL
SESSION
TOPIC 1
Outline
BBA, BIM, BHRM, BAC, BEC, BMKT, BTRM, BHM
BBPW3103
FINANCIAL MANAGEMENT I
T1
Introduction
Subtopics:
1. Finance
2. Roles of a Financial Manager
3. Objectives of Financial Management
4. Agency Problems
TOPIC 2
TOPIC 3
LEARNING
OUTCOMES
Topic 1:
Notes
INSTRUCTIONAL
ACTIVITIES
Topic 1:
Topic 2:
Topic 1:
1. Why is knowledge of finance important even to learners in other business
disciplines?
2. What is meant by agency problem? How can this problem be either prevented
or minimised?
3. Why is the maximisation of wealth viewed as superior to that of profit
maximisation as a business objective?
Topic 2:
1. What is the purpose of financial statement analysis?
2. Provide an example of how financial statements can be used internally by the
managers of a company?
3. Identify information that may be useful to investors and shareholders.
4. Based on the five categories of financial ratios, perform ratio analysis of a
company listed on Bursa Malaysia. Explain the significance of the ratios
calculated. Are there any limitations when performing the ratio analysis?
Or other
exercises
prepared
by face to
face
tutors
Topic 3:
1. What is the relationship between the time value of money and inflation?
2. Compare simple interest to compound interest.
3. What is an annuity? Give examples of annuities.
4. Suppose you were considering depositing RM50,000 in one of three banks, all
of which pay 4% interest; BA Bank compounds annually, AP Bank compounds
semi annually and TR Bank compounds daily. Which bank would you choose?
Why?
Solution:
To minimise agency problem, companys owners i.e. the
shareholders will have to bear the costs of agency and control
the actions of the managers. Among steps that can be taken
includes providing compensation or incentives based on the
companys achievement. The shareholders may introduce
incentive plans for managers that link their remuneration to
the performance of the business. A common form of
incentive plan is to give managers share options. In this way,
the interests of managers and shareholders will become
more closely aligned.
Extra Notes
RM 200
245
625
RM1,070
1,200
Total assets
RM2,270
Accounts payable
Notes payable
Other current liabilities
Total current liabilities
Long-term debt
Ordinary share
Total liabilities and equity
RM 205
425
115
RM 745
420
1,105
RM2,270
Current ratio =
Current assets
1,070
=
= 1.44 .
Current liabilities 745
RM2,400
1,834
RM 566
175
216
RM 175
35
RM 140
56
RM 84
ROA =
Net income
84
=
= 0.0370 = 3.70%.
Total assets 2,270
ROE =
Net income
84
=
= 0.0760 = 7.60%.
Shareholde rs' equity 1,105
ii. semiannually
Manual solution using formula: FVn = PV(1 + i/2)nx2
FVn = PV(1 + i/2)nx2
F2 = 22,500 (1 + 0.12/2)2x2
= 28,395
Answer: i. 4.5%
ii. 11.3%
iii. 22.5%
2
Last year 2011, Saphire Sdn. Bhd. had sales of RM300,000 and a
net income of RM20,000, and its year-end assets were
RM200,000. The companys total debt to total assets ratio was
40%. Based on the Du Pont equation, calculate the company's
return on equity (ROE).
Answer: 28.13%