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Theoretical and Practical Aspects of Financial Management

ALL responses must be at least 250 words in length. All sources used must be referenced; paraprased and quoted material must have accompanying citations. Must be APA format (in-text and reference citations are required for written responses). Show step by step solutions

1. Describe the statement of cash flows and why it is important to financial decision making.
2. Contrast the information provided in the balance sheet and income statement.
3. Contrast sources and uses of cash referencing using at least two examples of assets and liabilities (four total). Provide examples of how cash is used or provided depending on whether it is categorized as an asset or liability.
4. Differentiate between the different users of financial information, their needs and sources of information organization.
5. You are given the following selected financial information for The Blatz Corporation.

Income Statement            Balance Sheet
COGS $750                     Cash $250
Net Income $160              Net fixed assets $850

Ratios
ROS                             10%
Current ratio                 2.3
Inventory Turnover       6.0 x
ACP                             45 days
Debt ratio                     49.12%

Calculate accounts receivable, inventory, current assets, current liabilities, debt, equity, ROA, and ROE

6. Explain the process to calculate external funding needs and the importance to a business.
7. Construct a pro forma income statement for the first year and second year for the following assumptions:

Units of Sales in Year 1: 100,000
Price per Unit: $10
Variable cost per unit: 30%
Fixed Costs: $120,000
Income taxes: 15%
Interest Expense: $200,000
In year 2, Price per unit increases to $11.50, and unit of sales increases by 3%, all other assumptions remain the same.

8. Calculate the sustainable growth based on the following information:
D= 30%
ROE = 25%

9. Calculate a table of interest rates based on the following information:
The pure interest rate is 1.6%
Inflation expectations for year 1 = 3%, year 2 =3.5%, years 3-5 =5%
The default risk is .1% for year one and increases by .2% over each year
Liquidity premium is 0 for year 1 and increases by .2% each year
Maturity risk premium is 0 for years 1 and 2 and .2% for years 3-5

Solution Summary

The document provides an overview of theoretical and practical aspects of financial management

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