Examination card №1

1. Essence of the enterprise finance and connections to the firm’s goal

Efficient financial management requires the existence of some objective or goal because judgment as to whether or not a financial decision is efficient must be made in light of some standard.Various objectives have been recommended. The most important are profit maximization, value creation, the management's and the shareholders' goals, the social responsibility of the firm.

PROFIT MAXIMIZATION VERSUS VALUE CREATION

Maximizing profits is basically a single-period or, at the most, a short-term goal.

The most comprehensive goal is therefore the maximization of the market price per share, since this represents the focal judgment of all market participants as to the value of the particular firm.

PROFIT MAXIMIZATION VERSUS WEALTH CREATION

This table outlines the basic objectives of the two most popular definitions of the goal of the firm.

It also provides a comparison of the advantages and disad-vantages resulting from the selection of each one of the two definitions.

MANAGEMENT VERSUS SHAREHOLDERS

The separation of ownership and control in the modern corporation results in potential conflicts between owners and managers since the objectives of management may differ from those of the shareholders.

Shareholders can assure themselves that management will make optimal decisions only if appropriate incentives are given and if the agent is properly monitored.

SOCIAL RESPONSIBILITY OF THE FIRM

The maximization of shareholder's wealth does not mean that the firm, in the pursuit of its goal, should neglect relevant social responsibilities. today the firm has no choice but to act in socially responsible ways. They argue that shareholder wealth and, ultimately, the corporation's very existence, depends on its being socially responsible.

Setting clear criteria and consistent policies aimed at enforcing the firm's social responsibility is a difficult task.

Task 1

To calculate volume of realization of production and profit on the basis of such data:

The rests of non-realized production on the beginning of year:

· For wholesale prices of the enterprise of 100 thousand UAH.

· Under the industrial cost price of 70 thousand UAH.

Sales in planned year:

· For wholesale prices of the enterprise of 1200 thousand UAH.

· Under the industrial cost price of 1000 thousand UAH.

The rests of non-realized production on the end of the year 12 days.

Let’s find rests of non-realized production on the end of year:

-For wholesale prices of the enterprise

(100 th +1200th)/(365+12)*12=41.38 th UAH

-Under the industrial cost price

(70th+1000th)/(365+12)*12=34.06 th UAH

Let’s find volume of realization of production

- For wholesale prices of the enterprise

100^th +1200^th -41.38^th =1258.62th UAH

Under the industrial cost price

70^th+1000^th-34.06^th =1035.94^th UAH

Let’s find profit

(100^th -70^th)+(1200^th -1000^th)-(41.38^th -34.06^th)=30^th+200^th-7.32=222.68^th UAH

Task 2

Calculate the production budget based on the following data.

On the basis of this information we can build up the sales budget. Assume that the ending inventory in each quarter is 15 % of next quarter's sales and that ending inventory for the fourth quarter is 200 units.

Sales budget

	Quarter
					TOTAL
Expected sales in units
Unit sales Total sales	100,000	90,000	110,000	100,000	400,000

Production budget

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