Assignment 1 - Financial Management

Assignment 1 - Financial Management

Introduction

Financial management has made it easier for all organizations to prepare and analyze its financial statistics. This assignment is classified into two parts first part deals with the construction of cash flow statement and financial. On the other hand, in the second part we are going to investigate the risk and return problems related to the portfolio management.

Question # 1

A) Preparation of Cash Flow Statement of Global Technological Limited for the two years (2012, 2011)

Cash flow statement is a financial statement that shows how changes in the financial statements affect the cash and cash equivalent items of an organization. Cash flow statement describes the management of cash with in a company. Statement of cash flow classify all activities of a company into three heads; 1- Operating activities (Operating activities includes cash flows from sales, production, receipts from customers and payment to suppliers); 2- Investing activities (it includes cash inflows and cash outflows from long term investment or investing activities); 3- Financing activities (financing activities involve cash flow from banks, investors and other shareholders).

Given below is the cash flow statement of Global Technology Limited. We have developed this cash flow statement from the information given in the question (Jury, 2012).

Cash Flow Statement of Global Technological Limited

(All amounts in $ million)

Description

2012

2011

Operating Activities

Profit for the year

$ 74.9

$ 70.9

Adjustments

Add non cash items (Depreciation)

$ 8.4

$ 5.8

Deferred Tax

$ 3.6

$ 4.4

Inventory purchase

$ 0.5

$ -1.4

Account receivable

$ 3.5

$ -9.5

Trade Payable

$ 1.1

$ 1.3

Tax payable

$2.9

$ 2.3

Interest Payable

$ -0.5

$ 0

Net Cash Flow From Operations

$ 94.4

$ 73.8

Investing Activities

Change in fixed (non current asset)

$ -52

$ -20

Loans

$ -10

$ 0

Net Cash Flow From Investing Activities

$ -62

$ -20

Financing Activities

Issuance of Ordinary Shares

$ 0

$ 7

Other Reserves

$ 0

$ 0

Dividend Paid

$ -28

$ 8

Net Cash Flow From Financing Activities

$ -28

$ 15

Nat Increase\ Decrease in Cash & Cash Equivalent

$ 4.4

$ 68.8

Cash & Cash Equivalent @ 1st January

$ 151.8

$ 155.8

Cash & Cash Equivalent @ 31st December

$ 156.2

$ 224.6

b) Analysis of the Financial Performance of the company for the Time Period of Three Years (2012, 2011, 2010)

Financial analysis of a company assists investors in making sound decisions about the future outlook of the company. It is a technique of recognizing the financial weaknesses and scope of a company. It is a process of developing an integrated relationship between the items of the balance sheet and income statement.

Evaluation of Income Statement of Golden Technology Limited

Golden Technology Limited is making profits in three years as can be seen from the income statement of three years. There is an increasing trend in the per year profit of the company. Profit per year has increased by 7% in ...