Tutorial 01

Objectives and Environment of Managerial Finance

1. Define finance and describe managerial finance.

2. Distinguish between accounting and finance.

3. Identify the functions and areas of responsibility under the control of the financial manager.

4. Explain why the financial manager should identify surplus assets and dispose of them.

5. Given the following corporate objectives, provide a reasoned argument explaining which of them should be the main goal of the financail manager:

a. profit maximisation;

b. sales maximisation;

c. maximisation of benefit to employees and the local community;

d. maximisation of shareholder wealth.

6. Distinguish between profit maximisation and wealth maximisation.

7. Discuss the ways in which the concepts of agency theory can be used to explain the relationships that exist between the managers of a listed company and the providers of its equity finance.

8. Describe the three different forms of market efficiency.

9. Distinguish between capital markets and money markets.

10. Breifly explain the macroeconomic policy objectives.

11. Identify the importance of tax-deductable expenses for a company.

12. A machine costing $960,000 with a useful life of four years and a scrap value of 20% of cost is to be depreciated on reducing balance basis at 25% per annum. Taxation is at 30% payable one year in arrears. Calculate the tax benefits of capital allowance.