What are the goals of financial management? as shown. Nevada Mining currently ha

Question

What are the goals of financial management? as shown. Nevada Mining currently has taxable income of $92,800. How much is the tar Taxable Insoms ax Rate S 0-50,000 50,001- 75,000 5,001-100,000 100,001-335000 15% 2S% 34% 39% ABC has beginning retained earnings of $475,000 and ending retained earnings of $542,000. ABC had total dividend payout of $40,000 for the year. How much is the amount of net income? has a current accounts receivable balance of $286,000. Credit sales for the year just ended were accounts during this past Corner Supply $2430,000. How many days on average did it take for credit customers to pay off their year? Define the "balance sheet and the "income statement

Explanation / Answer

1. Goals of financial management are:

a) Maximize Profits: A company's most important goal is to make money and keep it. Profit-margin ratios are one way to measure how much money a company squeezes from its total revenue or total sales.

b) Minimize Costs: Companies use cost controls to manage and/or reduce their business expenses. To be profitable, companies must not only earn revenues, but also control costs.

c) Maximize Market Share: Market share is calculated by taking a company's sales over a given period and dividing it by the total sales of its industry over the same period. This metric provides a general idea of a company's size relative to its market and its competitors. Companies are always looking to expand their share of the market.

2. The tax is as under:

$0 - $50,000 = 15%; $50,000 * 15% = $7,500

50,001 - $75,000 = 25%; $25,000 * 25% = $6,250

$75,001 - $92,800 = 34%; $17,800 * 34% = $6,052

Total tax = $7,500 + $6,250 + $6,052 = $19,802

3. Ending retained earnings = Beginning retained earnings + Net income - Dividends paid

$542,000 = $475,000 + Net income - $40,000

Net income = $107,000

4. Receivables turnover ratio = Credit sales divided by Accounts receivable

Receivables turnover ratio = $2,430,000 / $286,000 = 8.49 times

Days of sales outstanding = 365 divided by Receivables turnover ratio

Days of sales outstanding = 365 / 8.49 = 42.96 days

5. The balance sheet and income statement are both important financial statements that detail the financial accounting of a company. The balance sheet details a company's assets and liabilities at a certain period of time. It is used to assess the financial position of the company as at a particular date. The income statement details income and expenses over a period of time (usually one year).It is used to assess the profitability of the company in a particular period (usually one year).

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