Financial Management Questions & Solutions

Running head: MBA FINANCIAL MANAGEMENT
Financial Management
Name of the Student:
Name of the University:
Author’s Note:

FINANCIAL MANAGEMENT1
Table of Contents
Question 1..........................................................................................................................2
Question 2..........................................................................................................................4
Question 3..........................................................................................................................8
Question 4........................................................................................................................12
Question 5........................................................................................................................13
Question 6........................................................................................................................15
References.......................................................................................................................17

FINANCIAL MANAGEMENT2
Question 1
a) The production volume at which the threshold level would breach out will be in the
form of breakeven analysis which would state the amount of units that needs to be well
sold for the purpose of maintaining the business profitable. Breakeven analysis is a key
financial tool that has been well used by financial managers for the purpose of
determining the amount of sales or contribution that a company needs to well make for
the purpose of covering the fixed cost that is associated with the business. Contribution
is well generated with the help of the by taking the total sales value less variable costs
that is associated with the product. The volume of production that the company needs to
well produce could be calculated with the help of the sales price of € 25/unit that the
company would be incurring based on the sales done. On the other hand, the variable
costs that is associated with the project has been around € 5/unit. The fixed costs that is
associated with the project has been around € 110,000 and the same would be well
considered for the purpose of calculating the threshold level of profitability that needs to
be well reached by the company.
Breakeven Point (In Units): Fixed Cost/(Sales Price Per Unit- Variable Cost Per
Unit)
Breakeven Point: € 110,000/(€25-€5)
Breakeven Point (In Units): 5,500 Units.
The calculation can be also shown with the help of other equation model as shown
below:
 p*x=-cf+(cv*x)
 25*x=110,000+(5*x)
 25x-5x=110,000
 X=110,000/20
 X=5,500 units-

FINANCIAL MANAGEMENT3
b) It is important that the company well reaches the breakeven point or sells the
minimum amount of quantity in order to well cover the fixed cost so that the profitability
or stability of the business well remains. It is important that company well maintains
breakeven point by estimating the fixed costs that it would be incurring and the amount
of contribution it will be having for covering the fixed costs of the company. The
breakeven amount in days has well been calculated for the company for the defined
point of time so that the company well knows the amount or period of days in which it
needs to well cover the fixed costs and how it could do the same. The management of
the company can well take important and crucial steps by well analysing the relevant
sales and relevant marketing strategies that it need to for well covering or reporting
down the sales value of the company. In order to well calculate the breakeven point for
the company or the days the company would be taking for well reaching the threshold
level can be well calculated and shown as below:
The annual sales of the company has been around 20,000 which well states that on
a daily basis the company needs to well sell around 55 units on a daily basis. The total
sales unit derived on a daily basis has been around 55 units and the sales price that the
company will be selling the products will be around € 25. Thus, if we multiply the daily
unit sold with the sales price per unit this makes the total sales value to be around
€1375 on a daily basis. The brief calculation of the same can be well shown below as
follows:
 20,000/365=54.79 or 55 Unit or Amount needs to be sold on a daily basis
 55*25€ unit=1375 €per day
 110,005€/1375€=80 days
c) The sales value or turnover that would be over the threshold level will be around
€110,000 and the same has been well calculated with the help of above calculations
done. The sales value in excess or corresponding to the threshold value in the
profitability can be well calculated with the help of the excess value that would be sold
by the company in excess of the required amount for breakeven.