Introduction to Finance

Introduction to
Finance

INTRODUCTI
ON..................2
MAIN BODY..................................................................................................................................2
Question 1........................................................................................................................................2
(a). Calculate the economic order quantity (EOQ)......................................................................2
(b). Calculate the total annual cost of hard plastic.......................................................................2
(c). Critically evaluate Touchdown Sports Inc’s decision to use the EOQ mode.......................3
(d). Advise Touchdown Sports Inc’s senior executive team and it also should include an
explanation of the costs of holding inventories...........................................................................3
Question 2........................................................................................................................................4
(a) Calculate the payback period of both options........................................................................4
(b) Calculate the accounting rate of return (ARR) for both options............................................5
(c) Critically evaluate the accounting rate of return technique....................................................5
(d) Characteristics of investment appraisal decisions and the advantages and disadvantages of
the IRR technique........................................................................................................................6
Question 3........................................................................................................................................7
(a). Calculate the following ratios...............................................................................................7
(b) Critically explain the importance of considering the audience for financial statement
analysis........................................................................................................................................9
Question 4........................................................................................................................................9
(a) Explain the role of each of the following organisations.........................................................9
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(b) Critically discuss the role of audit committees in corporate governance............................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
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INTRODUCTION
Finance is a general term that covers activities related to finance, debt or borrowing, lending,
financial markets, assets, and investment (Adams and Hunter, 2019). Essentially, finance
shows the management of money and the procedure of getting the needed funds. The role of
finance in an organization is also to ensure that there will be enough resources to function and
that company spend and invest the money. This assessment based on four different types of
questions which is about the sources of finance, calculate ratios for the analysis of company’s
overall performance and how investment appraisal techniques used to evaluate the profitability
of different options. In addition, explain the role of several international regulatory framework
organizations and discuss the role of audit committee.
MAIN BODY
Question 1
(a). Calculate the economic order quantity (EOQ)
Given Information:
Annual Usage = 27,000
Holding Cost = $1.75 per KG per Year
Ordering Cost = $ 14
Cost of Hard plastic = $0.90 per KG
Maximum price = $ 1.90 per KG
Minimum price = $0.75 per KG
Formula:
EOQ = Square root of { (2 X Annual Consumption X Ordering cost) / Holding cost }
= Square root of { (2 X 27,000 X 14) / 1.75 }
= Square root of (756,000 / 1.75)
= Square root of (432,000)
= 657.267
= 657 approx.
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