Introduction to Finance

Introduction to Finance

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Question 1....................................................................................................................................3
Question 2........................................................................................................................................5
Question 3..................................................................................................................................10
Question 4..................................................................................................................................13
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Finance is general term encompassing fiscal, debt or financing, economic, commodity
markets, assets, and investment operations. Finance effectively represents the management of
funding and the mechanism for the necessary funds to be raised (Bernards and Campbell-
Verduyn, 2019). The role of funding is to ensure that ample finances are available to continue
operating and that the enterprise is equipped to maintain and preserve capital funds. This
evaluation is focused on four main forms of considerations pertaining to sources of financing, the
evaluation of the estimates for measurement of the corporation 's financial results and the
application of techniques of investment appraisal/analysis to evaluate the viability of the
different solutions. Moreover, position and function of a variety of different regulatory structure
bodies is defined as well as roles of the auditing board is discussed.
MAIN BODY
Question 1
(a) Measurement of EOQ-
Economic ordering quantity: √2*annual usage*Ordering cost/Carrying or holding cost
Annual usage: 27000 KG
Carrying or holding cost: $1.75 @ per KG of year
Ordering cost: $0.9
Hence,
EOQ: √2*27000*0.9/1.75
= √48600/1.75
= √27771.43
= 166.65 Or 167
(b) Calculation of annual cost-

Buying cost: 27000Kg @ 0.90
= $24300
Ordering cost: Annual demand*per unit ordering cost/EOQ = (27000*0.90/167)
= $145.50
Holding cost: Holding Cost per unit*EOQ/2 = (1.75*657/2)
= $146.12
Hence,
Annual cost: $24300+$145.5+$146.12
= $ 24591.5
(c) Evaluation of decision to use EOQ model.
Managers commonly applies the EOQ method in regard to the company Touchdown
Sports to determine the optimum order volume that substantially decreases net cost or
satisfies customer demand. EOQ can be around 657, reducing costs or causing the
profitability to be improved by Touchdown Sports. Decision of the corporation to use
this technique is based on that this will enable them to to optimize stock or inventory
expenses and decide how much inventory retention as well as re-ordering level should be
considered by the corporation. In attempt to take greater advantages of decreased bulk
prices and lowered ordering rates, this method can also consider purchasing a bigger
volume with less orders. Additionally, if they are large as well as order volumes are
usually smaller, they can prefer to more further orders for several products to reduce
operational costs (Booth, Cleary and Rakita, 2020).
(d) Suggestion to Touchdown plc.
The adoption of inventory controls has been suggested to company Touchdown
Sports' senior management team in order to reduce/optimize total expense related
to inventory handling and storage as well as and, with the assistance of EOQ