Financial Resource Management Assignment: University Finance

This finance assignment addresses key aspects of financial resource management. Part A explores the benefits and potential issues of treasury centralization, including economic advantages, risk management, and operational considerations. Part B analyzes the considerations for a company listing on the stock exchange, outlining financial policies and benefits. Part C examines variance analysis, calculating sales revenue and analyzing a tunnel project using net present value. The assignment further delves into wealth maximization, comparing its advantages and disadvantages and evaluating a managing director's suggestion. The analysis includes a comparison of profit margins between different water services, providing insights into financial performance and decision-making.

MANAGE FINANCIAL RESOURCES
NAME OF THE STUDENT
NAME OF THE UNIVERSITY
STUDENT ID

PART A
Various benefits of treasury centralization are as follows –
Economic – it improves the management of working capital through increasing the
access to the cash that results into increased return on the investment for excess
cash and reduction of debt.
Control – it helps in standardized cash management for all the legal entities
Risk management – it helps is effective management of the FX exposure as well as
managing the interest rate risks through the global oversight
Potential issues for subsidiaries that may arise due to treasury centralization are as
follows –
Identification of risks and cash – it may take long time in constructing global cash
or the risk position while combining the information from different sources.
Access to liquidity and financing – once the global information is generated
regarding the entity’s position the treasury can act on optimizing the liquidity for
across the group..
Control and operational efficiency – operational efficiency as well as control across
all the subsidiaries shall be scrutinized before implementation of treasury
centralization as until there is proper control on the operational efficiency

If the overall performance is considered it can be stated that though the
profitability position of the entity is better as compared to industry
average, its leverage position as well as liquidity position is bad as
compared to industry average.
PART B

Consideration for listing under stock exchange
Management of Toyota may consider for stock exchange listing as it can be
benefitted in the following ways after listing –
It will be able to raise the additional funds through more stock issuance
In the process of acquiring other entities it can offer securities
It will get additional leverage while obtaining loans from the financial
institutions
It can attract attention of the hedge funds and mutual funds institutional
traders and market makers if it listed in the stock exchange
Financial policies required are as follows –
Increasing financial threshold for the purpose of listing that is for both asset
list and profit test
Introducing the minimum requirement for free float
Making minimum requirements for working capital that is consistent across
all the entities admitted under asset test
Changing spread test for better demonstration of sufficient level of the
investor’s interest in the company and the securities for justifying the listing

PART C
It is found that only the administration overhead is due to poor cost control of
the entity and all the other unfavourable variance is due to the increase in the
production units.
Sales revenue should have been $82,000 if 8200 units were sold at $10 per
unit. However, the sales revenue generated were $ 81,000 only hence it is
determined that sales price was $81,000/8200 = $9.88 per unit. Hence, the
actual revenue was not satisfactory from sales of 8200 units.

Analysis of tunnel project
In the above table, beta is generated from yahoo finance and in
absence of information regarding debt cost of equity is considered as
the discount rate.
As the net present value from the project is in negative that is $-193.34,
the project shall not be invested into.
PART A

The wealth maximization takes into consideration both risks and time of
business concern and provides the efficient resource allocation. Apart from
that it assures the society’s economic interest. However, on the contrary,
wealth maximization creates controversies among ownership and
management and it leads to the perspective idea of business concern that
is not suitable for the present day business operation. Hence, shareholder’s
wealth maximization shall not be the only true objective of an entity
Advantages and disadvantages of MD’s suggestion –
Advantages –
Generation of cash flows will enable the entity to meet its short term
liquidity which in turn will improve its solvency
Profit after tax and return on the investment is important as the investors
are mainly concerned about their investment and return on the same
However, the major disadvantage of taking into consideration the other
objective is that the management may shift its importance to other
objective from wealth maximization of shareholders. The shareholders on
the other side are more interested about maximization of their investment
made into the entity
PART B

From the above tables it can be identified that profit margin from Sydney water
service has been reduced from 40% to 29.03% over the years from 2019 to
2020. On the other hand, the combined profit from Melbourne water service is
33.33%. Hence, the performance of Melbourne water service is better.
PART C