The Cline family made a trip to Europe in 2009. They paid the following amounts

Question

The Cline family made a trip to Europe in 2009. They paid the following amounts in local currency for hotel, entertainment, and transportation. England f855 France f1,462 Germany f2,753 Denmark kr6,280 How much did the trip cost in U.S. dollars once they got to Europe? Us the exchange rates in following table: U.K. Direct Quote ($ per unit of foreign currency) Indirect Quote (foreign currency units per $) U.K Pound 1.6504 .6059 1-mos forward 1.6502 .6060 3-mos forward 1.6503 .6060 6-mos forward 1.6508 .6058

Explanation / Answer

According to Prof. Bradley, "Financial management is the area of business management, devoted to a judicious use of capital and a careful selection of sources of capital, in order to enable a spending unit to move in the direction of reaching its goals." [Cited Gitman, 1986; Pg. 8] This definition points to the four essential aspects of financial management, They are: - Financial management is a distinct area of business management - i.e. financial manager has a key role in overall business management - Prudent or rational use of capital resources -proper allocation and utilization of funds - Careful selection of the source of capital - Determining the debt equity ratio and designing a proper capital structure for the corporate - Goal achievement - ensuring the achievement of business objectives viz. wealth or profit maximization. The essential objective of financial management can be categorized into two broad functional categories -recurring finance functions and non-recurring or episodic finance functions. - Performing the regular finance functions including financial planning including assessing the funds requirement, identifying and sourcing funds, allocation of funds and income and controlling the use or utilization of funds towards achieving the primary goal of profit/wealth maximization. - Performing the non-recurring functions including, though not exclusively, the preparation of financial plan at the time of promotion of the business enterprise, financial readjustment during liquidity crisis, valuation of enterprise at the time of merger or reorganization and such other episodic activities of great financial implications

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