Financial Management

Assignment A
Answer-1(a)
Controller & Treasurer are independent & they have their own Perspectives & Drivers as detailed
below:Controller
Responsibilities
include,
Double
entry
accounting, financial reporting, Fraud measure,
detective controls, Financial restatement,
Compliance with statutory requirements like
Rules, Accounting standards, GAAP, IFRS
etc.,
Controller
works & forecasts the events for
a long term. Main focus income statement
Ex: Cash involved event
Controller looks from compliance angle (how
to record, what GAAP provides etc.,)

Treasurer
Responsible for Liquidity management (very
important function), Risk Management, More
focus on financial statements, follows leading
practices & responsible for the future
performance of company (projects cash flows)
Treasurer works/ forecasts the events regularly
(daily / weekly) focus Balance sheet &
future capital structure, capital expenditure etc.,
Treasurer concentrates more on cash
availability focus i.e. how to bring in the
required cash etc,

Therefore, from the above it is clear that, controller & treasurer have different roles to play.
However, majority of the Indian companies works with Financial Controller who himself takes
care of the treasury department/Portfolio.
Therefore, as far as from Indian context, it can be concluded that, controller is also responsible
for treasury jobs & there is no separate treasurer / treasury department exists
Question 1b: firm purchases machinery for Rs. 8, 00,000 by making a down payment of
Rs.1, 50,000 and remainder in equal installments of Rs. 1, 50,000 for six years. What is the rate
of interest to the firm?
Answer to Q1b:

Particulars
Cost of Machinery
Down Payment
made by firm
Financed
through
borrowings
Repayment in
equal installments
every year
(Maximum of six
years)

Ref

Year 0

(a)

800,000

(b)
c = (ab)

150,000

d=6*15
0,000
150,000

Year 1

Year 2

Year 3

Year 4

150,000

150,000

150,000

150,000

Year 5
Rs.

650,000

900,000

Total interest paid

over 6 year
period

e=dc

250,000

Rate of Interest
= total interest
/ total
Borrowings

f=e/c

38.46%

150,000

Year 6

Rate of
interest
per annum

g=f/6
yrs

6.41
%

Break of interest
cost / principal
repayment:
1) interest cost
be apportioned in
(can
the ratio of
no of years
repayment - i.e.
earlier the years
more
the interest cost &
vice versa)

2) Principal
Outstanding
adjustment

Year wise Interest

rates:
- Principal
Outstanding at year
end
(Principal o/s
at
Year beginning
- Principal
repayment)

RATE OF
INTEREST
EVERY
YEAR

6:5:4:3
: 2:1

21

(ratio)

(6+5+4+3+2
+1)

i=dh

25000
0

7142
9

5952
4

4761
9

3571
4

2381
0

1190
5

(250,000
*6/21)

(250,000
*5/21)

(250,00
0*4/21)

(250,00
0*3/21)

(250,000*
2/21)

(250,0
0*1/21
0
)

65000
0

7857
1

9047
6

10238
1

11428
6

12619
0

1380
95

650000

571429

480952

37857
1

264286

138095

(65000
0- i)

h / principal o/s at year

Beginning.

11.0%
(h /
650000)

(57142
9- i)

10.4%
(h /
57142
9)

(4809
52
- i)

9.9%
(h /
48095
2)

(3785
71
- i)

9.4%
(h /
37857
1)

(26428
6- i)

9.0%
(h /
26428
6)

0
(138095
- i)

8.6%
(h /
138095)