Petite & Accessories Ltd distributes hair ties to retailers across Australia. The company has recently employed a new Chief Finance Officer (CFO) who plans to review the company’s financial and accounting processes. The following information has been gathered by the company’s management accountant for the CFO. • The company has made a profit in the last financial year. • The company signed a debenture contract to borrow money one year ago. The debenture requires an 8% interest rate per annum and the face value will be repaid in five years’ time. • The Board of Directors consider buying two new machines for production. The machines cost $80 000 initially and will require annual maintenance of $6 000. The net cash inflow for the machines is expected to be $15 000 per annum. The machines will have a total residual value of $10 000 at the end of 5-year useful life. • The company is considering including a bonus payment term in the employment contracts for new managers. • There may be a need to make two senior staff redundant in the finance and accounting team under the company’s restructuring plan. These staff have been employed by the company for the last 10 years and contributed substantially to its success. Discuss five principles of financial management the CFO should consider in the context of Petite & Accessories Ltd. Reference should be made to the above information. *Relevant textbook for response chapter and page citations: "Financial Management, Principles and applications 6th edition" JPetty et al. 2012

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