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BBF612S - BUSINESS FINANCE - 2ND OPP - 2020 |
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NAMIBIA UNIVERSITY
OF SCIENCE AND TECHNOLOGY
Faculty of Management Sciences
Department of Management
QUALIFICATION: Bachelor in Business Management
QUALIFICATION CODE: 07BBMA
COURSE: Business Finance
LEVEL: 7
COURSE CODE: BBF612S
DATE: January 2020
SESSION: 2"! Opportunity
DURATION: 2 hours
MARKS: 100
EXAMINER(S)
MODERATOR:
2"? OPPORTUNITY QUESTION PAPER
Ms C Kauami
Mr A Ndjavera
Mr B Kamudyariwa
Mr Ernest Mbanga
THIS QUESTION PAPER CONSISTS OF 6 PAGES
(Including this front page)
INSTRUCTIONS
Answer all questions.
Show all formulae and calculations as marks will be awarded for them.
Write clearly and neatly.
Number the answers clearly.
Please refer to financial statements and additional information for ratio
calculations.
PERMISSIBLE MATERIALS
1. Calculator.
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Section A:
[15 Marks]
Question 1:
Multiple Choice Questions — Choose the correct Answer(s)
Please note that numerical questions carry 3 marks.
1. Credit standards refer to:
a. Terms required for all credit customers.
b. Limit of credit granted to a customer.
c. The different procedures that a firm uses to collect accounts receivable.
d. The minimum requirements for extending credit to a customer.
(1 mark)
2. What does initial outlay mean in time value of money investment decision?
a. Cash deposited for interest return
b. Cash outflow
c. Cash inflow
d. The number of years required to recover the initial investment.
(1 mark)
3. What is the disadvantage of raising finance through a share issue?
It is illegal
b. Existing shareholders will have less control
c. Liquidity will be reduced
d. Interest payments will rise
(1 mark)
4. What is the difference between R1 000 invested at 10% p.a. compounded interest for five
years if:
(3 marks)
e interest is calculated annually
interest is calculated semi-annually?
a. NSO
b. NS 18
c. NS$315
d. NS 611
5. The primary sources for financial analysis:
a. Statement of financial performance
b. Auditors’ report
c. Cashflow statement
d. Director’s report
(1 mark)
6. Inthe management of working capital, CCC refers to
a. convenient cash circulation
b. cash consumption cycle
c. cash conversion cycle
d. circulating cash cycle
(1 mark)
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7. The following are characteristics of management accounting, except:
a. Must follow externally imposed rules
Internally focused
No mandatory rules
Emphasis on the future
Broad, multidisciplinary
(1 mark)
8. Which of the following is not a time-adjusted method of ranking investment proposals?
a. Net Present value method
(1 mark)
b. Payback method
c. Internal rate of return
d. Allof the above are time-adjusted methods
9. The fundamental accounting concept that transactions are accounted for when they occur
and not when cash is paid or received, is known as
(1 mark)
a. Going concern
b. Relevance
c. Accrual
d. Matching
10. Better liquidity may be achieved by the following except
(1 mark)
a. stocking a range of products that has seasonal demand
b. accelerating cash flows from accounts receivable (debtors)
c. delaying cash flows by paying creditors (accounts payable) as late as possible
d. not over-investing in inventory (stock)
11. A company sells its products on credit. It takes the firm an average of 24 days from buying
stocks to selling it. The firm takes an average of 70 days to collect the money from debtors.
What is the operating cycle?
(3 marks)
a)
94 days
b)
46 days
c)
70 days
d)
48 days
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Section B: Short Questions
[54 Marks]
Question 2: Financial goal of a firm
Explain the fundamental principles of financial management.
(12 marks)
Question 3: Understanding financial statements
(14 marks)
List the principal users/stakeholders of financial statements and explain what information they
are interested in.
Question 4: Profit planning and control
(14 marks)
Briefly explain/define budgets and summarize their main functions.
Question 5: Management of working capital
(14 marks)
Briefly discuss the factors that are essential in the management of accounts receivable
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Section C
[31 Marks]
Question 6: Time Value of Money
(16 marks)
You have the opportunity to invest in an income generating asset for an initial investment of NS
80 O00. It is expected that the annual return will be NS 20 000 for the first four years and only
NS$10 000 for the next four years, due to a new competitor entering the market. The asset can be
sold for NS 5 000 to a scrap metal dealer at the end of year eight. The cost of capital (discount
rate) is 15%.
Determine:
a) the NPV (net present value)
b) the discounted Payback Period
c) would you invest in this asset? Why or why not?
(12 marks)
(2 marks)
(2 marks)
Additional information:
The PV discount factors, starting from year one are:
0,870; 0,756; 0,658; 0,572; 0,497; 0,432; 0,376 and 0,327
The FV interest factors, starting from year one are:
1,150; 1,323; 1,521; 1,749; 2,011; 2,313; 2,660 and 3,059
Question 7: Financial Statement Analysis
Make use of the Financial Statements on page 6 and solve the following:
i)
EBIT (earnings before interest and tax)
ii)
ROE (return on equity)
iii)
The Quick or Acid Test Ratio
iv)
The Inventory Turnover
v)
The Debt Ratio
vi)
EPS (earnings per share)
(15 marks)
(2 marks)
(3 marks)
(2 marks)
(3 marks)
(3 marks)
(2 marks)
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Statement of the financial performance of Momo (Pty) Ltd for the period 1 July 2018 to 30 June
2019
Sales
cos
Gross Profit
Fixed expenses
Net Profit before tax
Tax @ 30%
Net Profit after tax
NS 100000
60 000
40 000
30 000
10 000
3 000
7 000
Statement of the financial position for Momo (Pty) Ltd as on 30 June 2019
LIABILITIES
50 000 ordinary shares @ NS 2.00 each
Retained earnings
NS
100 000
20 000
Current liabilities: creditors
30 000
150 000
TOTAL ASSETS
Fixed assets at book value
60 000
Current assets:
Inventory/stock
Debtors
Cash
40 000
30 000
20 000
90 000
150 000
Additional Information:
1) opening stock = NS 30 000
2) all purchases are on credit
3) 50% of sales are on credit
4) Market price of shares = NS 1.60 per share
5) One year = 360 days
-END-