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BBF612S - BUSINESS FINANCE - 1ST OPP - NOV 2024 |
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nAmlBIA UnlVERSITY
OF SCIEn CE Ano TECHn OLOGY
FACULTY OF COMMERCE, HUMAN SCIENCES AND EDUCATION
DEPARTMENT OF GOVERNANCE AND MANAGEMENT SCIENCES
QUALIFICATION: BACHELOR OF BUSINESS MANAGEMENT
QUALIFICATION CODE: 07BBMN
LEVEL: 7
COURSE CODE: BBF612S
COURSE NAME: BUSINESSFINANCE
SESSION: NOVEMBER 2024
DURATION: 2 HOURS
PAPER: PAPER1/1
MARKS: 100
EXAMINER(S)
FIRST OPPORTUNITY EXAMINATION QUESTION PAPER
MSC KAUAMI
MS B NDUNGAUA
MODERATOR: MR ERNEST MBANGA
INSTRUCTIONS
1. Answer ALL the questions, except question 4 where you may choose
EITHER a. orb.
2. Show all formulae and calculations as marks will be awarded for them.
3. Write clearly and neatly.
4. Number the answers clearly.
PERMISSIBLE MATERIALS
1. Calculator.
THIS QUESTION PAPER CONSISTS OF 6 PAGES (Including this front page)
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SECTION A: MULTIPLE CHOICE QUESTIONS
[10 Marks]
Question 1: Multiple Choice Questions- Choosethe correct Answer
Please note that all questions carry 1 mark each.
1. The following are important considerations in financing assets, except:
a. Inflation
b. Suitability
c. Control
d. Timing
2. A good source of finance for a business that has difficulty in collecting debts is
a. Factoring
b. Debentures
c. Trade credit
d. Invoice discounting
3. Which of the following long-term financing methods is interest free?
a. Debentures
b. Bonds
c. Equity
d. Mortgage.
4. Bonds
a. require monthly instalments, comprising an interest component and partial
down payment of the principal.
b. are forms of equity financing which may be used for an indefinite period.
c. may be converted into overdraft accounts.
d. require interest payments every six months and repayment of the principal at
maturity.
5. A firm can finance its long-term financing by means of the following:
a. Equity, bank overdraft, debentures, bonds
b. Mortgage loan, equity, trade credit, bonds
c. Bonds, debentures, equity, mortgage loan
d. Trade credit, equity, overdraft, mortgage loan
6. Financial plans do not involve predictions of the economic outlook
a. True
b. False
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7. Retailers have heavy reliance on short-term debt because of having higher
proportion of temporary current assets.
a. True
b. False
8. Is it correct for you to advise a business to finance its short-term obligations using
long-term debt, in order to secure its cash flow position?
a. Yes
b. No
9. If firms obtain funds from creditors or by means of preference shares, they ....
a. Sacrifice little or no share of control of management
b. Sacrifice all share of control of management
c. Gain no share of control of management
d. None of the above
10. Financial leverage uses debt financing to:
a. Decrease liabilities and therefore increase the firm's value
a. Increase the EPS(earnings per share) and the value of the firm
b. Increase the firm's cost of capital
c. All of these
d. None of these
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SECTION B: SHORT QUESTIONS
[57 Marks]
Question 2: Introduction to Financial Management
(12 marks)
(1 marks per principle;3 marks for relevant explanations)
Explain the three fundamental principles of financial management.
Question 3: Users of Financial Statements
(14 marks)
(1 mark per user and 1 mark for relevant explanation)
Name the main users of financial statements and indicate what information they are
normally interested in.
Question 4: Profit planning and control
(14 marks)
(1 mark per advantage/principle and 1 mark for relevant explanation)
Answer only one question, either a) OR b).
a) Briefly summarise the advantages of budgeting.
OR
b) Briefly summarise the principles of budgeting.
Question 5: The Time Value of Money
(9 marks)
The purpose of financial management is to increase the value of the firm. In this
regard, the effect of time on the value of money is significant.
1. Briefly explain the concept of time value of money (TVM).
(3)
2. Contrast the concepts of Future Values (FV) and Present Values (PV) as concepts of
the time value of money.
(6)
Question 6: The Management of Working Capital
Briefly explain a firm's motives for holding cash
(8 marks)
(2 marks per correct answer)
(8)
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SECTION C: CALCULATIONS
[33 Marks]
Question 7: Analysis of Financial Statement
(18 marks)
(3 marks per correct answer)
Make use of the Financial Statements on page 6 and calculate the following:
i)
EAIT (earnings after interest and tax)
(3)
ii) ROE(return on equity)
(3)
iii) The Quick or Acid Test Ratio
(3)
iv) The Inventory Turnover
(3)
v) The Debt Ratio
(3)
vi) EPS(earnings per share)
(3)
Question 8: Capital Budgeting
(15 marks)
(1 marks per PV inflows; a= 2 marks NPV, b = 2 marks; c = 1 mark)
You have the opportunity to invest in an income generating asset (machine) for an
initial investment of N$ 70 000. It is expected that the annual return will be N$ 15
000 for the first five (5) years, and due to normal wear and tear, only N$10 000 for
the next five (5) years. The machine can then be sold for N$ 5 000 to a scrap metal
dealer. The cost of capital is 15%.
Determine:
a. the net present value (NPV), and
b. the discounted Payback Period
c. would you invest in this asset? Why or why not?
Additional Information
Interest factors @ 15%
YEAR FVIF
FVIFA
1. 1.150
1.000
2. 1.323
2.150
3. 1.521
3.473
4. 1.749
4.993
5. 2.011
6.742
6. 2.313
8.764
7. 2.660
11.067
8. 3.059
13.730
9. 3.518
16.790
10. 4.046
20.300
PVIF
0.870
0.756
0.658
0.572
0.497
0.432
0.376
0.327
0.284
0.247
PVIFA
0.870
1.626
2.283
2.855
3.352
3.784
4.160
4.487
4.772
5.019
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•, I
Statement of the financial performance of PATI Centre (Pty) Ltd for the period 1 July 2023
to 30 June 2024
Sales
N$
cos
Gross Profit
Fixed expenses
Net Profit before tax
200 000
120 000
80 000
60 000
20 000
Statement of the financial position for PATI Centre (Pty) Ltd as on 30 June 2024
EQUITY AND LIABILITIES
80 000 ordinary shares@ N$ 2.00 each
Retained earnings
Current liabilities: creditors
TOTAL ASSETS
160 000
40 000
so000
250 000
Fixed assets at book value
Current assets:
Inventory/stock
Debtors
Cash
60 000
so 000
so 000
90 000
160 000
250 000
Additional Information:
1) opening stock= N$ 30 000
2) all purchases are on credit
3) Tax@ 30%
4) 50% of sales are on credit
5) Market price of shares= N$ 1.60 per share
6) One year= 360 days
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