FM101 CHAPTERS COVERED : CHAPTERS 1, 5, 7 AND 8. DUE DATE : 3:00 p.m. 21 AUGUST 2012

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1 Page 1 of 11 ASSIGNMENT 2 ND SEMESTER : FINANCIAL MANAGEMENT 1 () CHAPTERS COVERED : CHAPTERS 1, 5, 7 AND 8 DUE DATE : 3:00 p.m. 21 AUGUST 2012 TOTAL MARKS : 100 INSTRUCTIONS TO CANDIDATES FOR COMPLETING AND SUBMITTING ASSIGNMENTS The complete Instructions to Students for Completing and Submitting Assignments must be collected from any IMM GSM office, the relevant Student Support Centre or can be downloaded from the IMM GSM website. It is essential that the complete instructions be studied prior to commencing your assignment. The following points highlight only a few important notes. 1. You are required to submit ONE assignment per subject. 2. The assignment will contribute 20% towards the final examination mark, and the other 80% will be contributed by the examination, however the examination papers will count out of 100%. 3. Although your assignment will contribute towards your final examination mark, you do not have to earn credits for admission to the examinations; you are automatically accepted on registering for the exam. 4. Number all the pages of your assignment (e.g. page 1 of 4) and write your name and surname, student number and subject at the top of each page. 5. The IMM GSM requires assignments to be presented on plain A4 paper. You must show all working calculations, including and where appropriate multiple choice working calculations. 6. A separate assignment cover, which is provided by the IMM GSM, must be attached to the front cover of each assignment. 7. Retain a copy of each assignment before submitting, in case the original does not reach the IMM GSM. 8. The assignment due date refers to the day up to which assignments will be accepted for marking purposes. The deadline is 3:00 p.m. on 21 August Late assignments will be accepted, but 25 marks will be deducted from the maximum mark, if received after 3:00 p.m. on 21 August 2012 and up to 5:00 p.m. the following day, after which no assignments will be accepted. 9. If you fail to follow these instructions carefully, the IMM Graduate School of Marketing cannot accept responsibility for the return of the assignment. It may even result in your assignment not being marked. Results will be available on the IMM GSM website, on Friday, 5 October 2012.

2 Page 2 of 11 SPECIFIC INSTRUCTIONS: Answer ALL the questions. Show ALL calculations. Read all questions carefully to determine exactly what is required before attempting to answer. Number your answers clearly and set them out under appropriate headings and sub-headings. ANSWER ALL THE QUESTIONS QUESTION 1 [25] Indicate your answers to each of the following questions on the answer sheet provided. Each answer is worth one (1) mark. For each question below select the MOST APPROPRIATE answer from the choices given. Mark your answer with an X in the correct block on the ANSWER SHEET on page The financial statement showing an organisation s accounting value on a particular date is the a. income statement. b. balance sheet. c. statement of cash flows. d. tax reconciliation statement. e. shareholders equity sheet A current asset is a. an item currently owned by the organisation. b. an item that the organisation expects to own within the next year. c. an item currently owned by the organisation that will convert to cash within the next 12 months. d. the amount of cash on hand the organisation currently shows on its balance sheet. e. the market value of all items currently owned by the organisation The financial statement summarising an organisation s performance over a period of time is the a. income statement. b. balance sheet. c. statement of cash flows. d. tax reconciliation statement. e. shareholders equity sheet A computer used in a business office by the office manager is classified as a. a current asset. b. an intangible asset. c. net working capital. d. a tangible asset. e. an inventory item.

3 Page 3 of Which of the following are included in current assets? I. Equipment II. Inventory III. Accounts payable IV. Cash a. II and IV only b. I and III only c. I, II, and IV only d. III and IV only e. II, III, and IV only 1.6. An increase in total assets a. means that net working capital is also increasing. b. requires an investment in non-current assets. c. means that shareholders equity must also increase. d. must be offset by an equal increase in liabilities and shareholders equity. e. can only occur when an organisation has positive net profits As seen on an income statement: a. interest is deducted from income and increases the total taxes incurred. b. the tax rate is applied to the profits before interest and taxes when the organisation has both depreciation and interest expenses. c. depreciation is shown as an expense but does not affect the taxes payable. d. depreciation reduces both the taxable profits and the net profit after tax. e. interest expense is added to profits before interest and taxes to get taxable profits According to Generally Accepted Accounting Principles a. revenues are recorded based on the matching principle. b. revenues are recorded based on the realisation principle. c. costs are recorded based on the liquidity principle. d. net profit after tax is recorded based on the realisation principle. e. depreciation is recorded as it affects the cash flows of an organisation According to Generally Accepted Accounting Principles, costs are a. recorded as incurred. b. recorded when paid. c. matched with revenues. d. matched with production levels. e. expensed as management desires An organisation has R300 in inventory, R600 in non-current assets, R200 in accounts receivables, R100 in accounts payable, and R50 in cash. What is the amount of the current assets? a. R500 b. R550 c. R600 d. R1 150 e. R1 200

4 Page 4 of An organisation has net working capital of R350. Long-term debt is R600, total assets are R950 and non-current assets are R400. What is the amount of the total liabilities? a. R200 b. R400 c. R600 d. R800 e. R An increase in which one of the following is a source of cash? a. Accounts payable b. Cash c. Inventory d. Non-current assets e. Accounts receivable Which of the following is (are) sources of cash? I. An increase in accounts receivables II. A decrease in ordinary shares III. An increase in long-term debt IV. A decrease in accounts payable a. I only b. III only c. II and IV only d. I and III only e. I, II, and IV only Use the following information obtained from the financial statements of Financer Ltd to answer Questions 1.14 to 1.18: R Other payables 900 Trade payables Deferred tax liabilities Deferred tax assets Ordinary shares Long-term loans Prepayments Non-controlling interest Preference shares Reserves Trade receivables Bank overdraft Tax payable Non-current assets Goodwill 2 300

5 Page 5 of Financer Ltd s current liabilities amount to: a. R7 000 b. R7 900 c. R8 900 d. R9 100 e. R Financer Ltd s non-current liabilities amount to: a. R2 100 b. R4 000 c. R5 000 d. R8 500 e R Financer Ltd s total equity amounts to: a. R5 500 b. R7 500 c. R9 000 d. R e. R Financer Ltd s total assets amount to: a. R b. R c. R d. R e. R Financer Ltd s current assets amount to: a. R8 000 b. R c. R d. R e. R Which one of the following business forms has a limited lifespan, and when one of the associates dies, leaves, or a new associate becomes part of the business entity, a new business entity then has to be formed? a. Private company b. Sole proprietorship c. Partnership d. Close corporation e. Public company

6 Page 6 of 11 Consider the following list of ratios, and indicate what combination you would use to evaluate the factors indicated in Questions 1.20 to 1.21: a) Trade payables turnover time f) Financial gearing ratio b) Dividend yield g) Reinvestment coverage c) Return on shareholders equity h) Price-earnings ratio d) Fixed obligations coverage i) Profit margin e) Cash return on assets j) Cash conversion cycle Profitability: a. (a) and (c) b. (b) and (f) c. (c) and (i) d. (d) and (i) e. (c) and (b) 1.21 Liquidity: a. (a) and (j) b. (b) and (g) c. (c) and (h) d. (e) and (g) e. (j) and (e) 1.22 A public company is distinguishable by the following abbreviation after the name of the company: a. (Pty) Ltd b. Ltd c. CC d. Corp e. Pty

7 Page 7 of 11 Use the following information from the 2009 financial statements of ABC Ltd to answer Questions 1.23 to 1.25: Cash Trade receivables Inventory Investment in associates Property, plant and equipment at cost Accumulated depreciation Trade payables Tax payable Short-term loans Long-term loans Ordinary share capital Preference share capital Reserves Retained profit Turnover Cost of sales Operating expenses Investment income Finance cost Tax Preference share dividends Ordinary share dividends ABC Ltd s current ratio is: a. 1,22 b. 1,37 c. 1,64 d. 1,81 e ABC Ltd s return on total assets is: a. 7.92% b % c % d % e 10.87% 1.25 ABC Ltd s inventory turnover ratio is: a times b times c times d times e 5.78 times

8 Page 8 of 11 QUESTION 2 [20] The following items from the 2011 financial statements of Missing Ltd are provided to you: Preference share capital Reserves Tax payable Investments in shares Trade receivables Dividends payable Ordinary share capital Property, plant and equipment at cost price Inventories Trade payables Cash Long-term loans Retained earnings Bank overdraft Accumulated depreciation on PPE Short-term loans Current assets Turnover Cost of sales Operating expenses Operating income Preference share dividends Finance cost Tax Ordinary share dividends Profit before finance cost and taxation You are required to: Complete the statement of financial position and statement of comprehensive income for Missing Ltd.

9 Page 9 of 11 QUESTION 3 [41] The 2011 standardised financial statements of Quest Ltd. are as follows: Statement of financial position Assets 2011 Property, plant and equipment (PPE) at cost price Accumulated depreciation (16 000) PPE at carrying value Investment in shares Other long-term assets Non-current assets Inventories Trade receivables Cash and cash equivalents Current assets Total assets Equity and liabilities Share capital Reserves Retained earnings Ordinary shareholders equity Preference shares Shareholders equity Total equity Long-term debentures Long-term debt Non-current liabilities Trade payables Tax payable Dividends payable Current liabilities Total equity and liabilities

10 Page 10 of 11 Statement of comprehensive income 2011 Turnover Cost of sales and services rendered (90 000) Gross profit Operating expenses (23 510) Operating profit Investment income Finance cost (2 800) Profit before tax Tax (11 160) Profit after tax Preference share dividends (6 000) Attributable earnings Ordinary dividends (3 700) Retained earnings (for the year) Additional information: Purchases on credit for the year amount to R Lease payments of R7 000 were made during the year Assume that there are 360 days per year. You are required to: Calculate all possible ratios under the following headings: Liquidity ratios, Efficiency ratios and Profitability ratios. QUESTION 4 [14] Complete the following table by writing your answers next to the corresponding letters A N in your script: (e.g. P = R4 500) Number of units sold Cost price per unit Total Cost % mark-up on cost price % mark-up on selling price Mark-up Selling Price Total Sales 1000 R 50 R A B R 5.00 R R C R 150 R D E R F R G R H 6.54 I R J K R 210 R L M N R ASSIGNMENT TOTAL: 100

11 Page 11 of 11 ANSWER SHEET (DETACH THE ANSWER SHEET AND INCLUDE IT WITH YOUR ASSIGNMENT) ASSIGNMENT: DATE: 21 August 2012 QUESTION One (1) STUDENT NUMBER: Financial Management () QUESTION NO. SELECTED ANSWER 1.1 a b c d e 1.2 a b c d e 1.3 a b c d e 1.4 a b c d e 1.5 a b c d e 1.6 a b c d e 1.7 a b c d e 1.8 a b c d e 1.9 a b c d e 1.10 a b c d e 1.11 a b c d e 1.12 a b c d e 1.13 a b c d e 1.14 a b c d e 1.15 a b c d e 1.16 a b c d e 1.17 a b c d e 1.18 a b c d e 1.19 a b c d e 1.20 a b c d e 1.21 a b c d e 1.22 a b c d e 1.23 a b c d e 1.24 a b c d e 1.25 a b c d e

CHAPTERS COVERED : CHAPTERS 1-8, 10 & LEARNER GUIDE : STUDY UNITS 1-4 & 8. DUE DATE : 3:00 p.m. 21 AUGUST 2012

Page 1 of 6 ASSIGNMENT 2 ND SEMESTER : FINANCIAL MANAGEMENT () CHAPTERS COVERED : CHAPTERS 1-8, 10 & 21-24 LEARNER GUIDE : STUDY UNITS 1-4 & 8 DUE DATE : 3:00 p.m. 21 AUGUST 2012 TOTAL MARKS : 100 INSTRUCTIONS