MAC3761 QUESTION BANK 2 of 2 2021. 100% VERIFIED Q AND A.

FREQUENTLY ASKED QUESTIONS 1. Can I expect to see identical examination questions as included in previous exam papers or other questions included in the assignment questions or in other tutorial letters? No. You will not get questions that you have seen before, although the exam paper will test the same principles as the questions included in past papers, practice case studies, assignment questions and the study guide. The principles will be tested on a level that is acceptable for third year students. Please work through all the examples and questions referenced in the tutorial letters, assignment questions and the solutions, case studies, additional practice questions and the question bank (all available on myUnisa). Once working through all these different examples you will get an understanding of the different methods as to how the principles can be tested. 2. Which topics are examinable? All topics are examinable and you should refer to your tutorial letters as well as the MAC3761 Financial Management 8 th Edition Study Outline file (under Additional Resources/Managerial Finance 8th Edition FAQ and Explanation) which highlight key areas to focus on and sections that are excluded from the MAC3761 - Finance syllabus. You are encouraged to attempt all the assignments on your own and well in advance to prepare you for the examination. 3. Do I only need to focus on the information included in the MAC3761 - Finance tutorial letters or do I also need to have knowledge of MAC2602? In your tutorial letters of MAC3761 – Finance, we refer to assumed prior knowledge and we refer you to the study guide of MAC2602. If you have not done this specific module (MAC2602) but an equivalent one, please make sure that you make use of the study material available on the website relating to MAC2602. 4. Will I receive a formula sheet or do I need to know my formulas? Only certain formulas may be provided to you should they be tested in the exam. These formulas include the following: 1. Formulas to calculate the beta coefficient 2. Covariance and standard deviation 3. Portfolio variance based on the correlation coefficient 4. Correlation coefficient NB. You still need to know all other formulas by heart. 5. What is the examination format of the tests and year end examination for MAC3761? The MAC3761 examination and test papers will be out of 100 marks (3-hour duration), consisting of two questions, covering both Costing and Finance. The split between the two components may not necessarily be 50%/50%, and you are encouraged to always well prepare for both syllabi. You should also expect the integration of both Costing and Finance topics in a question. MAC3761/QB002 5 6. Do I need to write out the formula (for ratio calculation) or can I substitute my amounts directly into the formula to save time? Writing down the formula and substituting the components / elements will enable the marker to follow your thought process and may lead to conceptual / principle marks when applicable. However, it should be noted that no marks are awarded for simply providing the formula. 7. When computing ratios, should we use the average or closing balances if using balance sheet accounts? ONLY when the question specifically states that average balances should be used. In all other instances use the CLOSING BALANCES. You are encouraged to know how to apply both methods. It should also be noted that when computing ratios, book values must be used instead of market values, unless specifically instructed to or if the ratio formula requires a market value. 8. In the examination, will we be given specific ratios to compute or will we be required to compute all ratios under a particular category (e.g. Profitability, Capital Structure/Solvency or Liquidity)? You will be asked specific ratios that you need to compute, and these will cover different categories as outlined in your textbook. However, students may be required to compute ratios under a particular category in an assignment or an FI concession assessment. You are advised to study all ratios covered in the textbook and know the formulas off by heart. Cash flow related ratios are not covered in MAC3761 – Finance syllabus. 9. When commenting on ratios, are there marks allocated for stating that there was an increase/decrease between two different periods? No. Marks are only awarded if relevant comment is provided over and above simply stating there was an increase or decrease. You are advised to study the REQUIRED carefully to understand whether you need to provide reasons for the increase or if you are required to generally comment on the ratios. Remember to apply your comment to the scenario and not to simply “dump” generic statements. 10. What should be included in the debt balance of the debt : equity ratio? The debt (or interest-bearing debt) balance should include all the interest bearing debt balances (this includes both the long- and short term portions of long term loans). Bank overdraft is usually not included in the debt balance as the bank overdraft is normally used to finance working capital shortfalls, unless the scenario / information depicts the overdraft to be of a permanent nature. 11. Are preference shares to be classified as equity or liability? For simplicity, in MAC3761 – Finance the distinguishing factor is whether the preference shares are redeemable or irredeemable. Redeemable preference shares are classified as a long-term liability and irredeemable (or non-redeemable) preference shares fall under equity. MAC3761/QB002 6 12. Can I make use of my calculator when calculating the Internal Rate of Return (IRR)? If the question does not specify that you need to use the formula, you may use your calculator. HOWEVER: You need to write down the amounts and steps entered into your calculator and the type of calculator (SHARP or HP) used. Marks will be allocated to these amounts and steps. 13. When calculating the Net Present Value, should I use the factors included in the table or can I use my calculator? No tables will be provided in the exams. However, you will be allowed to use a calculator. You need to write down the amounts and steps entered into your calculator and the type of calculator (CASIO, SHARP or HP) used. Marks will be allocated to these amounts and steps. There is no need for writing discount factors when a financial calculator is used. If you do not have a financial calculator, please make sure that you know the TVM formulas as they will not be provided in the exam. 14. Will the valuation methods only be tested as part of Mergers and Acquisitions or will it be tested separately? You may be tested on both of the above. If an exam includes a valuation question, only one of the two options will be tested (that is to say either as part of a Mergers and Acquisition question or as a standalone valuation question). 15. In the examination, are we told which valuation method we should use? The question will provide guidance as to which method you should use to carry out the valuation. This information at times may not be clear and you are advised to always know which methods are applicable. 16. When using the free cash flow method for valuation purposes, the non-operating assets of the entity will not form part of the free cash flow valuation and should be valued separately. What is the implication thereof? It means that you will only include cash flow that represents the operational cash flow that is “free” for distribution to all providers of capital independent of the way the business is financed. Therefore, you need to EXCLUDE: • Non-operational cash flow as non-operating assets should be valued separately • Non-cash charges (depreciation and amortisation) • Finance related cash flows Therefore, you need to INCLUDE: • The effect of capital expenditure and working capital investment that are necessary to sustain the projected future free cash flow • The taxation effect of the cash flows included