FIN2601 Exam Pack .

FIN2601 Exam Pack. Financial Management. At the end of 2015, Moscow Industries reported retained earnings of R775 000 and it had R367 500 worth of net income during the year. The previous year the company had reported R455 000 in retained earnings. If the company purchased no shares during 2007, how much dividends did it pay during 2015 1. R 47 500 2. R 47 381 3. R 52 500 4. R 55 125 5) A firm with sales of R1 000 000, net profit after taxes of R52 250, total assets of R1 200 000 and total liabilities of R450 000 has a return on equity of? 1. 20% 2. 4% 3. 3% 4. 7 6) Which one of the following statements is correct? 1. A reduction in inventories held will have no effect on the current ratio 2. If a firm increase its sales while holding inventories constant, then its inventory turnover will increase if all other factors are held constant. 3. An increase in inventories will have no effect on the current ratio. 4. A reduction in inventory turnover will generally lead to an increase in the return on equity (ROE) 7) In the DuPont formula, the return on total assets is equal to 1. (net profit margin) x (total asset turnover) 2. (return on equity) x (financial leverage multiplier) 3. (net profit margin) x (fixed asset turnover) pg. 4 4. (return on equity) x (total asset turnover) 8) An organisation with a gross profit margin that meets the industry standards, but a net profit margin that is below the industry standards must have excessive 1. principal payments 2. dividend payments 3. general and administrative expenses 4. cost of goods sold Question 9 and 10 are based on the following cash budget. We are Brazil Pty Ltd had the following cash budget prior to the FIFA 2014 World Cup. The company’s policy is to maintain a target cash level of R2 500 every month. 9) The bank overdraft required for February is? 1. R3 600 2. R2 500 3. R3 000 4. R500 10) The surplus cash required for marketable securities in May is? 1. R 1 700 2. R 4 600 3. R 2 500 4. R 2 100 pg. 5 11) Cadbury Ltd's latest net income for 2014 was R1250 000 and it had R225 000 ordinary shares outstanding Its interest expense amounted to R20 000. The company wants to pay out 45% of its income. What dividend per share should it declare'? 1. R2,50 2. R2,14 3. R2,46 4. R2,26 12) Lisa is considering an investment of R650 today that will accumulate to R734 in one year's time. Calculate the effective annual rate on the investment if the interest is compounded semi-annually 1. 117% 2. 9 1% 3. 129% 4. 141% 13) The present value of R 2 000 to be received 10years from today, assuming an opportunity cost of 15%, is 1. R5187 2. R494 3. R881 4. R771 14) Find the present value of the following stream of cash flows by assuming that the organisation has an opportunity cost of 25% Year Amount a) R 5 000 b) R25 000 c) R14 000 pg. 6 1. R27 168 2. R34 000 3. R32 800 4. R35 200 15) The future value of a R2 000 annuity due, deposited at 8%, compounded annually for each of the next 10 years, is 1. R28 973 2. R64 000 3. R55 510 4. R31 291 16)If the annual interest rate is12% and is compounded quarterly, calculate the approximate future value of R2 000 invested for 3 years 1. R2 850 2. R3150 3. R3 000 4. R2 810 17) Mr Moyo plans to buy a bicycle for R5 000 in 4% year's time If the interest rate is16% compounded quarterly, how much should he invest today(round off to the nearest whole number)? 1. R2 240 2. R2 468 3. R1500 4. R3 377 pg. 7 18) Which one of the following would best be classified as "a use of cash" when preparing a firm's cash flow statement? 1. An increase in retained earnings 2. A decrease in cash 3. An increase in accounts payable 4. An increase in inventories 19) The future value of the following stream of cash inflows assuming an interest rate of 25% is Year Amount a) R 5 000 b) R25 000 c) R14 000 1. R53 065 2. R50 250 3. R44 000 4. R66 340 20) The future value of a rand as the interest rate increases and the further into the future an initial deposit is to be received 1. increases, decreases 2. decreases, decreases 3. increases, increases 4. decreases, increases 21) You have just purchased a 10-year, R1 000 par value 8% debentures with interest paid every 6 months If you expect to earn a 10% return on this debenture, how much did you pay for it 1. R1 122 87 2. R875 38 3. R 812 15 pg. 8 4. R1 003 42 22) The current price of a 10-year, R1000 par value debenture is R1158, 91 Interest on this debenture is paid every 6 months and the simple annual yield is 14% Given these facts, what is the bond's annual coupon rate?