FIN 3702 ASSIGNMENT 2

QUESTION 1 Three important line items on the statement of cash flows that must be obtained from the income statement include all of the following EXCEPT … 1. interest expenses. 2. net profit after taxes. 3. depreciation and any non-cash charges. 4. cash dividends paid on both preference and ordinary shares. . QUESTION 2 Which one of the following will increase the balance on the cash flow statement of the firm? 1. Sale of stock on credit 2. Loan repayment to banks 3. Debtors paying amounts owed 4. Bank approving overdraft facility QUESTION 3 Which of the following occurrences can most likely explain a negative cash flow from operating activities? 1. Repayment of a loan 2. Investment in new fixed assets 3. An increase in dividend payments 4. A rise in credit sales FIN3702/001/3/2021 5 QUESTION 4 Top Finance Bank Ltd has offered Diamond Company the following alternatives in response to the R275 000 one-year loan application he made to the bank. • Alternative 1: 12% discount interest, with an 10% compensating balance. • Alternative 2: 14% simple interest with interest paid monthly. What will be the effective annual rate if the Diamond chooses to take the cheaper alternative? 1. 12.50% 2. 13.63% 3. 14.93% 4. 15.38% QUESTION 5 Paile furniture suppliers (PFS Ltd) maintains an average inventory of 2000 desks to supply to schools. The carrying cost per desk is estimated at R7.25. The company places an order of 4000 desks on the first of each quarter and the order cost is R80. What will the company’s carrying cost be if the firm uses the EOQ method of inventory? 1. R 894 2. R 1 215 3. R 2 500 4. R14 500 QUESTION 6 The one way for a firm to reduce the amount of cash it needs in any one month is to … 1. accrue taxes. 2. delay the payment of wages. 3. speed up the payment of accounts payable. 4. slow down the payment of accounts receivable. QUESTION 7 Bank Ltd has offered Elle’s Pizza Parlour the following in response to a R100 000 one-year loan application which was made to the bank. The stated rate was 10.4% and a 20% compensating balance. What will the effective annual rate be? 1. 7.00%