ASSIGNMENT 2 SEMESTER : FINANCIAL MANAGEMENT (FM ... - imm
Page 1 of 8
ASSIGNMENT 2ND SEMESTER : FINANCIAL MANAGEMENT (FM) STUDY UNITS COVERED
: CHAPTERS 1 - 5
DUE DATE
: 3:00 p.m. 16 AUGUST 2011
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 made up from 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 the 16 August 2011. Late assignments will be accepted, but 25 marks will be deducted from the maximum mark, if received after 3:00 p.m. on the 16 August 2011 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, www.immgsm.ac.za, on Friday, 7 October 2011.
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
Page 2 of 8
SPECIFIC INSTRUCTIONS Answer ALL questions The use of calculators is permitted. 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 QUESTIONS
QUESTION 1
[10]
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 8. Each question is worth one mark. NB: Detach the answer sheet from the question paper and insert it in your assignment before handing in. 1.1
Accounting statements rest on four important principles. Which ONE of the following is NOT one of these principles? (a) Going concern principle (b) Consistency principle (c) Matching principle (d) Ethical principle
1.2
An example of a tangible asset is a (a) trademark. (b) warehouse. (c) license. (d) goodwill.
1.3
In a cash flow statement the section dealing with cash utilised in investing activities will reflect (a) the redemption of preferential shares, buyback of shares, issuing of shares, and increasing or decreasing interest-bearing debt. (b) the net increase or decrease in cash and cash equivalents for the current year. (c) the income from normal trading activities, such as the trading profit plus depreciation. (d) the replacement of properties, fixtures, equipment and vehicles, for the purposes of maintaining or expanding the current level of activities in the firm.
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
Page 3 of 8
1.4
The cost price of goods that were sold is determined as follows. (a) Stock at the beginning of the period minus purchases at cost price minus end value of stock at cost price. (b) Stock at the beginning of the period plus purchases at cost price minus end value of stock at cost price. (c) Stock at the beginning of the period minus purchases at cost price plus end value of stock at cost price. (d) None of the above statements are correct.
1.5
The declining balance method of depreciation (a) is a fixed annual depreciation percentage applied to the written-down value of the asset. (b) will give the same total net profit as when the declining method is used. (c) is widely used and simple to calculate. (d) All of the above statements are true.
1.6
The correct formula to determine ROCE is (a) sales/assets. (b) net profit after tax + Interest/net total assets. (c) sales/shareholders funds. (d) net profit/assets.
1.7
Earnings yield (EY) is calculated using the formula (a) (b) (c) (d)
net profit after tax/number of ordinary shares. dividends per share/share price. earnings per share/price per share. earnings per share/dividend per share.
1.8
Which ONE of the following statements is correct? (a) It is appropriate to do a time series analysis when sales data are available over several past periods and the business has been established for a long time. (b) With exponential smoothing, data from the past are used and they are analysed for movement. (c) If there is a relationship between sales and some other variable a moving average technique can be applied to construct an equation to describe the relationship. (d) In a scatter diagram the explanatory variable (population) is plotted on the Y-axis and the dependent variable (turnover) is plotted on the Xaxis.
1.9
Management is usually confronted by the degree to which they should automate processes. Identify the correct statement. (a) The higher the degree of automation, the lower the fixed costs would be and the lower the leverage of the firm. (b) The lower the degree of automation, the higher the fixed costs would be and the higher the leverage of the firm. (c) The higher the degree of automation, the higher the fixed costs would be and the higher the operating leverage of the firm.
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
Page 4 of 8
(d)
1.10
The lower the degree of automation, the lower the fixed costs would be and the higher the leverage of the firm.
The Expected Monetary Value (EMV) of a project is (a) the sum of the probabilities of the possible outcomes of a project. (b) used when the business is facing complex situations. (c) improved by allowing customers to place orders in advance or to pay for better information about the level of demand. (d) All of the above.
QUESTION 2 2.1
[15]
Consider the items in the following table and classify them according to their character as components of the basic accounting equation (6) NCA
CA
NCL
CL
OE
a) Capital b) Delivery vehicle c) Trading stock d) Interest earned but not yet received e) Creditor (accounts payable) f) Accumulated depreciation g) Bank overdraft h) Drawings i) Retained earnings j) Sales commission due to be paid to salesmen k) Provision for bad debt l) Amount owed to SARS
NCA = Non-current asset CA = Current asset NCL = Non-current liability CL = Current liability OE = Owners equity
Each correct answer is ½ mark
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
Page 5 of 8
2.2
You are provided with the Income Statement for Mills & Boon for the year ending August 2010. (a)
(b)
You are required to provide the formula and calculate the following ratios for both years: 1. Gross Margin 2. Net Margin 3. Mark-up%
(3)
Comment on the movement in each of the ratios.
(6)
QUESTION 3
[20]
Alex Traders had the following transactions regarding a particular stock item for the month of February 2011. 1 2 7 15 20 25 30
Opening stock 30 units at R50 each Sold 10 units Purchased 20 units at R75 each Purchased 40 units at R100 each Sold 55 units Purchased 45 units at R125 each Sold 12 units
(16)
Calculate the following: a) The cost of sales for the month of February using the FIFO method. (2) b) The amount of gross profit if the firm applies a mark-up of 20% on cost price. (2) Ensure that you follow the format as explained in your study guide and show the units, price and amount for items issued and received as well as the balance after each transaction. QUESTION 4 4.1
[20]
The effectiveness of marketing operations is measured through application of various financial analysis activities. Draw a diagram showing the sequence of these activities and explain the purpose of each activity. (10)
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
Page 6 of 8
Define the concept “capital gearing” and give the formula to calculate this ratio.
(3)
4.3
Explain what is meant by the term “highly geared”.
(1)
4.4
Name the major categories of ratios that can be used for analysis purposes and give at least two examples of each. (6)
4.2
QUESTION 5
[15]
Refer to the information given below and draft the cash flow statement for Peter‟s Kitchen Renovations for the month of August 2011. Show all the relevant entries and also determine the cash balance as at the end of the month. 1 August 1 August 2 August 3 August 4 August 5 August 6 August 7 August 8 August 9 August 10 August 11 August 12 August 13 August 14 August 15 August 16 August
Cash in bank R9,870 Pay R3,000 for new computer software by cheque Receive cash payment from client R10,400 for work performed J.Zwane settles outstanding account to amount of R12,160 Pay an amount of R3,600 to SARS 2nd provisional tax payment Pay Maxi Builders for materials purchased in July 2011, R6,200 Receive invoice from AAA Plumbers for R2,500 Buy goods for R2,100 and pay by debit card Issue invoice to K.Smith for R13,200 for work performed Receive cash deposit from client R3,700 for work to be performed Receive Water and Lights invoice for R1,900 Settle fuel account for July R2,190 Transfer R14,200 from personal account to business account Metro Upholsterers pay 50% deposit on quotation of R21,000 Withdraw cash for salaries to be paid R18,400 Withdraw R7,000 from business account for personal use Write off bad debt of R8,300.
QUESTION 6
[20]
James Black t/a Jack Black opened a new business on 1 October 2009. You are required to complete a balance sheet for the business as at 30 September 2011, given the information below. You must show all your calculations against notes to the balance sheet as appropriate. 1. 2.
James deposited R245,000 in the business account on 1 October 2009. James acquired a 20-year loan to fund the property from where the business is operating. The outstanding amount of the loan as at 30 September 2011 is R230,000. The property is currently valued at R250,000.
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
Page 7 of 8
3.
4. 5.
6. 7. 8.
The business owns a vehicle which was bought on the 1st October 2009 for R120,000. Depreciation on vehicles must be provided for at 20% per annum using the straight line method of depreciation. The business owns equipment acquired on 1st October 2009 for R90,000. Depreciation must be provided for at 15% using the reducing balance method. On 30 September 2011 the following amounts were extracted from the trial balance: 5.1 Debtor‟s control account: R25,000 5.2 Creditor‟s control account: R65,000 5.3 Retained profit as at 01 October 2010: R60,000 5.4 Cash in bank R124,975 Jack Black made a profit after tax of R15,000 for the year ending 30 September 2011 Inventory as at 30 September 2011 amounted to R18,000 James took R60,000 during the year for personal expenses
ASSIGNMENT TOTAL: 100
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
Page 8 of 8
ANSWER SHEET (INCLUDE IT WITH YOUR ASSIGNMENT)
EXAMINATION
:
FINANCIAL MANAGEMENT (FM)
QUESTION
:
ONE (1)
STUDENT NUMBER:
Question no
Answer
1.1
a
b
c
d
1.2
a
b
c
d
1.3
a
b
c
d
1.4
a
b
c
d
1.5
a
b
c
d
1.6
a
b
c
d
1.7
a
b
c
d
1.8
a
b
c
d
1.9
a
b
c
d
1.10
a
b
c
d
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
ASSIGNMENT 2ND SEMESTER : FINANCIAL MANAGEMENT (FM) STUDY UNITS COVERED
: CHAPTERS 1 - 5
DUE DATE
: 3:00 p.m. 16 AUGUST 2011
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 made up from 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 the 16 August 2011. Late assignments will be accepted, but 25 marks will be deducted from the maximum mark, if received after 3:00 p.m. on the 16 August 2011 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, www.immgsm.ac.za, on Friday, 7 October 2011.
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
Page 2 of 8
SPECIFIC INSTRUCTIONS Answer ALL questions The use of calculators is permitted. 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 QUESTIONS
QUESTION 1
[10]
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 8. Each question is worth one mark. NB: Detach the answer sheet from the question paper and insert it in your assignment before handing in. 1.1
Accounting statements rest on four important principles. Which ONE of the following is NOT one of these principles? (a) Going concern principle (b) Consistency principle (c) Matching principle (d) Ethical principle
1.2
An example of a tangible asset is a (a) trademark. (b) warehouse. (c) license. (d) goodwill.
1.3
In a cash flow statement the section dealing with cash utilised in investing activities will reflect (a) the redemption of preferential shares, buyback of shares, issuing of shares, and increasing or decreasing interest-bearing debt. (b) the net increase or decrease in cash and cash equivalents for the current year. (c) the income from normal trading activities, such as the trading profit plus depreciation. (d) the replacement of properties, fixtures, equipment and vehicles, for the purposes of maintaining or expanding the current level of activities in the firm.
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
Page 3 of 8
1.4
The cost price of goods that were sold is determined as follows. (a) Stock at the beginning of the period minus purchases at cost price minus end value of stock at cost price. (b) Stock at the beginning of the period plus purchases at cost price minus end value of stock at cost price. (c) Stock at the beginning of the period minus purchases at cost price plus end value of stock at cost price. (d) None of the above statements are correct.
1.5
The declining balance method of depreciation (a) is a fixed annual depreciation percentage applied to the written-down value of the asset. (b) will give the same total net profit as when the declining method is used. (c) is widely used and simple to calculate. (d) All of the above statements are true.
1.6
The correct formula to determine ROCE is (a) sales/assets. (b) net profit after tax + Interest/net total assets. (c) sales/shareholders funds. (d) net profit/assets.
1.7
Earnings yield (EY) is calculated using the formula (a) (b) (c) (d)
net profit after tax/number of ordinary shares. dividends per share/share price. earnings per share/price per share. earnings per share/dividend per share.
1.8
Which ONE of the following statements is correct? (a) It is appropriate to do a time series analysis when sales data are available over several past periods and the business has been established for a long time. (b) With exponential smoothing, data from the past are used and they are analysed for movement. (c) If there is a relationship between sales and some other variable a moving average technique can be applied to construct an equation to describe the relationship. (d) In a scatter diagram the explanatory variable (population) is plotted on the Y-axis and the dependent variable (turnover) is plotted on the Xaxis.
1.9
Management is usually confronted by the degree to which they should automate processes. Identify the correct statement. (a) The higher the degree of automation, the lower the fixed costs would be and the lower the leverage of the firm. (b) The lower the degree of automation, the higher the fixed costs would be and the higher the leverage of the firm. (c) The higher the degree of automation, the higher the fixed costs would be and the higher the operating leverage of the firm.
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
Page 4 of 8
(d)
1.10
The lower the degree of automation, the lower the fixed costs would be and the higher the leverage of the firm.
The Expected Monetary Value (EMV) of a project is (a) the sum of the probabilities of the possible outcomes of a project. (b) used when the business is facing complex situations. (c) improved by allowing customers to place orders in advance or to pay for better information about the level of demand. (d) All of the above.
QUESTION 2 2.1
[15]
Consider the items in the following table and classify them according to their character as components of the basic accounting equation (6) NCA
CA
NCL
CL
OE
a) Capital b) Delivery vehicle c) Trading stock d) Interest earned but not yet received e) Creditor (accounts payable) f) Accumulated depreciation g) Bank overdraft h) Drawings i) Retained earnings j) Sales commission due to be paid to salesmen k) Provision for bad debt l) Amount owed to SARS
NCA = Non-current asset CA = Current asset NCL = Non-current liability CL = Current liability OE = Owners equity
Each correct answer is ½ mark
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
Page 5 of 8
2.2
You are provided with the Income Statement for Mills & Boon for the year ending August 2010. (a)
(b)
You are required to provide the formula and calculate the following ratios for both years: 1. Gross Margin 2. Net Margin 3. Mark-up%
(3)
Comment on the movement in each of the ratios.
(6)
QUESTION 3
[20]
Alex Traders had the following transactions regarding a particular stock item for the month of February 2011. 1 2 7 15 20 25 30
Opening stock 30 units at R50 each Sold 10 units Purchased 20 units at R75 each Purchased 40 units at R100 each Sold 55 units Purchased 45 units at R125 each Sold 12 units
(16)
Calculate the following: a) The cost of sales for the month of February using the FIFO method. (2) b) The amount of gross profit if the firm applies a mark-up of 20% on cost price. (2) Ensure that you follow the format as explained in your study guide and show the units, price and amount for items issued and received as well as the balance after each transaction. QUESTION 4 4.1
[20]
The effectiveness of marketing operations is measured through application of various financial analysis activities. Draw a diagram showing the sequence of these activities and explain the purpose of each activity. (10)
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
Page 6 of 8
Define the concept “capital gearing” and give the formula to calculate this ratio.
(3)
4.3
Explain what is meant by the term “highly geared”.
(1)
4.4
Name the major categories of ratios that can be used for analysis purposes and give at least two examples of each. (6)
4.2
QUESTION 5
[15]
Refer to the information given below and draft the cash flow statement for Peter‟s Kitchen Renovations for the month of August 2011. Show all the relevant entries and also determine the cash balance as at the end of the month. 1 August 1 August 2 August 3 August 4 August 5 August 6 August 7 August 8 August 9 August 10 August 11 August 12 August 13 August 14 August 15 August 16 August
Cash in bank R9,870 Pay R3,000 for new computer software by cheque Receive cash payment from client R10,400 for work performed J.Zwane settles outstanding account to amount of R12,160 Pay an amount of R3,600 to SARS 2nd provisional tax payment Pay Maxi Builders for materials purchased in July 2011, R6,200 Receive invoice from AAA Plumbers for R2,500 Buy goods for R2,100 and pay by debit card Issue invoice to K.Smith for R13,200 for work performed Receive cash deposit from client R3,700 for work to be performed Receive Water and Lights invoice for R1,900 Settle fuel account for July R2,190 Transfer R14,200 from personal account to business account Metro Upholsterers pay 50% deposit on quotation of R21,000 Withdraw cash for salaries to be paid R18,400 Withdraw R7,000 from business account for personal use Write off bad debt of R8,300.
QUESTION 6
[20]
James Black t/a Jack Black opened a new business on 1 October 2009. You are required to complete a balance sheet for the business as at 30 September 2011, given the information below. You must show all your calculations against notes to the balance sheet as appropriate. 1. 2.
James deposited R245,000 in the business account on 1 October 2009. James acquired a 20-year loan to fund the property from where the business is operating. The outstanding amount of the loan as at 30 September 2011 is R230,000. The property is currently valued at R250,000.
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
Page 7 of 8
3.
4. 5.
6. 7. 8.
The business owns a vehicle which was bought on the 1st October 2009 for R120,000. Depreciation on vehicles must be provided for at 20% per annum using the straight line method of depreciation. The business owns equipment acquired on 1st October 2009 for R90,000. Depreciation must be provided for at 15% using the reducing balance method. On 30 September 2011 the following amounts were extracted from the trial balance: 5.1 Debtor‟s control account: R25,000 5.2 Creditor‟s control account: R65,000 5.3 Retained profit as at 01 October 2010: R60,000 5.4 Cash in bank R124,975 Jack Black made a profit after tax of R15,000 for the year ending 30 September 2011 Inventory as at 30 September 2011 amounted to R18,000 James took R60,000 during the year for personal expenses
ASSIGNMENT TOTAL: 100
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
Page 8 of 8
ANSWER SHEET (INCLUDE IT WITH YOUR ASSIGNMENT)
EXAMINATION
:
FINANCIAL MANAGEMENT (FM)
QUESTION
:
ONE (1)
STUDENT NUMBER:
Question no
Answer
1.1
a
b
c
d
1.2
a
b
c
d
1.3
a
b
c
d
1.4
a
b
c
d
1.5
a
b
c
d
1.6
a
b
c
d
1.7
a
b
c
d
1.8
a
b
c
d
1.9
a
b
c
d
1.10
a
b
c
d
Assignment: 2nd Semester 2011
© IMM Graduate School of Marketing FM
