FIN3702 Assignment 2 (COMPLETE ANSWERS) Semester 2 2024 (215721)- DUE 30 September 2024

FIN3702 Assignment 2 (COMPLETE ANSWERS) Semester 2 2024 (215721)- DUE 30 September 2024 ; 100% TRUSTED Complete, trusted solutions and explanations. For assistance, Whats-App 0.6.7-1.7.1-1.7.3.9... Question 1 Not yet answered Marked out of 1.00 Question 2 Not yet answered Marked out of 1.00 QUIZ The information below applies to the next four questions. Extracted statement of fi nancial position for AB Pharmacies Ltd Assets Equity & Liabilities Current assets R10 000 Current liabilities R5 000 Fixed assets R20 000 Long-term debt R12 000 Equity R13 000 Total R30 000 Total R30 000 The company earns 5% on current assets and 15% on fi xed assets. The fi rm’s current liabilities cost 7% to maintain and theaverage annual cost of long-term funds is 20%. Question 01 The fi rm’s initial annual profi ts on total assets are ... 1. R2 500. 2. R3 000. 3. R3 500. 4. R4 500. If the fi rm were to shift R3 000 of current assets to fi xed assets, the fi rm’s net working capital would … the annual profi ts ontotal assets would … and the risk of technical insolvency would … respectively. 1. decrease; increase; increase 2. increase; decrease; decrease 3. decrease; increase; decrease 4. increase; decrease; increase Question 3 Not yet answered Marked out of 1.00 Question 4 Not yet answered Marked out of 1.00 If the fi rm were to shift R7 000 of fi xed assets to current assets, the fi rm’s net working capital would … the annual profi ts ontotal assets would … and the risk of on not being able to meet current obligations would … respectively. 1. increase; decrease; decrease 2. decrease; increase; increase 3. decrease; increase; decrease 4. increase, decrease; increase If the fi rm were to shift R2 000 of current liabilities to long-term funds, the fi rm’s net working capital would … the annual costof fi nancing would … and the risk of technical insolvency would … respectively. 1. decrease; decrease; increase 2. increase; increase; decrease 3. increase; decrease; decrease 4. decrease; increase; decrease Question 5 Not yet answered Marked out of 1.00 Question 6 Not yet answered Marked out of 1.00 The next two questions apply to the information provided below: Bolts and Nuts Ltd has 10 different items in its inventory. The average number of units held in inventory and the average unitcost for each item are provided in the table below. The fi rm uses an ABC system of inventory. Use the information below toanswer questions 5 and 6. Item Average number of units Average unit cost (R) 1 5 000 0.05 2 2 000 1.50 3 100 8.50 4 500 45.00 5 650 3.50 6 10 000 100.00 7 5 100 0.25 8 3 100 5.00 9 20 0.75 10 1 150 2.00 Question 5 According to the table above, the items that belong in the category A include … 1. items 1 and 7. 2. items 4 and 6. 3. items 3 and 9. 4. items 1, 6 and 7. According to the table above, the items that belong in the category C include … 1. items 4 and 6. 2. items 1 and 7. 3. items 1, 3 and 9. 4. items 1, 6 and 7. Question 7 Not yet answered Marked out of 1.00 Question 8 Not yet answered Marked out of 1.00 Question 9 Not yet answered Marked out of 1.00 A fi rm has an operating cycle of 195 days and an average collection period of 49 days and an average payment period of 60days. Assuming 365 days per year, this fi rm will have an average inventory turnover per year of … 1. 2.5 times. 2. 3.2 times. 3. 3.6 times. 4. 4.0 times. In a period of rising sales, the percent-of-sales method used to prepare pro forma fi nancial statements and to plan fi nancing,will tend to … 1. understate retained earnings and overstate the fi nancing needed. 2. overstate retained earnings and understate the fi nancing needed. 3. overstate retained earnings and overstate the additional fi nancing required. 4. understate retained earnings and understate the additional fi nancing required. A company writes checks averaging R15 000 per day, and it takes fi ve days for these checks to clear. The fi rm also receiveschecks in the amount of R17 000 per day, but the fi rm loses three days while its receipts are being deposited and cleared.What is the fi rm’s net fl oat in rand terms? 1. R24 000 2. R32 000 3. R75 000 4. R126 000 Question 10 Not yet answered Marked out of 1.00 Question 11 Not yet answered Marked out of 1.00 Question 12 Not yet answered Marked out of 1.00 Which of the following would cause average inventory holdings to decrease, while other factors remain constant? 1. Fixed order costs double 2. The sales forecast is revised downward by 10% 3. The purchase price of inventory items decreases by 50% 4. The carrying cost of an item deceases (as a percentage of the purchase price) The following information applies to the next two questions. Kekana Bridal Ltd uses 1 540 000 metres of material each year. Furthermore, the fi rm orders the material at a cost of R2 permetre, and fi xed ordering costs of R100 per order. The fi rm’s carrying cost is 20% of the inventory value at cost. Assume a365-day year for this company. Question 11 What is fi rm’s EOQ? 1. 13 563 2. 26 833 3. 27 749 4. 43 987 What is the fi rm’s minimum costs of ordering and holding inventory? 1. R6 254 2. R11 100 3. R11 566 4. R13 563 Question 13 Not yet answered Marked out of 1.00 Question 14 Not yet answered Marked out of 1.00 Question 15 Not yet answered Marked out of 1.00 Relative to cash fl ows affecting net working capital, all of the following are true EXCEPT … 1. that cash outlays for current liabilities are relatively predictable. 2. that cash infl ows are generally more predictable than cash outlays. 3. the more predictable the cash infl ows, the less net working capital a fi rm needs. 4. that since most fi rms are unable to match cash infl ows to outfl ows with certainty, current assets that more thancover outfl ows for current liabilities are necessary. A fi rm may have a negative cash conversion cycle if it carries … 1. very little inventory and sells its products on credit. 2. high inventory and sells its products on credit. 3. very little inventory and sells its products for cash. 4. high inventory and sells its products for cash. A bank lends a fi rm R500 000 for one year at an interest rate of 8% and requires compensating balances of 10% of the facevalue of the loan. The effective annual interest associated with this loan is … 1. 7.0%. 2. 7.2%. 3. 8.0%. 4. 8.9%. Question 16 Not yet answered Marked out of 1.00 Question 17 Not yet answered Marked out of 1.00 Question 18 Not yet answered Marked out of 1.00 The interest charged on the secured short-term loans to a corporation is generally higher than that charged on unsecuredshort-term loans because … 1. secured loans are less risky than unsecured loans. 2. the risk of default is lower on secured loans. 3. it is costly to negotiate and administer secured loans. 4. lenders of secured loans must pay more for their funds. Which one of the following is true about the EOQ ( economic order quantity ) model? 1. If the average inventory increases by 20%, then the total carrying costs will increase by 20%. 2. If the fi xed per order costs increase by 20%, then the EOQ will increase by 20%. 3. If the annual sales, in units, increase by 20%, then the EOQ will increase by 20%. 4. If the average inventory increases by 20%, the total order costs will increase by 20%. Calculate the net operating profi t after tax (NOPAT) if a fi rm has sales of R1 000 000, operating profi t (EBIT) of R100 000,interest expense of R50 000, depreciation of R50 000 and a tax rate of 30%. 1. R35 000 2. R70 000 3. R120 000 4. R700 000 Question 19 Not yet answered Marked out of 1.00 Question 20 Not yet answered Marked out of 1.00 A fi rm has just ended the calendar year making a sale in the amount of R200 000 of merchandise purchased during the yearat a total cost of R150 500. Although the fi rm paid in full for the merchandise purchased during the year, it has yet to collectat year end from the customer. One possible problem this fi rm may face is … 1. low profi tability. 2. insolvency. 3. inability to receive credit. 4. high leverage. A fi rm which uses the aggressive fi nancing strategy plans to purchase raw materials in large quantities to take pricediscounts. The fi rm will fi nance the purchase with a loan. The most likely consequence of this action is … 1. a decrease in the current ratio. 2. an increase in net working capital. 3. an undetermined change in the current ratio. 4. an increase in long-term debt.