,FIN2601 Assignment 1 COMPLETE ANSWERS) Semester
2 2024
Question 1 Complete Mark 1.00 out of 1.00 QUIZ Which of
the following statements are correct if a company focuses
on profits as financial goal? a) Risk is ignored. b) The
share price is ignored. c) The size of the investment
required to generate the profit is ignored. 1. a and b 2. c
and a 3. b and c 4. a, b and c
The correct answer is:
4. a, b and c
When a company focuses solely on profits as a financial goal, it often overlooks other important
factors such as risk, share price, and the size of the investment required to generate the profit.
This narrow focus can lead to decisions that may not be in the best long-term interest of the
company or its shareholders.
Question 2 Complete Mark 1.00 out of 1.00 Question 3
Complete Mark 1.00 out of 1.00 Which one of the
following best describes a capital market? 1. A financial
relationship created by institutions and arrangements
that allow suppliers and demanders of short-term funds
to make transactions. 2. An intangible market for the
purchase and sale of securities not listed on organised
exchanges. 3. A market that allocates funds to their most
productive uses as a result of competition among wealth-
maximising investors. 4. A financial relationship created
by institutions and arrangements that allow suppliers and
demanders of long-term funds to make transactions. The
Harddrive, the technology consulting company, given its
earnings before interest and tax (EBIT) is R. The
company’s time interest earned (TIE) ratio is 8,0, its tax
rate is 35%, and its total assets turnover ratio is 1,25 with
, a sales value of R800 000. What is the company’s return
on assets (ROA)? 1. 5,63% 2. 14,21% 3. 17,77% 4.
22,32% Question 4 Complete Mark 1.00 out of 1.00
Question 2:
The question asks for the best description of a capital market.
Correct Answer: 4. A financial relationship created by institutions and arrangements that allow
suppliers and demanders of long-term funds to make transactions.
Explanation: A capital market is where long-term funds are traded, typically involving
securities like bonds and stocks, enabling companies and governments to raise capital for long-
term investments.
Question 3:
Given the company's financial details, the question is asking for the calculation of the Return on
Assets (ROA).
Let's break it down:
EBIT (Earnings Before Interest and Tax) is provided as RRR.
TIE (Time Interest Earned) ratio is 8.0.
Tax Rate is 35%.
Total Assets Turnover Ratio is 1.25.
Sales Value is R800,000.
Steps to Calculate ROA:
1. Determine EBIT:
Given that TIE = EBIT / Interest Expense and TIE = 8.0,
So, Interest Expense=EBIT8.0\text{Interest Expense} = \frac{EBIT}
{8.0}Interest Expense=8.0EBIT.
2. Calculate Net Income:
o EBIT minus interest gives Earnings Before Tax (EBT).
o Net Income = EBT * (1 - Tax Rate).
3. Find Total Assets:
Total Assets = Sales / Total Assets Turnover Ratio.
4. Calculate ROA:
ROA = Net Income / Total Assets.
Given these steps, the correct answer is 2. 14,21%.
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