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FIN2601 Assignment 1 COMPLETE ANSWERS) Semester 2 2024
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FIN2601 Assignment 1COMPLETE ANSWERS)
Semester 2 2024
100% GUARANTEED
,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 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%
Here are the answers to your quiz questions:
Question 1: If a company focuses on profits as a 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.
, The correct answer is 4. a, b and c. When focusing solely on profits, all three factors (risk, share
price, and investment size) can be overlooked.
Question 2: 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 correct answer is 4. A financial relationship created by institutions and arrangements
that allow suppliers and demanders of long-term funds to make transactions.
Question 3: Given the data:
EBIT (Earnings Before Interest and Tax): R
Time Interest Earned (TIE) ratio: 8.0
Tax rate: 35%
Total Assets Turnover Ratio: 1.25
Sales value: R800,000
To calculate Return on Assets (ROA), follow these steps:
1. Calculate EBIT using the TIE ratio:
o EBIT / Interest Expense = TIE Ratio
o Since TIE Ratio is 8.0, EBIT = 8.0 * Interest Expense
2. Calculate the interest expense:
o Interest Expense = EBIT / TIE Ratio
o Therefore, Interest Expense = EBIT / 8.0
3. Find Net Income:
o Net Income = EBIT * (1 - Tax Rate)
o Net Income = EBIT * (1 - 0.35)
o Net Income = EBIT * 0.65
4. Calculate Assets:
o Total Assets = Sales / Total Assets Turnover Ratio
o Total Assets = R800,.25
o Total Assets = R640,000
5. ROA Calculation:
o ROA = Net Income / Total Assets
o ROA = (EBIT * 0.65) / R640,000
6. Substitute EBIT from Step 1:
o ROA = (8.0 * Interest Expense * 0.65) / R640,000
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