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FIN3702 Assignment 2 Semester 2 2024 (215721)- DUE 30 September 2024
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FIN3702 Assignment 2 Semester 2 2024 (215721)- DUE 30 September 2024 QUESTIONS WITH COMPLETE ANSWERS
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[Date]FIN3702 Assignment
2 Semester 2 2024
(215721)- DUE 30
September 2024
QUESTIONS WITH ANSWERS
,FIN3702 Assignment 2 Semester 2 2024 (215721)- DUE 30 September 2024
Question 1
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.
QUESTION 2
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
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
QUESTION 4
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
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
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