Exam (elaborations)
FIN3702 Assignment 2 Semester 2 2024 (215721)- DUE 30 September 2024
- Institution
- University Of South Africa
FIN3702 Assignment 2 Semester 2 2024 (215721)- DUE 30 September 2024 QUESTIONS WITH ANSWERS
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FIN3702 Assignment 2Semester 2 2024
(215721)- DUE 30
September 2024
[Company address]
,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
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