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) QUESTIONS WITH ANSWERS
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[Company name]FIN3702
Assignment 2
Semester 2 2024
(215721)- DUE 30
September 2024
QUESTIONS WITH DETAILED 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 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
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