Exam (elaborations)
FIN2601 Assignment 1 Semester 2 2024
- Institution
- University Of South Africa
FIN2601 Assignment 1 Semester 2 2024 QUESTIONS AND ANSWERS
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FIN2601 Assignment 1Semester 2 2024
[Company address]
,FIN2601 Assignment 1 Semester 2 2024
Question 1
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
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.
QUESTION 3
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
Financial reporting provides information about a company’s economic resources and
the claims to those resources and various parties have varying objectives when they
examine a company’s financial statements. Which of the following statement is least
correct when analysing ratios?
1. Liquidity ratios measures the company ability to meet its financial obligation in the
long run.
2. Activity ratios measures the efficiency with which accounts are converted into
investments.
3. Profitability ratios measures the company’s profit with respect to profit for the year.
4. Debt ratio is a proportion of total assets financed by the company’s liabilities.
QUESTIO 5
Kiddies County clothing company pays 6% interest on its outstanding debt, which
amounts to R720 000. The company’s sales are R2 478 000, its tax rate is 40% and its
net profit margin is 10,7%. What is the company time interest earned ratio?
1. 1,74 times
2. 5,73 times
3. 6,74 times
4. 7,80 times
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