RSK4804
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CONFIDENTIAL
UNIVERSITY EXAMINATIONS
January/February 2024
RSK4804
CREDIT RISK MANAGEMENT
100 marks
Duration: 3 hours
EXAMINERS:
FIRST: MR S MOLEFE
SECOND: MR M NXUMALO
EXTERNAL: DR H Le ROUX
This assessment consists of 26 pages. Please remember to scan the QR code for the Invigilator App.
Instructions:
1. Any battery-operated pocket calculator may be used. You may use a Sharp EL733-A, Sharp
EL738, HP12C or HP10BII financial calculator.
2. No rough work will be marked.
3. Use sentence case in Arial 10pt.
4. This is closed book examination.
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RSK4804
Date: 5 February 2024
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CONFIDENTIAL
Page 2 of 26 RSK4804
January/February 2024
QUESTION 1 [10]
When anyone is planning to acquire, keep or sell shares in a business, the financial health
thereof is of the utmost importance. According to Prof Edward Altman, the Z-score can be used
to predict with 95% accuracy the risk of a business going bankrupt within a year, and with 72%
accuracy, within two years. Banks use similar information to make lending decisions. As a credit
analyst for Saamtrek Bank, use the information below to calculate the bankruptcy risk of
Matimba Transport (Pty) Ltd using Altman’s Z-score, and then give your recommendation.
The following ratios are completed for Matimba Transport (Pty) Ltd for FY 2021:
o working capital to total assets ratio = 25% - X1
o retained earnings to total assets ratio = 30% - X2
o profit before interest and tax to total assets = 32% - X3
o market value of equity to book value of debt = 135% - X4
o sales to total assets = 250% - X5
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