BUSINESS STUDIES – FINANCIAL MANAGEMENT

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10 nov. 2013 (il y a 3 années et 11 mois)

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BUSINESS STUDIES


FINANCIAL MANAGEMENT


Paper I : Short Questions

1.

What are the common sources of long term funds for a small business?

(90:2 marks)

2.

Describe, with examples, the differences between a restaurant

s fixed costs and
its variable costs. (90:
4 marks)

3.

How could a company

s credit policy affect its profits? (91:3 marks)

4.

Briefly describe any 2 types of budgets used in business. (92:2 marks)

5.

If a company adopts an easy credit policy, what might be the effects on its
earnings? (92:3 marks)

6.

Brief
ly explain 3 applications of break
-
even analysis. (92:3 marks)

7.

What is a rights issue(or offer) of new shares? (93:2 marks)

8.

What are the major drawbacks of the payback method in capital budgeting?
(93:2 marks)

9.

What types of inventory costs are NOT inclu
ded in the calculation of simple
Economic Order Quantity in inventory control? (94:2 marks)

10.

What are the limitations of the Net Present Value method in capital budgeting?
(94:2 marks)

11.

What is financial leverage? (95:2 marks)

12.

What activity ratios are com
monly used and how useful are they in
analyzing

financial statements? (95:3 marks)

13.

A clerk calculates the following financial ratios for a company. Explain the
mistakes, if any, in the figures.

Current ratio




=

2.0

Quick ratio




=

3.0

Fixed assets tur
nover


=

1.5

Total assets turnover


=

2.0



(96:4 marks)

14.

How could a company

s inventory policy affect its profits? (97:4 marks)

15.

Describe 3 common sources of long term funds for small businesses.

(97:3 marks)

16.

What is a futures market? Give an example o
f a locally traded instrument.
(98:3 marks)

17.

How might a company

s profits be affected if it adopts a tight credit control
policy? (98:4 marks)




18.

Consider the following financial ratios for Tse Kee Jewellery:

Tse Kee



Industry Average



Current ratio

3.2 times 3.3 times



Quick ratio (acid test)



1.2 times




2.5 times



Profit margin





3.8%




3.9%



Return on total assets



5.5%




8.0%

Briefly explain why Tse Kee

s quick ratio and return on total assets are so low
comp
ared with the industry averages. (99:3 marks)

19.

List 4 factors that are commonly used to evaluate a company

s credit standing.
(00:4 marks)

20.

Activity ratios are commonly used in financial ratio analysis to measure specific
aspects of a company

s operations.

Name two of these ratios and briefly
describe what they measure. (00:3 marks)

21.

A petroleum refinery is worried about the fluctuation of crude oil prices in three
month

s time. Explain how the refinery can make use of futures contracts to
reduce the risk
s of fluctuation in oil prices. (01:3 marks)

22.

A company is considering relaxing its credit policy during a recession. Suggest
one reason for and one reason against this change in credit policy. (02:4 marks)

23.

A company is holding an investment portfolio of

Hang Seng Index constituent
stocks. If the company expects a falling stock market, explain how it can hedge
the risk this portfolio is facing. (04 : 4 marks)


Paper II : Essay Questions

1.

If you were the financial manager of a large firm, what types of s
hort
-
term
funding would you use most? Why? Would it be different if you were the
financial manager of a small to medium size firm? Why? (1992)

2.

Why is it so important for a small business to have a good financial plan and what
elements should be taken i
nto account in preparing the financial plan? (1994)

3.

Which is the better measure of management performance of a firm: the rate of
return on owners


equity or the market share? Discuss with examples. (2000)

4.

(a)

What are the factors affecting the ability o
f a firm to obtain short
-
term


funding? (10 marks)

(b)

With reference to the factors in (a), explain how the sources of short
-
term



funding for a large firm might be different from those for a small firm.



(15 marks)







(2001)




5.

The successful start
-
up of a small business requires not only securing initial
financing but also dealing with various managerial issues.

(a)

Evaluate the main sources of initial financing available to a small business.

(9 marks)

(b)

Discuss the managerial issues

that have to be dealt with in setting up a small
business. (16 marks) (2002)

6.

Effective credit management is very important because the majority of
commercial sales are on credit.

(a)

Suggest what criteria can be used to assess the credit worthiness of cu
stomers.
(10 marks)

(b)

What methods are available to lower the risk of bad debts? (15 marks)
(2004)