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CONFIDENTIAL AFD 1013 / JANUARY – MAY 2008
SECTION A: (30 MARKS)
Part I: Multiple Choice Questions
Answer all questions.
1. Which of the following is the activity which finance people are involved:
A. Investing decisions
B. Operation decisions
C. Promotion decisions
D. Marketing decisions
2. Marketable securities, account receivables and inventory are listed as .
A. Current asset
B. Current liabilities
C. Long term asset
D. Long term bond
3. Which of the following refer to correlation coefficient, r?
A. A measure of the risk per unit of return
B. A measure of the degree of relationship between two variables.
C. The weighted average expected return on stocks held in a portfolio
D. A measure of the extent to which the returns on a given stock move with the stock
market
4.
This ratio will measure the firm’s
capability to pay off its short-term
liabilities and expenses.
The above statement refers to .
A. Activity ratio
B. Leverage ratio
C. Liquidity ratio
D. Profitability ratio
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CONFIDENTIAL AFD 1013 / JANUARY – MAY 2008
5. refers to part of current assets that fluctuates directly with
changes in sales level.
A. Financing
B. Investment
C. Permanent assets
D. Temporary assets
6. Which of the following function refers to career opportunities in investment?
A. Making decision to decide the credit term and cash management.
B. Analyzing individual securities and determine the optimal mix of securities.
C. Must possess knowledge of valuation technique, regulations and financial
instrument.
D. Making decision regarding choosing what type of securities to issue and inventory
management.
7. Identify which of the following answer will be considered as uses of funds:
A. Sales of stock
B. Increase in assets
C. Decrease in assets
D. Increase in liability
8. Which of the following show the characteristic of financial assets market?
A. Also called ‘tangible’ or ‘real’ asset market
B. Deal with stocks, bonds, notes, mortgages, and other financial instrument
C. Deal with loans on residential, agricultural, commercial and industrial real estate
D. Involve loans on autos and appliances, as well as loans for education and
vacations
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CONFIDENTIAL AFD 1013 / JANUARY – MAY 2008
9. In January 2008, a security analyst estimated that the following returns could be
expected on four large companies.
^
Expected return, k
Burger King 10%
Mac Donald 15%
Pizza Hut 20%
KFC 25%
If we formed a RM100,000 portfolio, investing RM 25,000 in each of these stocks,
what would be expected portfolio return.
A. 17.5%
B. 18.5%
C. 19.5%
D. 20.5%
10.
Ringgit
Financing Short-term or temporary
TCA
PCA
Permanent plus spontaneous
Fixed assets financing
Time
The above graphic illustrate which types of approaches to financing current asset.
A. Classical approach
B. Conservative approach
C. Maturity matching approach
D. Relatively aggressive approach
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CONFIDENTIAL AFD 1013 / JANUARY – MAY 2008
Question 11 is based on the below statement:
Best Inc. : Income Statements for Years Ending December 31,2008
RM (million)
Net sales 3,300.0
Operating cost excluding depreciation & amortization 2,877.8
EBITDA 422.2
Depreciation 110.0
Amortization 0.0
Depreciation and amortization 110.0
EBIT 312.2
Less interest 96.8
Earning before taxes (EBT) 215.4
Taxes (40%) 86.2
Net income before preferred dividends 129.2
Preferred dividends 4.4
Net income 124.8
11. Calculate the Net Cash Flow of the above statement.
A. 123.5
B. 234.8
C. 333.8
D. 883.3
12. Izzudin want to have RM40,000.00 to retire in 15 years. What is his present value at
the discount rate of 12 percent?
A. RM 7320
B. RM 8250
C. RM 8671
D. RM 9543
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CONFIDENTIAL AFD 1013 / JANUARY – MAY 2008
13. Anum is investing RM 1,000.00 at the interest rate of 8 percent for eight years. What
is the value of the investment at the end of the investment period?
A. RM 1,656
B. RM 1,851
C. RM 3,521
D. RM 3,893
14. Nabila deposits RM 150 at the end of each year for the next eight years in an account
that pays 5% interest, how much will Nabila have at the end of eight years?
A. RM 1,234.89
B. RM 1,345.78
C. RM 1,432.35
D. RM 1,987.67
15. Suppose Luqman decides that he needs to have RM 5,300 at the end of the eight
years. How much will he have to deposit at the end of each year at 8 % interest rate?
A. RM 1182.50
B. RM 1211.80
C. RM 1228.20
D. RM 1756.40
Question 16, 17 and 18 based on the following statement.
Hasanah Co. is planning next year’s production. It’s budgeted expenses would be RM 6
million. The company purchased RM 1 million worth of inventory on June 1 st on credit
basis. The company will pay the amount at the end of the credit period 2/10; net 40.
Hasanah Co. also decided to sell the finished goods to the customers on Sept. 1 and its
credit policy as follows 5/10; net 30. The customers of this finished goods normally pay
Hasanah Co. on discount basis.
16. What is cash cycle of Hasanah Co.?
A. 50 days
B. 60 days
C. 70 day
D. 80 days
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CONFIDENTIAL AFD 1013 / JANUARY – MAY 2008
17. Calculate the cash turnover of Hasanah Co.?
A. 0.1833 times
B. 0.1944 times
C. 1.534 times
D. 1.354 times
18. How much the company has to have minimum operating cash?
A. RM 25,720,164.64
B. RM 27,520,164.68
C. RM 28,430,143.77
D. RM 30,864,197.53
19. Which of the following is the types of the five C’s, for evaluation of credit applicants?
I. Character III. Collateral
II.Capacity IV. Collection
A. I , II & III
B. 1, II & IV
C. II, III & IV
D. II & IV
20. Which of the following examples refers to raw materials?
I. Bolts III. Timber
II . Rubbersheet IV. Plywood
A. I only
B. I, II, IV
C. I, III, IV
D. II, III, IV
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CONFIDENTIAL AFD 1013 / JANUARY – MAY 2008
Part II: True or False (10 Marks)
1. The controller is responsible for the activities of the accounting and
the tax department. (True/False)
2. Analyzing individual securities and determining the optimal mix of
securities are main function in investment. (True/False)
3. Coefficient of variation (CV), is a measure of the degree of
relationship between two variables. (True/False)
4. In leverage ratio, the lower the amount of debt, the higher the
higher the ratio will be. (True/False)
5. Continuous probability distribution is the number of possible
outcomes is limited, or finite. (True/False)
6. There are two types of annuity payment; ordinary annuity and
annuity due. (True/False)
7. Hedging approach involves a policy that matches assets and
liabilities maturities. (True/False)
8. Reducing average inventory of age is a strategy that could reduce
the cash cycles and consequently increase its turnover. (True/False)
9. Cash on delivery (COD) means a firm must receive cash before
deliveries can be made. (True/False)
10. Safety stock refers the inventory level at which an order should
be placed. (True/False)
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CONFIDENTIAL AFD 1013 / JANUARY – MAY 2008
SECTION B: (70 MARKS)
Answer all questions.
STRUCTURED QUESTIONS. (30 MARKS)
1. Identify TWO (2) advantages and TWO (2) disadvantages of corporation.
(4 marks)
2. State FOUR (4) fundamental factors affect the cost of money. (4 marks)
3. Defined these term:
i. Spontaneous financing
ii. Permanent financing
iii. Permanent investment in current asset
(6 marks)
4. Describe the major investment characteristics of Malaysian Government Securities
(MGS), Cagamas Bond and Commercial Paper. ( 6 marks)
5. Briefly explain THREE (3) sources of credit information. ( 6 marks)
6. Companies nowadays have established new ways of inventory control systems.
Describe TWO (2) of the systems. ( 4 marks)
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CONFIDENTIAL AFD 1013 / JANUARY – MAY 2008
ESSAY QUESTION. (40 MARKS)
Question 1
Farrah Sdn. Bhd. plan to borrow RM 10,000 for a period of 5 years at 10% per annum.
Calculate the yearly or annuity payments (AP), then complete the table below.
A B C D E
Year Beginning Annuity Interest Principal Ending
balance balance
1 RM 10,000
2
3
4
5 0
(10 marks)
Question 2
Using EOQ Model, calculate the following information supplied by Syahidah Sdn Bhd,
retailer of designer jeans. (Assume 50 weeks a year)
Annual sales = 45,000 units
Annual carrying costs per order = RM 8 per pair of jeans
Ordering cost per order = RM 150
Desired safety stock = 1,500 pairs of jeans
Delivery time = 2 weeks
Calculate:
i. The economic ordering quantity (2.5 marks)
ii. Total inventory costs (2.5 marks)
iii. Number of order placed (2.5 marks)
iv. Reorder point (2.5 marks)
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CONFIDENTIAL AFD 1013 / JANUARY – MAY 2008
Question 3
You just have been appointed as the financial controller of Amer Berhad. Since the
company has been experiencing low profitability in recent years, you are required to
assess this situation and write a report on the performance of this company.
Amer Berhad
Balance Sheet as at 31 Dec 2007
RM RM
Fixed asset 247,500
Less : Provisions for depreciation 85,800
161,700
Current assets
Cash 49,500
Marketable securities 36,300
Account receivable 72,600
Stocks 174,900
333,300
Current liabilities
Account payable 49,500
Notes payable 49,500
Accruals 23,100
122,100 211,200
372,900
Financed by:
Share capital 125,400
Accumulated profit 221,100
346,500
Long term liabilities
Term loan 26,400
372,900
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CONFIDENTIAL AFD 1013 / JANUARY – MAY 2008
Amer Berhad
Income Statement for the year ending 31 Dec 2007
RM RM
Sales 874,500
Cost of goods sold 726,000
Gross profit 148,500
Less:
Interest expenses 4,950
Selling expenses 80,850
Depreciation expenses 13,200 99,000
Net profit before tax 49,500
Taxation (40%) 19,800
Net profit after tax 29,700
Industry average ratios are as follows:
Current ratio 2.0 times
Debt ratio 30%
Times interest earned 7.0 times
Inventory turnover 10.0 times
Average collection period 24 days
Total asset turnover 3 times
Fixed asset turnover 6 times
Net profit margin 3.0 %
Return on total asset 9.0 %
Return on common equity 1.29 %
a) Calculate the relevant ratios as indicated above. (assume 360 days)
(10 marks)
b) Based on your answers in (a), comment on the firm’s liquidity and leverage.
(4 marks)
c) Briefly explain THREE (3) limitation of ratio analysis. (6 marks)
End of Question Paper
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