Financial Management 1 (FINM3101)
Faculty of Economics and Management Science (FEMS)
Semester: First Semester
Level: 300
Year: 2018
Section A; COST ANALYSIS
Question one: (25 mks)
Jones corporation’s financial statement appears as shown below:
Jones corporation
Balance sheet as at 31/12/211
ASSETS
Non-current assets:
Plant assets
5,000,000
Current assets
Cash 1,000,000
Marketable securities 2,000,000
Inventory 3,000,000
Total current assets
6,000,000
Total assets
11,000,000
LIABILITIES AND STOCK HOLDERS EQUITY
Liabilities
Current liabilities 2,000,000
Long term liabilities 1,000,000
Total liabilities
3,000,000
Shareholders equity
Common stock 10f per value 100,000 1,000,000
Premiums on common stock 5,000,000
Retained earnings 2,000,000
Total owners equity
8,000,000
Total liabilities and owners equity
11,000,000
Jones corporation in
Income statement elements for the year ended Dec 31/12/2011(amounts in FCAF)
Net sales 10,000,000
Gross profit 6,000,000
Operating Expenses 4,000,000
Income before taxes 1,000,000
Income tax (33%) 3,000,000
Net income: 1,860,000
Additional information includes a market price of 1500frs per share of stocks; total dividend
of 6,000,000frs for the year 2011 and 2,500,000frs of inventory as at Dec. 31.2010
Required: compute the following ratios
a) Current ratios 9mks)
b) Quick ratio (3mks)
THE UNIVERSITY OF BAMENDA
FACULTY OF ECONOMICS AND MANAGEMENT SCIENCES
1
st
Semester Exam Course: Financial Management: FINA301
Credit Value:
Course Lecturers:
Time: Course Status: Date: 2018
Venue: Instruction:
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c) Inventory turnover (3mks)
d) Debt equity ratio (3mks)
e) Earnings per share (3mks)
f) Price earnings ratio (4mks)
g) Dividends per share (3mks)
h) Dividend payout (3mks)
Question two:
Assume a firm that is having 20% as its required rate of return is faced with the following
investments opportunities:
project Initial cash out
flow FCFA
IRR(%) NPV(FRS) PI
A 150,000 23 27,000 0.18
B 300,000 25 50,000 0.17
C 450,000 21 175,000 0.39
D 150,000 29 35,000 0.23
E 200,000 18 (28,000) (0.14)
F 110,000 30 27,500 0.25
G 100,000 27 25,000 0.25
H 65,000 24 19,300 0.3
I 350,000 19 (21,000) (0.06)
J 90,000 28 18,700 0.21
K 210,000 17 (22,550) (0.11)
REQUIRED;
a). If the budget ceiling for the initial cash outlays during the period is 965,000 FCFA and the
proposals are independent of each other, advice the management of the firm on the combination
of projects that will increase the firms’ value (20mks)
Question 3: 25 mks
Q1(A) Give two reasons to justify why it is important to draw a cash flow
Q1(B) The balance sheet of MUMA co Ltd is presented as follows;
MUMA Co Ltd balance sheet as at 31
st
December
item 2016
amounts in
FCFA
2017
amounts in
FCFA
item 2016 amount
in FCFA
2017 amount
in FCFA
goodwill 1,000,000 4,000,000 capital 25,000,000 45,000,000
Land 5,000,000 7,000,000 Reserves 6,000,000 12,050,000
Office
equipment
30,000,000 32,800,000 Profit 12,000,000 3,830,000
Stock of
goods
15,000,000 15,500,000 Long term
loans
10,000,000 5,000,000
Customers 6,000,000 7,000,000 Suppliers 8,000,000 9,000,000
Cash 4,000,000 8,580,000
TOTAL 61,000,000 74,880,000 total 61,000,000 74,880,000
Additional information:
Profit for 2016 was distributed as follows:
Reserves: 6,050,000
Dividend paid 5,950,000
Depreciation expenses of office equipment for 2017 is 5,300,000frs
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During the year 2017,
An office equipment was bought by cash 15,000,000frs
An office equipment was sold by cash the value of 7,500,000frs, with the original value being
10,000,000frs and accumulated depreciation 3,100,000frs
A new piece of land was bought cash with an amount of 2,000,000frs
Required:
Prepare the statement of cash flow for MUMA Co Ltd as December 2017, as required by the
IAS 7. (20mks)
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