Docsity
Log inSign up
Docsity
Prepare for your exams
Prepare for your exams

Study with the several resources on Docsity

Earn points to download
Earn points to download

Earn points by helping other students or get them with a premium plan

Guidelines and tips
Guidelines and tips
Sell on Docsity
Sell on Docsity
Docsity AI
Docsity AI
Log inSign up

Prepare for your exams

Study with the several resources on Docsity

Find documents

Prepare for your exams with the study notes shared by other students like you on Docsity

Search for your university

Find the specific documents for your university's exams

Docsity AINEW

Summarize your documents, ask them questions, convert them into quizzes and concept maps

Explore questions

Clear up your doubts by reading the answers to questions asked by your fellow students

Earn points to download

Earn points by helping other students or get them with a premium plan

Share documents
download point icon20 Points

For each uploaded document

Answer questions
download point icon5 Points

For each given answer (max 1 per day)

All the ways to get free points
Get points immediately

Choose a premium plan with all the points you need

Study Opportunities

Choose your next study program

Get in touch with the best universities in the world. Search through thousands of universities and official partners

Community

Ask the community

Ask the community for help and clear up your study doubts

Free resources

Our save-the-student-ebooks!

Download our free guides on studying techniques, anxiety management strategies, and thesis advice from Docsity tutors

Accounting and Finance Exam Questions and Solutions, Exercises of Business Management and Analysis

Aventis School of ManagementBusiness Management and Analysis

business management business management

Typology: Exercises

2018/2019

Uploaded on 08/06/2021

aliciacheong
aliciacheong 🇸🇬

4 documents

1 / 4

Toggle sidebar

This page cannot be seen from the preview

Don't miss anything!

bg1
1
Suggested Solution
Sample exam questions 2
Question 1
(a)
The loan is not a non-current liability for the year 2018 because the company is
merely plan or having intention to apply for it in 2019.
For a liability to be recognised in a balance sheet, the company needs to show that the
obligation to sacrifice future economic benefits is present in the current financial year
In their answers, these 2 points must be clearly related to the situation.
(b)
The statement of CF tells us how the business has generated cash during the period
and where that cash has gone. It provides details of the sources and uses of cash that
cannot be determined from the other financial statements.
The cash flows are classified in three categories – operating, investing and financing
activities.
(c) i- Cost of sales = 54,000+130,000-44,000 = 140,000
ii- Gross profit = 200,000 - 140,000 = 60,000
iii- Net profit = 60,000-2,000-1,500-3,500= 53,000
Question 2
A. The current ratio increased from 2.1:1(in 2018) to 3.1:1 (in 2019), suggesting that the
company has improved liquidity. However, the quick ratio decreased to 0.8:1 (in
2019) from 1.4:1 (in 2018). This is an unfavourable indication as to immediate
liquidity. This could also be explained by the slower inventory turnover in 2019 (165
days) than in 2018 (110 days), suggesting the increase in current assets in 2019 was
mainly due to the accumulation of inventory.
B. The ratios reveal that the accounts receivable turnover ratio is longer for 2019 (63
days) than 2018 (21 days), indicating that the company took longer time to receive
payments from its credit customers. This indicates the company is having problems
with collecting debts. Nevertheless, there is not much difference between the times
taken to pay accounts payable. In 2019, it took 50 days to pay its accounts payable,
whereas in 2018 it took 48 days. It is interesting to compare the difference in the
accounts receivable and accounts payable collection periods for these two years. Since
in 2019, the company allowed an average of 63 days’ credit to its customers, yet pays
accounts payable within 50 days, it will require greater investment in working capital
in 2019 than in 2018, during which it only allowed an average of 21 days to its
accounts receivable but took 45 days to pay its accounts payable.
C. In 2019, the company had a much higher gross profit percentage than in 2018.
However, the net profit percentage for the two years was identical, which was 10%.
pf3
pf4

Partial preview of the text

Download Accounting and Finance Exam Questions and Solutions and more Exercises Business Management and Analysis in PDF only on Docsity!

Suggested Solution

Sample exam questions 2

Question 1 (a)  The loan is not a non-current liability for the year 2018 because the company is merely plan or having intention to apply for it in 2019.  For a liability to be recognised in a balance sheet, the company needs to show that the obligation to sacrifice future economic benefits is present in the current financial year In their answers, these 2 points must be clearly related to the situation. (b)  The statement of CF tells us how the business has generated cash during the period and where that cash has gone. It provides details of the sources and uses of cash that cannot be determined from the other financial statements.  The cash flows are classified in three categories – operating, investing and financing activities. (c) i- Cost of sales = 54,000+130,000-44,000 = 140, ii- Gross profit = 200,000 - 140,000 = 60, iii- Net profit = 60,000-2,000-1,500-3,500= 53, Question 2 A. The current ratio increased from 2.1:1(in 201 8 ) to 3.1:1 (in 201 9 ), suggesting that the company has improved liquidity. However, the quick ratio decreased to 0.8:1 (in 2019 ) from 1.4:1 (in 201 8 ). This is an unfavourable indication as to immediate liquidity. This could also be explained by the slower inventory turnover in 201 9 ( days) than in 201 8 (110 days), suggesting the increase in current assets in 201 9 was mainly due to the accumulation of inventory. B. The ratios reveal that the accounts receivable turnover ratio is longer for 201 9 ( days) than 201 8 (21 days), indicating that the company took longer time to receive payments from its credit customers. This indicates the company is having problems with collecting debts. Nevertheless, there is not much difference between the times taken to pay accounts payable. In 201 9 , it took 50 days to pay its accounts payable, whereas in 201 8 it took 4 8 days. It is interesting to compare the difference in the accounts receivable and accounts payable collection periods for these two years. Since in 201 9 , the company allowed an average of 63 days’ credit to its customers, yet pays accounts payable within 50 days, it will require greater investment in working capital in 201 9 than in 201 8 , during which it only allowed an average of 21 days to its accounts receivable but took 45 days to pay its accounts payable. C. In 201 9 , the company had a much higher gross profit percentage than in 201 8. However, the net profit percentage for the two years was identical, which was 10%.

This suggested that in 2019, the company had much lower cost of goods sold, but higher operating costs than in 201 8. Question 3 A. There are two possible answers:

  • To offer fewer choices to customers will reduce the level of clothing inventory being held.
  • OR, with a narrower range of clothing, the business might want to increase the quantity of clothing to keep. Either answer is acceptable. Award points only to ONE answer. B. There are two possible answers:  The business might increase in the purchase of the components from the existing supplier, to take account of the defective element in inventory acquired. It would have to spend longer inspection time for items received. This would lead to a rise in inventory levels.  OR, the business might reduce the purchase from the existing supplier to avoid the costs of having low quality components in its assembly lines. However, the business would need to find a new supplier who can provide a good quality of components. In the end, the business would have a normal level of components again. Either answer is acceptable. Award points only to ONE answer. Question 4 a. Projected cash inflows from debtors in: January: (60% x 20,000) + (40% x 40,000) = $28, February: (60% x 30,000) + (40% x 20,000) = $26, Cash inflows from sales in March = 22,000 + (60% x 40,000) + (40% x 30,000) = $ 58, b. With a cash budget, short-term problems such as the shortage of cash can be predicted before it has actually happened. A company can then arrange for contingency plans , for example, to consider taking additional loans or devise strategies to cut down costs. By preparing a cash budget, a company could also expect that it will have excess cash in the future. With this expectation, the company can plan for additional investments to maximise the return on the excess cash or plan to expedite the repayment of existing loans. Question 5

 The project could cause environmental pollution which could compromise the company’s image. [Answers may consist the above points or other logical factors. All points must be clearly explained] B. Evaluate the proposed projects below. Based on the information given, which project would you choose to take on? Clearly explain your reasons. Accounting rate of return Payback period Net present value Project 1 25% 2.25 years 69, Project 2 21% 5 years 93,  Choose Project 1 because it has higher ARR and shorter payback period. Also, the NPV

  1. These indicate that Project 1 is more profitable than Project 2. The company could recoup the initial investment amount in 2.25 years, which is much earlier than Project
  1. Although NPV for Project 1 is smaller than Project 2, Project 1 is a good project because its NPV is positive.  Alternatively, assuming the company is not risk averse, they may accept Project 2 because they are willing to accept the longer payback period (higher risk) because of the considerably higher NPV. It is also worth rewarding answers noting that both AAR and PP ignore the time value of money.