MAC4865/Assignment_01/2022

Assignment 01/2022
Financial Strategy

MAC4865

Year Module

Department of Management Accounting

IMPORTANT INFORMATION

Please register on myUnisa, activate your myLife email address and make
sure that you have regular access to the myUnisa module website for
MAC4865-22-Y.

Note: This is a fully online module and therefore it is only available on myUnisa.
 CONTENTS

Page

INTRODUCTION ........................................................................................................................................ 3
QUESTION 1 (20 marks – 20 questions of 1 mark each) ..................................................................... 4

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 MAC4865/Assignment_01

INTRODUCTION

Dear Student

The document contains the questions making up assignment 01 (this assignment is compulsory
and gives you admission to the examination – it is however not contributing to your year mark).

ASSIGNMENT 01: COMPULSORY FOR EXAM ADMISSION

Due date: 28 April 2022 at 23:00

Unique Number: 548268

This assignment will assess your under-graduate knowledge of the subject, as well as limited
material of content area A, Financial policy decisions, covering chapters 1, 2 and 3 in the F3
study text. You may be required to do research on the under-graduate knowledge if you are
uncertain about any of the questions contained in this assignment. Note that this assignment is
compulsory for examination admission, and the submission thereof and marks earned will prove
that you are an active student, however, the marks earned WILL NOT contribute towards your
year mark.

THIS ASSIGNMENT CONSISTS OF MULTIPLE CHOICE QUESTIONS.

You should submit multiple-choice assignments online via myUnisa. Always ensure that
your answers to multiple-choice questions are ready before connecting to the internet.

Navigate to the module site MAC4865-22-Y, Assessment 1, where the assignment 01

questions will be available to complete and submit via the quiz.

THIS ASSIGNMENT MUST BE SUBMITTED ON OR BEFORE THE DUE DATE AND TIME IN
ORDER TO OBTAIN EXAMINATION ADMISSION.

For more information on assignment submissions, please visit the following links:

https://www.unisa.ac.za/sites/myunisa/default/Assignments-&-
Examination/Assignments/Assignment-submission-with-myUnisa

Don’t wait until the closing date: Try to submit your assignments at least 3 working days
before the due date, as you may experience unforeseen problems (e.g. your internet
connection is down) on the day you want to submit your assignment.

Kind regards Contact details:

Mr Dawid Scott Email: scottdjp@unisa.ac.za
MAC4865 Lecturer Tel: 012 429 8933

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QUESTION 1 (20 marks – 20 questions of 1 mark each)

Answer the following Multiple Choice Questions

Select only the number (A, B, C or D) of the correct answer for the question or statement. There
are twenty questions. There is only one correct answer. Every answer counts one mark.

The questions are as follows:

Please use the following information below (relating to the short case study of
Company A) to answer questions 1 to 5.

Company A has the following figures from its most recent accounts:

R million
Sales (75% on credit) 760
Materials usage 400
Materials purchases (all on credit) 350
Production cost 450
Cost of sales 420
Average trade receivables 80
Average trade payables 70
Average raw material inventory 45
Average WIP inventory 32
Average finished goods inventory 53

1. Calculate the raw materials holding period relating to the information of Company A.
Round your answer to the nearest day.

Which one of the following options are the raw materials holding period?

A 22 days
B 39 days
C 41 days
D 47 days

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 MAC4865/Assignment_01
2. Calculate the WIP holding period relating to the information of Company A. Round your
answer to the nearest day.

Which one of the following options is the WIP holding period?

A 15 days
B 26 days
C 28 days
D 29 days

3. Calculate the finished goods inventory holding period relating to the information of
Company A. Round your answer to the nearest day.

Which one of the following options is the finished goods inventory holding period?

A 25 days
B 43 days
C 46 days
D 48 days

4. Calculate the trade receivables days relating to the information of Company A. Round
your answer to the nearest day.

Which one of the following options is the trade receivables days?

A 38 days
B 51 days
C 66 days
D 83 days

5. Calculate the trade payables days relating to the information of Company A. Round your
answer to the nearest day.

Which one of the following options is the trade payables days?

A 34 days
B 42 days
C 62 days
D 73 days

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6. On 1 January 2021, an entity placed R100 million on deposit at an interest rate of 12%.
The deposit has a maturity date of 30 September 2021 (270 days later).

For this question only, assume that there are 360 days in a year for interest calculation
purposes.

What is the amount of cash that the entity will receive on the maturity of the deposit?

A R 91 000 000
B R 109 000 000
C R 112 000 000
D R 121 000 000

7. The forecast sales for an entity are as follows:

July August September October November
Sales R300 000 R350 000 R250 000 R280 000 R330 000

All sales are on credit and receivables tend to pay in the following pattern:
%
In the month where the sales took place 50
In the month after the sales took place 30
Two months after the sales took place 18

The entity expects the rate of irrecoverable debts to be 2%.

Calculate the forecast cash receipts from receivables in October.

Which one of the following options is the forecast cash receipts from receivables in
October?

A R 278 000
B R 280 000
C R 284 000
D R 294 000

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8. A company paid an ordinary dividend of 78 cents per share. As a result, the shares are
trading at R12.00.

If dividend growth is expected to be 8% per annum, what is the company’s cost of

equity? Round your answer to the nearest whole percentage.

A 4%
B 8%
C 9%
D 15%

9. Company B has the following capital structure:

R million
50 million ordinary shares of 50c 25
Reserves 120
5% bonds 40
185
The bonds are irredeemable and are trading at their par value. The company’s tax rate is
30%. Company B’s cost of equity has been estimated at 9% per annum. The current
market price per share is R1.50 ex div.

Which one of the following options is Company B’s weighted average cost of capital?

A 4.8%
B 5.9%
C 7.1%
D 7.8%

10. Company C has a policy of increasing its dividend at a rate of 10% per year.
Company C’s shares are currently trading at R23.90 cum div, and a dividend of R1.40 is
due to be paid.

Using the dividend growth model, what is the cost of equity for Company C?

A 15.9%
B 16.2%
C 16.4%
D 16.8%

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11. The following is an extract from the statement of financial position of Company D:

Equity R million
Share capital (R1 shares) 50
Share premium 10
Revaluation surplus 30
Retained earnings 40
130
Non-controlling interest 15
Total equity 145

Non-current liabilities
Long-term borrowings 100
Redeemable preference shares 35
Deferred tax 15
Total non-current liabilities 150

Which one of the following options is Company D’s gearing ratio?

Note: calculate the gearing ratio as debt/equity

A 0.69 : 1
B 0.931 : 1
C 1.034 : 1
D 1.667 : 1

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 MAC4865/Assignment_01
Please use the following information below (relating to the short case study of
Company E) to answer questions 12 to 13.

The following is an extract from the statement of financial position of Company E:

Current assets R million

Inventories 200
Receivables 500
Cash and cash equivalents 100

Non-current liabilities
Loans 600

Current liabilities
Payables 150
Overdraft 50

12. Calculate the current ratio relating to the information pertaining to Company E.

Which one of the following options is the current ratio of Company E?

A 1.00
B 3.33
C 4.00
D 4.67

13. Calculate the quick ratio relating to the information pertaining to Company E.

Which one of the following options is the quick ratio of Company E?

A 0.75
B 1.00
C 3.00
D 4.00

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14. The following are extracts from the financial statements of Company F for the year ended
31 December 2021:

Statement of financial position R ‘000

Issued share capital 400
Retained earnings 560
960
8% Long term loan 500
1 460

Statement of profit and loss and other

comprehensive income
Profit before tax 140
Finance cost (40)
Net profit 100

Which one of the following options is Company F’s return on capital employed?

A 9.6%
B 10.4%
C 14.6%
D 35.0%

15. An entity requires 10 000 units of material per month. The cost per order is R200
regardless of the size of the order. The annual holding costs are R5 per unit. Calculate
the economic order quantity. Round your answer to the nearest unit.

Which one of the following options is the economic order quantity?

A 490 units
B 600 units
C 2 191 units
D 3 098 units

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16. The analysis of the statement of financial position of Company G for the year ended 2021
reveals the following relationships:

Revenue : current assets 3:1

Current ratio 2:1
Acid-test ratio 1.5:1

If revenue for the year was R 30 million, which one of the following options is the value of
current liabilities that will appear in the statement of financial position?

A R 2.5 million
B R 5.0 million
C R 10.0 million
D R 15.0 million

17. According to the creditors' hierarchy, list the following from high risk to low risk from the
viewpoint of the investor:

i Ordinary share capital

ii Preference share capital

iii Trade payables

iv Bank loan with fixed and floating charges

Which one of the following options present the list from high risk to low risk from the
viewpoint of the investor?

A i; ii; iii; iv
B i; iii; ii; iv
C iv; iii; ii; i
D iv; ii; iii; i

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18. Which one of the following statements is true in respect of raising equity finance using a
rights issue?

A If an entity is not listed on a stock market it cannot initiate a rights issue.

B A rights issue will be at the existing market price of an entity to avoid dilution in its
share price.
C A rights issue occurs when equity shares are available to be purchased by
institutional shareholders only.
D A rights issue allows shareholders the right to ensure that their existing
shareholding is not diluted.

19. Which one of the following is a characteristic of a bank loan?

A The interest rate charged by the bank may be fixed, variable or capped.
B Bank loans are typically irredeemable.
C Banks face lower risk than investors in ordinary shares and therefore will expect a
higher return.
D Bank loans are fixed-rate IOUs.

20. An entity wishes to increase its return on capital employed (ROCE).

Which one of the following options is a course of action that will help the entity to achieve
this in the short term?

A Increase sales.
B Issue ordinary shares.
C Restructure its long-term finance exchanging debt for equity.
D Revalue land and buildings upwards.

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