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    Fin202 Midterm Spring2020

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    Min Suga
    This document contains a mid-term test for a corporate finance course. It provides instructions that students have 1.5 hours to complete the test, must answer 4 questions to receive full marks, and are allowed to use calculators. It also states that students who break rules or commit misconduct will be disqualified. The test then contains 4 questions assessing students' knowledge of topics like financial gearing, liquidity ratios, time value of money calculations, and preparing a statement of cash flows.

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    Fin202 Midterm Spring2020

    Uploaded by

    Min Suga
    120 views3 pages
    This document contains a mid-term test for a corporate finance course. It provides instructions that students have 1.5 hours to complete the test, must answer 4 questions to receive full marks, and are allowed to use calculators. It also states that students who break rules or commit misconduct will be disqualified. The test then contains 4 questions assessing students' knowledge of topics like financial gearing, liquidity ratios, time value of money calculations, and preparing a statement of cash flows.

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    This document contains a mid-term test for a corporate finance course. It provides instructions that students have 1.5 hours to complete the test, must answer 4 questions to receive full marks, and are allowed to use calculators. It also states that students who break rules or commit misconduct will be disqualified. The test then contains 4 questions assessing students' knowledge of topics like financial gearing, liquidity ratios, time value of money calculations, and preparing a statement of cash flows.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    120 views3 pages

    Fin202 Midterm Spring2020

    Uploaded by

    Min Suga
    This document contains a mid-term test for a corporate finance course. It provides instructions that students have 1.5 hours to complete the test, must answer 4 questions to receive full marks, and are allowed to use calculators. It also states that students who break rules or commit misconduct will be disqualified. The test then contains 4 questions assessing students' knowledge of topics like financial gearing, liquidity ratios, time value of money calculations, and preparing a statement of cash flows.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    FPT University – HCMC

    Subject: Corporate Finance – Fin202


    Mid-Term Test – Spring 2020
    Supervisor: Nguyen Quang Dung
    Date: 06/03/2020
    1. Time allowed: 1h30min
    2. Answer FOUR questions to get full mark
    3. Calculators, including scientific calculators, are allowed providing they are not
    programmable and cannot store or recall information.
    4. Students who break examination rules or commit any misconducts will be
    disqualified from the examinations

    Q1)

    a)Financial gearing occurs when a firm is financed, at least in part, by borrowing rather
    than by equity.

    Critically assess the advantages and disadvantages of a high level of financial gearing.
    (10 marks)

    b)Using examples to support your answer, discuss the advantages and limitations of:

    (i) Current Ratio (5 marks)

    (ii) Working Capital Cycle (5 marks)

    Q2)

    a)Happy Harry has just bought a scratch lottery ticket and won $10,000. He wants to
    finance the future study of his newly born daughter and invests this money in a fund
    with a maturity of 18 years offering a promising yearly return of 6%. What is the amount
    available on the 18th birthday of his daughter? (5 marks)

    b) Rudy will retire in 20 years. This year he wants to fund an amount of $15,000 to
    become available in 20 years. How much does he have to deposit into a pension plan
    earning 7% annually? (5 marks)

    c) Willy has just bought a house. She estimates that the roof will have to be renewed at
    a cost of $25,000 after 20 years. To cover these costs, she intends to save an equal
    amount of money at the end of each year, earning 6% annual interest rate. How much is
    such a yearly annuity? (5 marks)

    d) Calculate the value of a constant cash flow of $500 a year with a growth of 4%,
    measured over an infinite period at a discount rate (i) of 10%? (5 marks)

    Q3

    a) Explain the reason why a Statement of Cash Flows must be prepared for a company
    and outline the format in which it should be presented. (10 marks)

    b) The following information relates to Elterwater Plc for the year ended 30th June 2020:

    $000
    Operating profit before tax 241
    Depreciation charge for the 61
    year
    Proceeds from the sale of 47
    fixed assets
    Dividends paid 34
    Tax paid 94
    Repayment of loan 68
    Increase in stock 32
    Increase in creditors 36
    Share issue 20
    Decrease in debtors 22
    Interest paid 26
    Purchase of fixed assets 81
    Increase in cash 92

    Required:

    Prepare a cash flow statement for the year to 30th June 2020. (20 marks)

    Q4) The following summary information from the final accounts of Florence has been
    provided at 31 May 2019

    $
    Sales 80,000
    Cost of sales 45,000
    Expenses 30,000
    Drawings 4,000
    Non-current assets (net book value) 28,000
    Current assets 24,000
    Current liabilities 12,000
    Capital 40,000
    Note: The inventory at 31 May 2019 was valued at £8,000.

    a) Calculate the following ratios at 31 May 2019, to two decimal places:

    (i) Gross profit to sales (5 marks)

    (ii) Net profit to sales (5 marks)

    (iii) Current ratio (5 marks)

    (iv) Acid test ratio (5 marks)

    (b) The following ratios were calculated for Florence at 31 May 2018:

    Gross profit to sales 51%

    Net profit to sales 13%

    Current ratio 1.5:1

    Acid test ratio 1.0:1

    Explain the change in liquidity over the period from 31 May 2018 to 31 May 2019 (10
    marks)

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