THIS FREE CONTENT WAS PROVIDED TO YOU BY BPP ACCA EXAM SURGERY

Size: px
Start display at page:

Download "THIS FREE CONTENT WAS PROVIDED TO YOU BY BPP ACCA EXAM SURGERY"

Transcription

1 THIS FREE CONTENT WAS PROVIDED TO YOU BY BPP ACCA EXAM SURGERY FOR MORE INFORMATION, GO TO BPP.COM/ACCA FOLLOW US ON: FACEBOOK TWITTER LINKEDIN PAST EXAM QUESTION AND ANSWER

2 F9 Answer - 11 PKA Co Text references. Working capital management is covered in Chapters 4 and 5. Hedging foreign currency risk is covered in Chapter 19. Top tips. Part (b) requires a methodical step-by-step approach. Make sure you show all your workings so you can gain marks throughout even if you make a mistake or get stuck. In part (c) you must answer the specific requirements of the question. Identify the two problem areas and discuss how to address them. Don t just write everything you know about receivables management. Easy marks. Part (a) provides three easy marks for a textbook explanation and the calculations in part (d) are straightforward if you have learnt the techniques. Examiner's comments. There were many good answers to part (a) and most candidates gained high marks. However, some answers tended to be somewhat general rather than focusing on the objectives of working capital management and some answers were much too long for the three marks on offer. In part (b) many candidates incorrectly calculated the holding costs of each policy. Some candidates failed to consider the buffer inventory in calculating holding costs. Others used the re-order inventory level as the buffer level, failing to reduce inventory by consumption during the lead time it took for orders to arrive after being placed. Others added the re-order level to order quantity before dividing by two to calculate average inventory level, when only the order quantity is averaged. Candidates failing to gain high marks in part (c) tended to offer a limited number of possible methods, for example by focusing at length on factoring to the exclusion of internal accounts receivables management methods. Despite the requirement to discuss domestic accounts receivable, some candidates discussed export factoring and exchange rate hedging. In part (d) some candidates offered discursive answers, for which they gained little credit since the question asked for an evaluation of hedging methods. Many candidates were unable to calculate correctly the spot and forward exchange rates from the information provided. Many candidates failed to compare all three hedges from a common time horizon perspective, ie either from the current time or from three months hence. Marking scheme Marks (a) Profitability and liquidity 1 Discussion of conflict between objectives 2 3 (b) Cost of cutting ordering policy 3 Cost of EOQ based ordering policy 3 Saving by using EOQ model 1 7 (c) Reduction of bad debts 3 4 Reduction of average receivable period 3 4 Discussion of other improvements 1 2 Maximum 7 (d) Money market hedge 3

3 Forward market hedge 2 Lead payment 2 Evaluation (a) (b) (c) Objectives of working capital management The two main objectives of working capital management are to ensure it has sufficient liquid resources to continue in business and to increase its profitability. Every business needs adequate liquid resources to maintain day-to-day cash flow. It needs enough to pay wages, salaries and accounts payable if it is to keep its workforce and ensure its supplies. Maintaining adequate working capital is not just important in the short term. Adequate liquidity is needed to ensure the survival of the business in the long term. Even a profitable company may fail without adequate cash flow to meet its liabilities. On the other hand, an excessively conservative approach to working capital management resulting in high levels of cash holdings will harm profits because the opportunity to make a return on the assets tied up as cash will have been missed. These two objectives will often conflict as liquid assets give the lowest returns. Cost of current ordering policy Minimum inventory level = re-order level (average usage average lead time) Average usage per week = 625,000 units/ 50 weeks = 12,500 units Average lead time = 2 weeks Re-order level = 35,000 units Minimum inventory level = 35,000 (12,500 2) = 10,000 units Average inventory = Minimum level + = 10,000 + (100,000/2) = 60,000 units reorder quantity 2 Annual holding cost = 60, = 30,000 Annual ordering cost = 250 (625,000/100,000) = 1,563 Annual total cost = 30, ,563 = 31,563 Economic order quantity 2C EOQ = 0D = C h , = 25,000 units. Number of orders per year = 625,000/25,000 = 25 Annual ordering cost = = 6,250 Annual holding cost = (10,000 + (25,000/2)) 0.50 = 11,250 Annual total cost = 11, ,250 = 17,500 Saving as a result of using the economic order quantity model = 31,563 17,500 = 14,063 per year Areas for improvement The two areas of concern are the increase in the percentage of bad debts from 5% to 8% of sales and the excessive credit period being taken by customers. Reducing the percentage of bad debts

4 (d) The key to reducing the percentage of bad debts is to assess the credit worthiness of customers. The risks and costs of a customer defaulting will need to be balanced against the profitability of the business provided by that customer. PKA Co needs to examine its system for checking the credit worthiness of customers and instigate a policy or improve the current policy. For example, new customers should give two good references, including one from a bank, before being granted credit; credit ratings might be checked through a credit rating agency; a new customer's credit limit should be fixed at a low level and only increased if his payment record subsequently warrants it. Reducing the average accounts receivable period The average accounts receivable period was over twice the agreed 30 day credit period. This is costly for PKA in terms of the opportunity costs of interest on additional borrowed funds and also the loss of opportunity to make a return on the money tied up. Encouraging early payment PKA first needs to find out whether competitors receivables periods are similarly long. If they are, PKA would have to be careful not to lose business as a result of overstringent credit control action. A better approach would be to encourage early payment, perhaps through early settlement discounts. Improved credit control procedures If competitors are not experiencing the same problems, PKA needs to examine its own credit control policies and procedures. For example, accounts receivable' payment records must be monitored continually. This depends on successful sales ledger administration. A customer's payment record and the accounts receivable aged analysis should be examined regularly, as a matter of course. Breaches of the credit limit, or attempted breaches of it, should be brought immediately to the attention of the credit controller. PKA needs to have in place agreed procedures for dealing with overdue accounts. Examples include instituting reminders or final demands, chasing payment by telephone or making a personal approach. If this does not work, the company could refuse to grant any more credit to the customer, hire a specialist debt collecting agency or, as a last resort, take legal action. Money market hedge Money market hedging would involve borrowing in euros, converting the money borrowed into dollars and putting the money on deposit until the time the transaction is completed, hoping to take advantage of favourable interest rate movements. $ interest rate over six months = 3.5/2 = 1.75% $s required now in order to have $250,000 in six months time = 250,000/ = $245,700 Current spot selling rate = = $1.996 per 1 Cost of $s to be deposited = 245,700/1.996 = 123,096 interest rate over six months = 6.1/2 = 3.05% Value of loan in six months time = 123, = 126,850 Forward market hedge Forward exchange contracts hedge against transaction exposure by allowing the importer to arrange for a bank to buy a quantity of foreign currency at a future date, at a rate of exchange determined when the forward contract is made. Six months forward rate = = $1.975 per 1 cost using forward market hedge = 250,000/1.975 = 126,582 Lead payment

5 A lead payment is a payment in advance. This is particularly useful if the currency in which the payment is to be made is appreciating, as is the case here. cost now = 250,000/1.996 = 125,251 This money would need to be borrowed so there is an interest cost. value of loan in six months time = 125, = 129,071 Conclusion All of the hedging methods relate to six months in the future so can be directly compared. The lead payment is the most expensive method and the forward market hedge is the cheapest. It is therefore recommended that a forward market hedge be used.

½ a mark for rounding up (6 marks) (b) There are a number of costs to the business associated with holding inventory:

½ a mark for rounding up (6 marks) (b) There are a number of costs to the business associated with holding inventory: EDI LCCI IQ ON DEMAND AWARD IN BUSINESS FINANCE AND BANKING OPERATIONS SAMPLE LEVEL 4 MARKING SCHEME DISTINCTION MARK 75% CREDIT MARK 60% PASS MARK 50% TOTAL 100 MARKS QUESTION 1 (a) Inventory days Receivable

More information

Question 1. Marking scheme. F9 ACCA June 2013 Exam: BPP Answers

Question 1. Marking scheme. F9 ACCA June 2013 Exam: BPP Answers Question 1 Text references. NPV is covered in Chapter 8 and real or nominal terms in Chapter 9. Financial objectives are covered in Chapter 1. Top tips. Part (b) requires you to explain the different approaches.

More information

Fundamentals Level Skills Module, Paper F9

Fundamentals Level Skills Module, Paper F9 Answers Fundamentals Level Skills Module, Paper F9 Financial Management December 2007 Answers 1 (a) (i) Price/earnings ratio method valuation Earnings per share of Danoca Co = 40c Average sector price/earnings

More information

CIMA F3 Course Notes. Chapter 3. Short term finance

CIMA F3 Course Notes. Chapter 3. Short term finance CIMA F3 Course Notes c Chapter 3 Short term finance Personal use only - not licensed for use on courses 31 1. Conservative, Aggressive and Matching strategies There are three over-riding approaches to

More information

Many members will be in some way involved with the control of Working Capital and its influence upon business success.

Many members will be in some way involved with the control of Working Capital and its influence upon business success. Working Capital Control, Philip E Dunn Many members will be in some way involved with the control of Working Capital and its influence upon business success. Working capital is a key element in business

More information

Paper F9. Financial Management. Fundamentals Pilot Paper Skills module. The Association of Chartered Certified Accountants

Paper F9. Financial Management. Fundamentals Pilot Paper Skills module. The Association of Chartered Certified Accountants Fundamentals Pilot Paper Skills module Financial Management Time allowed Reading and planning: Writing: 15 minutes 3 hours ALL FOUR questions are compulsory and MUST be attempted. Do NOT open this paper

More information

MARK SCHEME for the October/November 2014 series 0452 ACCOUNTING. 0452/23 Paper 2, maximum raw mark 120

MARK SCHEME for the October/November 2014 series 0452 ACCOUNTING. 0452/23 Paper 2, maximum raw mark 120 CAMBRIDGE INTERNATIONAL EXAMINATIONS Cambridge International General Certificate of Secondary Education MARK SCHEME for the October/November series 0452 ACCOUNTING 0452/23 Paper 2, maximum raw mark 120

More information

Institute of Chartered Accountant Ghana (ICAG) Paper 2.4 Financial Management

Institute of Chartered Accountant Ghana (ICAG) Paper 2.4 Financial Management Institute of Chartered Accountant Ghana (ICAG) Paper 2.4 Financial Management Final Mock Exam 1 Marking scheme and suggested solutions DO NOT TURN THIS PAGE UNTIL YOU HAVE COMPLETED THE MOCK EXAM ii Financial

More information

Fundamentals Level Skills Module, Paper F9. Section A. Monetary value of return = $3 10 x 1 197 = $3 71 Current share price = $3 71 $0 21 = $3 50

Fundamentals Level Skills Module, Paper F9. Section A. Monetary value of return = $3 10 x 1 197 = $3 71 Current share price = $3 71 $0 21 = $3 50 Answers Fundamentals Level Skills Module, Paper F9 Financial Management December 2014 Answers Section A 1 A Monetary value of return = $3 10 x 1 197 = $3 71 Current share price = $3 71 $0 21 = $3 50 2

More information

The Nature, Elements and Importance of Working Capital

The Nature, Elements and Importance of Working Capital C. WORKING CAPITAL MANAGEMENT 1. The nature, elements and importance of working capital 2. Management of inventories, accounts receivable, accounts payable and cash 3. Determining working capital needs

More information

1 (a) Net present value of investment in new machinery Year 1 2 3 4 5 $000 $000 $000 $000 $000 Sales income 6,084 6,327 6,580 6,844

1 (a) Net present value of investment in new machinery Year 1 2 3 4 5 $000 $000 $000 $000 $000 Sales income 6,084 6,327 6,580 6,844 Answers Fundamentals Level Skills Module, Paper F9 Financial Management June 2013 Answers 1 (a) Net present value of investment in new machinery Year 1 2 3 4 5 $000 $000 $000 $000 $000 Sales income 6,084

More information

Untangling F9 terminology

Untangling F9 terminology Untangling F9 terminology Welcome! This is not a textbook and we are certainly not trying to replace yours! However, we do know that some students find some of the terminology used in F9 difficult to understand.

More information

foreign risk and its relevant to acca qualification paper F9

foreign risk and its relevant to acca qualification paper F9 01 technical foreign risk and its relevant to acca qualification paper F9 Increasingly, many businesses have dealings in foreign currencies and, unless exchange rates are fixed with respect to one another,

More information

Advanced Financial Management

Advanced Financial Management Progress Test 2 Advanced Financial Management P4AFM-PT2-Z14-A Answers & Marking Scheme 2014 DeVry/Becker Educational Development Corp. Tutorial note: the answers below are more comprehensive than would

More information

Fundamentals Level Skills Module, Paper F9

Fundamentals Level Skills Module, Paper F9 Answers Fundamentals Level Skills Module, Paper F9 Financial Management December 2008 Answers 1 (a) Rights issue price = 2 5 x 0 8 = $2 00 per share Theoretical ex rights price = ((2 50 x 4) + (1 x 2 00)/5=$2

More information

A guide to business cash flow management

A guide to business cash flow management A guide to business cash flow management Contents 01. Cash flow management 01 02. Practical steps to managing cash flow 04 03. Improving everyday cash flow 06 04. How to manage cash flow surpluses and

More information

FINANCIAL ACCOUNTING

FINANCIAL ACCOUNTING FINANCIAL ACCOUNTING FORMATION 2 EXAMINATION - AUGUST 2012 NOTES: You are required to answer Question 1. You are also required to answer any three out of Questions 2 to 5. (If you provide answers to all

More information

Examiner s report F9 Financial Management December 2012

Examiner s report F9 Financial Management December 2012 Examiner s report F9 Financial Management December 2012 General Comments Congratulations to all those candidates who were successful in passing Paper F9 in December 2012! The overall performance in December

More information

Cash Conversion, Inventory, and Receivables Management

Cash Conversion, Inventory, and Receivables Management Chapter 19 Cash Conversion, Inventory, and Receivables Management Answers to Concept Review Questions 1. What does the firm s cash conversion cycle represent? What is the financial manager s goal with

More information

Notes. CIMA Paper P1. Performance Operations

Notes. CIMA Paper P1. Performance Operations Chapter 5 extract from our ExPress notes for use with the current video. A full set of P1 ExPress notes can be downloaded free of charge at www.. CIMA Paper P1 Performance Operations For exams in 2011

More information

Finance for the non-financial manager

Finance for the non-financial manager Finance for the non-financial manager A Guest Article by Paul Lower January 2010 How to control working capital and cash flow The banking crisis, credit crunch and global recession have provided the backdrop

More information

ARE YOU TAKING THE WRONG FX RISK? Focusing on transaction risks may be a mistake. Structural and portfolio risks require more than hedging

ARE YOU TAKING THE WRONG FX RISK? Focusing on transaction risks may be a mistake. Structural and portfolio risks require more than hedging ARE YOU TAKING THE WRONG FX RISK? Focusing on transaction risks may be a mistake Structural and portfolio risks require more than hedging Companies need to understand not just correlate the relationship

More information

Examiner s report F9 Financial Management December 2014

Examiner s report F9 Financial Management December 2014 Examiner s report F9 Financial Management December 2014 General Comments The F9 examination paper consisted of two sections. Section A contained 20 multiple-choice questions worth two marks each. Section

More information

June 2014 exam. (4CW) SME Cash and Working Capital. Instructions to students:

June 2014 exam. (4CW) SME Cash and Working Capital. Instructions to students: 1 June 2014 exam (4CW) SME Cash and Working Capital Instructions to students: 1. Time allowed is 3 hours and 10 minutes, which includes 10 minutes reading time. 2. This is a closed book examination. 3.

More information

M Simpson Associates

M Simpson Associates M Simpson Associates A Straight Talking Consultancy Business specialists with the ability to see through the smoke and get to the bottom line quickly Exclusive Business Insight from M Simpson 1 2 3 4 INVOICE

More information

2012 FINANCIAL MANAGEMENT AND ACCOUNTS

2012 FINANCIAL MANAGEMENT AND ACCOUNTS Name : Roll No. :.... Invigilator s Signature :.. CS/B.TECH/EE/CSE/IT/ICE/SEP.SUPPLE/SEM-7/HU-701/2012 2012 FINANCIAL MANAGEMENT AND ACCOUNTS Time Allotted : 3 Hours Full Marks : 70 The figures in the

More information

Fundamentals Level Skills Module, Paper F9

Fundamentals Level Skills Module, Paper F9 Answers Fundamentals Level Skills Module, Paper F9 Financial Management June 2008 Answers 1 (a) Calculation of weighted average cost of capital (WACC) Cost of equity Cost of equity using capital asset

More information

Foundations in Financial Management (FFM) September 2016 to June 2017

Foundations in Financial Management (FFM) September 2016 to June 2017 Foundations in Financial Management (FFM) September 2016 to June 2017 This syllabus and study guide is designed to help with teaching and learning and is intended to provide detailed information on what

More information

The aim behind the calculations of EOQ and ROL is to weigh up these, and other advantages and disadvantages and to find a suitable compromise level.

The aim behind the calculations of EOQ and ROL is to weigh up these, and other advantages and disadvantages and to find a suitable compromise level. Stock control by Tony Mock 12 Feb 2004 Stock control features in the syllabuses of several ACCA examination papers, including CAT Papers 4 and 10, and Professional Scheme Papers 1.2 and 2.4. The areas

More information

Chapter 1 Financial Management

Chapter 1 Financial Management Chapter 1 Financial Management Questions 1. What is the cycle of money? Who participates in the cycle of money? What is the objective of a financial transaction? The cycle of money is the movement of funds

More information

Incisive Business Guide to Factoring

Incisive Business Guide to Factoring Incisive Guide to Factoring Factoring Guide Summary This guide from Incisive outlines the features and benefits for your business from using factoring and invoice discounting services. Factoring is commonly

More information

Contribution 787 1,368 1,813 983. Taxable cash flow 682 1,253 1,688 858 Tax liabilities (205) (376) (506) (257)

Contribution 787 1,368 1,813 983. Taxable cash flow 682 1,253 1,688 858 Tax liabilities (205) (376) (506) (257) Answers Fundamentals Level Skills Module, Paper F9 Financial Management June 2012 Answers 1 (a) Calculation of net present value (NPV) As nominal after-tax cash flows are to be discounted, the nominal

More information

Working Capital Management

Working Capital Management Working Capital Management Gitman and Hennessey, Chapter 14 Spring 2004 14.1 Net Working Capital Fundamentals In 2002, current assets accounted for 31.7% of non-financial Canadian corporations total assets.

More information

Working Capital Management

Working Capital Management Working Capital Management Gitman and Hennessey, Chapter 14 Spring 2004 14.1 Net Working Capital Fundamentals In 2002, current assets accounted for 31.7% of non-financial Canadian corporations total assets.

More information

Paper F9. Financial Management. Friday 7 June 2013. Fundamentals Level Skills Module. The Association of Chartered Certified Accountants.

Paper F9. Financial Management. Friday 7 June 2013. Fundamentals Level Skills Module. The Association of Chartered Certified Accountants. Fundamentals Level Skills Module Financial Management Friday 7 June 2013 Time allowed Reading and planning: Writing: 15 minutes 3 hours ALL FOUR questions are compulsory and MUST be attempted. Formulae

More information

1 (a) NPV calculation Year 1 2 3 4 5 $000 $000 $000 $000 $000 Sales revenue 5,614 7,214 9,015 7,034. Contribution 2,583 3,283 3,880 2,860

1 (a) NPV calculation Year 1 2 3 4 5 $000 $000 $000 $000 $000 Sales revenue 5,614 7,214 9,015 7,034. Contribution 2,583 3,283 3,880 2,860 Answers Fundamentals Level Skills Module, Paper F9 Financial Management December 2012 Answers 1 (a) NPV calculation Year 1 2 3 4 5 $000 $000 $000 $000 $000 Sales revenue 5,614 7,214 9,015 7,034 Variable

More information

WORKING CAPITAL MANAGEMENT

WORKING CAPITAL MANAGEMENT CHAPTER 9 WORKING CAPITAL MANAGEMENT Working capital is the long term fund required to run the day to day operations of the business. The company starts with cash. It buys raw materials, employs staff

More information

Study Unit 6. Managing Current Assets

Study Unit 6. Managing Current Assets Study Unit 6 Managing Current Assets SU- 6.1 Working Capital What is working capital and types of capital policies What all is included in working capital? Net working capital = What is used to acquire

More information

Chapter 13. Working Capital Management

Chapter 13. Working Capital Management Chapter 13 Working Capital Management Learning Objectives 1. Model the cash conversion cycle and explain its components. 2. Understand why the timing of accounts receivable is important and explain the

More information

Web. Chapter FINANCIAL INSTITUTIONS AND MARKETS

Web. Chapter FINANCIAL INSTITUTIONS AND MARKETS FINANCIAL INSTITUTIONS AND MARKETS T Chapter Summary Chapter Web he Web Chapter provides an overview of the various financial institutions and markets that serve managers of firms and investors who invest

More information

FREQUENTLY ASKED QUESTIONS ON THE ROYTRIN HIGH YIELD FUND

FREQUENTLY ASKED QUESTIONS ON THE ROYTRIN HIGH YIELD FUND FREQUENTLY ASKED QUESTIONS ON THE ROYTRIN HIGH YIELD FUND 1. What is the Roytrin High Yield Fund? The Roytrin High Yield Fund is an open-ended mutual fund that specifically targets individuals seeking

More information

Examiner s report F9 Financial Management June 2013

Examiner s report F9 Financial Management June 2013 Examiner s report F9 Financial Management June 2013 General Comments The examination consisted of four compulsory questions, each worth 25 marks. Most candidates attempted all four questions and there

More information

THE WORKING CAPITAL CYCLE IN INTERNATIONAL TRADE

THE WORKING CAPITAL CYCLE IN INTERNATIONAL TRADE THE WORKING CAPITAL CYCLE IN INTERNATIONAL TRADE Introduction The working capital cycle is the period of time which elapses between the points at which cash is used in the supply/production process, to

More information

Examiner s report F9 Financial Management June 2011

Examiner s report F9 Financial Management June 2011 Examiner s report F9 Financial Management June 2011 General Comments Congratulations to candidates who passed Paper F9 in June 2011! The examination paper looked at many areas of the syllabus and a consideration

More information

Chapter 16: Financial Risk Management

Chapter 16: Financial Risk Management Chapter 16: Financial Risk Management Introduction Overview of Financial Risk Management in Treasury Interest Rate Risk Foreign Exchange (FX) Risk Commodity Price Risk Managing Financial Risk The Benefits

More information

Lecture 13 Working Capital Management and Credit Issues

Lecture 13 Working Capital Management and Credit Issues Lecture 13 - Working Capital Management Gross working capital: Net working capital: BASIC DEFINITIONS Total current assets. Net operating working capital (NOWC): Operating CA Operating CL = Current assets

More information

Performance Review for Electricity Now

Performance Review for Electricity Now Performance Review for Electricity Now For the period ending 03/31/2008 Provided By Mark Dashkewytch 780-963-5783 Report prepared for: Electricity Now Industry: 23821 - Electrical Contractors Revenue:

More information

CHAPTER 26. Working Capital Management. Chapter Synopsis

CHAPTER 26. Working Capital Management. Chapter Synopsis CHAPTER 26 Working Capital Management Chapter Synopsis 26.1 Overview of Working Capital Any reduction in working capital requirements generates a positive free cash flow that the firm can distribute immediately

More information

AWARD IN BUSINESS FINANCE AND BANKING OPERATIONS

AWARD IN BUSINESS FINANCE AND BANKING OPERATIONS Sample Paper AWARD IN BUSINESS FINANCE AND BANKING OPERATIONS Level 4 Subject code: ASE20084 SAMPLE Time allowed: 2 hours INSTRUCTIONS FOR CANDIDATES Answer ALL 4 questions. All questions carry equal marks.

More information

Chapter 18 Working Capital Management

Chapter 18 Working Capital Management Chapter 18 Working Capital Management Slide Contents Learning Objectives Principles Used in This Chapter 1. Working Capital Management and the Risk-Return Tradeoff 2. Working Capital Policy 3. Operating

More information

Apple Capital Group, Inc.

Apple Capital Group, Inc. COMMERCIAL FINANCE Commercial finance typical revolves around what are considered the assets of your business and are often called "asset based loans". The assets of your business are things such as your

More information

Questions 1, 3 and 4 gained reasonable average marks, whereas Question 2 was poorly answered, especially parts (b),(c) and (f).

Questions 1, 3 and 4 gained reasonable average marks, whereas Question 2 was poorly answered, especially parts (b),(c) and (f). General Comments This sitting produced a reasonable pass rate for a resit paper although there was a large variation in pass rates between centres. It was clear that well-prepared candidates did not have

More information

Managing Working Capital cntd... (EOQ - Example)

Managing Working Capital cntd... (EOQ - Example) Managing Working Capital cntd... (EOQ - Example) A Manufacturing Company expects to use 8000 steel plates in the coming year. The estimated cost of placing an order (including follow up costs and written

More information

Net revenue 785 25 1,721 05 5,038 54 3,340 65 Tax payable (235 58) (516 32) (1,511 56) (1,002 20)

Net revenue 785 25 1,721 05 5,038 54 3,340 65 Tax payable (235 58) (516 32) (1,511 56) (1,002 20) Answers Fundamentals Level Skills Module, Paper F9 Financial Management December 2013 Answers 1 (a) Calculating the net present value of the investment project using a nominal terms approach requires the

More information

Inventory period: The length of time required to produce and sell the product.

Inventory period: The length of time required to produce and sell the product. FIN 301 Class Notes Chapter 19: Short-Term Financial Planning Operating Cycle Purchasing resources from suppliers Producing the product Distributing the product to customers Create cash flows: Unsynchronized:

More information

Cash flow before tax 1,587 1,915 1,442 2,027 Tax at 28% (444) (536) (404) (568)

Cash flow before tax 1,587 1,915 1,442 2,027 Tax at 28% (444) (536) (404) (568) Answers Fundamentals Level Skills Module, Paper F9 Financial Management June 2014 Answers 1 (a) Calculation of NPV Year 1 2 3 4 5 $000 $000 $000 $000 $000 Sales income 5,670 6,808 5,788 6,928 Variable

More information

This act of setting a price today for a transaction in the future, hedging. hedge currency exposure, short long long hedge short hedge Hedgers

This act of setting a price today for a transaction in the future, hedging. hedge currency exposure, short long long hedge short hedge Hedgers Section 7.3 and Section 4.5 Oct. 7, 2002 William Pugh 7.3 Example of a forward contract: In May, a crude oil producer gets together with a refiner to agree on a price for crude oil. This price is for crude

More information

Fundamentals Level Skills Module, Paper F9. Section B

Fundamentals Level Skills Module, Paper F9. Section B Answers Fundamentals Level Skills Module, Paper F9 Financial Management September/December 2015 Answers Section B 1 (a) Market value of equity = 15,000,000 x 3 75 = $56,250,000 Market value of each irredeemable

More information

CFS. Syllabus. Certified Finance Specialist. International benchmark in Finance profession

CFS. Syllabus. Certified Finance Specialist. International benchmark in Finance profession CFS Certified Finance Specialist Syllabus International benchmark in Finance profession Certified Finance Specialist Summary: This award will provide candidates the opportunity to gain advanced level knowledge

More information

MARK SCHEME for the October/November 2011 question paper for the guidance of teachers 0452 ACCOUNTING. 0452/23 Paper 2, maximum raw mark 120

MARK SCHEME for the October/November 2011 question paper for the guidance of teachers 0452 ACCOUNTING. 0452/23 Paper 2, maximum raw mark 120 www.xtremepapers.com UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the October/November question paper for the guidance of

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. ECON 4110: Sample Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Economists define risk as A) the difference between the return on common

More information

Financing the Business

Financing the Business USQ UNIVERSITY OF SOUTHERN QUEENSLAND MBA - ACC5502 Accounting & Financial Management / S1 / 2015 Financing the Business M B G Wimalarathna [FCA, FCMA, MCIM, FMAAT, MCPM, (MBA PIM/USJ)] Financing through

More information

Paper F9. Financial Management. Specimen Exam applicable from December 2014. Fundamentals Level Skills Module

Paper F9. Financial Management. Specimen Exam applicable from December 2014. Fundamentals Level Skills Module Fundamentals Level Skills Module Financial Management Specimen Exam applicable from December 2014 Time allowed Reading and planning: 15 minutes Writing: 3 hours This paper is divided into two sections:

More information

CHAPTER 8 Valuation of Inventories: A Cost Basis Approach

CHAPTER 8 Valuation of Inventories: A Cost Basis Approach CHAPTER 8 Valuation of Inventories: A Cost Basis Approach 8-1 LECTURE OUTLINE This chapter can be covered in three to four class sessions. Students should have had previous exposure to inventory accounting

More information

Understanding Financial Management: A Practical Guide Guideline Answers to the Concept Check Questions

Understanding Financial Management: A Practical Guide Guideline Answers to the Concept Check Questions Understanding Financial Management: A Practical Guide Guideline Answers to the Concept Check Questions Chapter 6 Working Capital Management Concept Check 6.1 1. What is the meaning of the terms working

More information

Chapter 6 Foreign Currency Translation. The objective of a currency is to provide a standard of value, a medium of

Chapter 6 Foreign Currency Translation. The objective of a currency is to provide a standard of value, a medium of Introduction and Background Chapter 6 Foreign Currency Translation Foreign Exchange Concepts and Definitions The objective of a currency is to provide a standard of value, a medium of exchange, and a unit

More information

MARK SCHEME for the October/November 2010 question paper for the guidance of teachers 0452 ACCOUNTING. 0452/22 Paper 2, maximum raw mark 120

MARK SCHEME for the October/November 2010 question paper for the guidance of teachers 0452 ACCOUNTING. 0452/22 Paper 2, maximum raw mark 120 www.xtremepapers.com UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the October/November 2010 question paper for the guidance

More information

Module 7: Foreign Currency Transaction and Hedge Accounting:

Module 7: Foreign Currency Transaction and Hedge Accounting: Module 7: Foreign Currency Transaction and Hedge Accounting: Part 1: Foreign currency transactions occur when a company buys or sells in a currency other than its reporting currency. The objectives of

More information

Brown Advisory Strategic Bond Fund Class/Ticker: Institutional Shares / (Not Available for Sale)

Brown Advisory Strategic Bond Fund Class/Ticker: Institutional Shares / (Not Available for Sale) Summary Prospectus October 30, 2015 Brown Advisory Strategic Bond Fund Class/Ticker: Institutional Shares / (Not Available for Sale) Before you invest, you may want to review the Fund s Prospectus, which

More information

Practice set #4 and solutions

Practice set #4 and solutions FIN-465 Derivatives (3 credits) Professor Michel Robe Practice set #4 and solutions To help students with the material, seven practice sets with solutions will be handed out. They will not be graded: the

More information

UNDERSTANDING FINANCIAL STATEMENTS

UNDERSTANDING FINANCIAL STATEMENTS UNDERSTANDING FINANCIAL STATEMENTS ITEM 8 It is important that the directors of any business, cooperative or otherwise, understand the financial statements of the business. Without a basic understanding

More information

A Guide to for Financial Instruments in the Public Sector

A Guide to for Financial Instruments in the Public Sector November 2011 www.bdo.ca Assurance and accounting A Guide to Accounting for Financial Instruments in the Public Sector In June 2011, the Public Sector Accounting Standards Board released Section PS3450,

More information

JUNE 2012 EXAMINATION. D2. Business Finance. Answer ALL THREE questions. Question 1: 20 marks available. Question 2: 30 marks available

JUNE 2012 EXAMINATION. D2. Business Finance. Answer ALL THREE questions. Question 1: 20 marks available. Question 2: 30 marks available 1 JUNE 2012 EXAMINATION D2. Business Finance Instructions to candidates 1. Time allowed is 3 hours and 10 minutes, which includes 10 minutes reading time. 2. This is a closed book examination. 3. Use of

More information

5.3.2015 г. OC = AAI + ACP

5.3.2015 г. OC = AAI + ACP D. Dimov Working capital (or short-term financial) management is the management of current assets and current liabilities: Current assets include inventory, accounts receivable, marketable securities,

More information

ABOUT FINANCIAL RATIO ANALYSIS

ABOUT FINANCIAL RATIO ANALYSIS ABOUT FINANCIAL RATIO ANALYSIS Over the years, a great many financial analysis techniques have developed. They illustrate the relationship between values drawn from the balance sheet and income statement

More information

Version 2016/01. Credit Report Advice

Version 2016/01. Credit Report Advice Version 2016/01 D Credit Report Advice Credit checks When you apply to buy a shared ownership property, we will ask to check your credit history as part of the application process, and so will any mortgage

More information

A guide to managing foreign exchange risk

A guide to managing foreign exchange risk A guide to managing foreign exchange risk CPA Australia Ltd ( CPA Australia ) is one of the world s largest accounting bodies with more than 122,000 members of the financial, accounting and business profession

More information

INCOME TAX : THE TREATMENT OF GAINS AND LOSSES ON FOREIGN EXCHANGE TRANSACTIONS IN TERMS OF SECTION 24I OF THE INCOME TAX ACT, 1962 (the Act)

INCOME TAX : THE TREATMENT OF GAINS AND LOSSES ON FOREIGN EXCHANGE TRANSACTIONS IN TERMS OF SECTION 24I OF THE INCOME TAX ACT, 1962 (the Act) REPUBLIC OF SOUTH AFRICA SOUTH AFRICAN REVENUE SERVICE PRACTICE NOTE : NO. 4 DATE : 8 MARCH 1999 INCOME TAX : THE TREATMENT OF GAINS AND LOSSES ON FOREIGN EXCHANGE TRANSACTIONS IN TERMS OF SECTION 24I

More information

Cashflow Management. What is cashflow

Cashflow Management. What is cashflow Cashflow Management This Fact File Information Sheet looks at the key elements of cashflow, and how effective cashflow management will help protect the financial security of a business. It outlines the

More information

RELEVANT TO ACCA QUALIFICATION PAPER F9. Studying Paper F9? Performance objectives 15 and 16 are relevant to this exam

RELEVANT TO ACCA QUALIFICATION PAPER F9. Studying Paper F9? Performance objectives 15 and 16 are relevant to this exam RELEVANT TO ACCA QUALIFICATION PAPER F9 Studying Paper F9? Performance objectives 15 and 16 are relevant to this exam Business finance Section E of the Paper F9, Financial Management syllabus deals with

More information

FACULTY OF COMMERCE DEPARTMENT OF FINANCE BACHELOR OF COMMERCE HONOURS DEGREE IN FINANCE PART IV

FACULTY OF COMMERCE DEPARTMENT OF FINANCE BACHELOR OF COMMERCE HONOURS DEGREE IN FINANCE PART IV FACULTY OF COMMERCE DEPARTMENT OF FINANCE BACHELOR OF COMMERCE HONOURS DEGREE IN FINANCE PART IV 2 nd SEMESTER FINAL EXAMINATION MAY 2012 INTERNATIONAL FINANCE II [CFI 4202] TIME ALLOWED: 3 HOURS INSTRUCTIONS

More information

Complex Products. Non-Complex Products. General risks of trading

Complex Products. Non-Complex Products. General risks of trading We offer a wide range of investments, each with their own risks and rewards. The following information provides you with a general description of the nature and risks of the investments that you can trade

More information

2.1.1 Residents are free to undertake any amount of investment in foreign currency assets offered in Malaysia by a resident.

2.1.1 Residents are free to undertake any amount of investment in foreign currency assets offered in Malaysia by a resident. 2. RULES APPLICABLE TO RESIDENTS 2.1 Investment in foreign currency assets 2.1.1 Residents are free to undertake any amount of investment in foreign currency assets offered in Malaysia by a resident. 2.1.2

More information

performance of a company?

performance of a company? How to deal with questions on assessing the performance of a company? (Relevant to ATE Paper 7 Advanced Accounting) Dr. M H Ho This article provides guidance for candidates in dealing with examination

More information

Course 4: Managing Cash Flow

Course 4: Managing Cash Flow Excellence in Financial Management Course 4: Managing Cash Flow Prepared by: Matt H. Evans, CPA, CMA, CFM This course provides an introduction to cash flow management. This course is recommended for 2

More information

Manage your. The 8 best ways to ask for payments. Increase your sales through customer feedback. How to stay on top of your.

Manage your. The 8 best ways to ask for payments. Increase your sales through customer feedback. How to stay on top of your. Manage your cash flow Increase your sales through customer feedback The 8 best ways to ask for payments How to stay on top of your cash flow What is cash flow? As any small business owner or adviser will

More information

aggressive short-term financing policy amortization cash budget cash conversion cycle conservative short-term financing policy commercial paper

aggressive short-term financing policy amortization cash budget cash conversion cycle conservative short-term financing policy commercial paper aggressive short-term financing policy amortization cash budget cash conversion cycle commercial paper conservative short-term financing policy costly trade credit inventory blanket lien inventory conversion

More information

INR Volatility - Hedging Options & Effective Strategies

INR Volatility - Hedging Options & Effective Strategies INR Volatility - Hedging Options & Effective Strategies The purpose of the article is to draw attention on the recent volatility in Indian Rupee, various hedging options and effective hedging strategies.

More information

RISK FACTORS AND RISK MANAGEMENT

RISK FACTORS AND RISK MANAGEMENT Bangkok Bank Public Company Limited 044 RISK FACTORS AND RISK MANAGEMENT Bangkok Bank recognizes that effective risk management is fundamental to good banking practice. Accordingly, the Bank has established

More information

Guide to cash flow management

Guide to cash flow management Guide to cash flow management Cash flow management What is cash flow management? For a business to be successful, good cash flow management is crucial. Cash flow is the primary indicator of a business

More information

Chapter. Working capital

Chapter. Working capital Chapter 10 Working capital 1 10.1 Working capital Working capital is the capital available for conducting the day-to-day operations of the business and consists of current assets and current liabilities.

More information

Chapter 4. Money, Interest Rates, and Exchange Rates

Chapter 4. Money, Interest Rates, and Exchange Rates Chapter 4 Money, Interest Rates, and Exchange Rates Preview What is money? Control of the supply of money The willingness to hold monetary assets A model of real monetary assets and interest rates A model

More information

Debtor Management (Relevant to PBE Paper II Management Accounting and Finance)

Debtor Management (Relevant to PBE Paper II Management Accounting and Finance) Debtor Management (Relevant to PBE Paper II Management Accounting and Finance) Eric Y.W. Leung, CUHK Business School, The Chinese University of Hong Kong Accounts receivable forms quite a significant part

More information

Risk Management Programme Guidelines

Risk Management Programme Guidelines Risk Management Programme Guidelines Submissions are invited on these draft Reserve Bank risk management programme guidelines for non-bank deposit takers. Submissions should be made by 29 June 2009 and

More information

STATEMENT OF STANDARD ACCOUNTING PRACTICE FOREIGN CURRENCY TRANSLATION. (Issued April 1983)

STATEMENT OF STANDARD ACCOUNTING PRACTICE FOREIGN CURRENCY TRANSLATION. (Issued April 1983) Contents (Issued April 1983) Part 1 - Explanatory Note 1-32 Background 1 Objectives of translation 2 Procedures 3 The individual company stage 4-12 The consolidated financial statements stage 13-14 The

More information

ECONOMIC GROWTH* Chapter. Key Concepts

ECONOMIC GROWTH* Chapter. Key Concepts Chapter 5 MEASURING GDP AND ECONOMIC GROWTH* Key Concepts Gross Domestic Product Gross domestic product, GDP, is the market value of all the final goods and services produced within in a country in a given

More information

Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS. Peter N. Ireland Department of Economics Boston College. irelandp@bc.edu

Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS. Peter N. Ireland Department of Economics Boston College. irelandp@bc.edu Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS Peter N. Ireland Department of Economics Boston College irelandp@bc.edu http://www2.bc.edu/~irelandp/ec261.html Chapter 9: Banking and the Management

More information

Reporting Form ARF 320.9 Intra-Group Receivables and Payables Instruction Guide

Reporting Form ARF 320.9 Intra-Group Receivables and Payables Instruction Guide Reporting Form ARF 320.9 Intra-Group Receivables and Payables Instruction Guide General directions and notes Reporting entity The Intra-Group Receivables and Payables form is to be completed by all locally

More information

Financial Statements

Financial Statements PROVINCIAL JUDGES AND MASTERS IN CHAMBERS RESERVE FUND Financial Statements Year Ended March 31, 2015 Independent Auditor s Report.... 204 Statement of Financial Position..................... 205 Statement

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Study Questions 5 (Money) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The functions of money are 1) A) medium of exchange, unit of account,

More information