FINANCE Part A -Multiple Ch |. Which of the following items are “current assets"? (a) Motor vehicles, and, owner’s equity () Stock, cash at bank, accounts receivables (6) Mortgage, cash at bank. accounts payable (a) Stock, motor vehicles, equipment 2. Which of the following financial ratios is used to measure efficiency? (a) Current Assets Ratio (b) Gross Profit Ratio (c) Inventory Turnover Ratio (a) Debt to Equity Ratio 3. A business has current assets worth $75,000 anid current fiabilities worth $150,000. What is, the current ratio for their business? (w 05 (a) 105 {b) 2:1 () 251 4. Which of the following is considered as atest or measure of a business’ gearing/solvency? {a) Return on Owner's Equity Ratio (b) Debt to Equity Ratio (c) Accounts Receivable Tumover Ratio (a) Current Ratio 5, Examine the following financial information in order tw answer question 5: s Opening stock 25,000 Purchases 12,000 Cartage inwards 3.000 Sales 125.000 Closing stock 30,000 Mortgage 180,000 What is the value of COGS in this business?” (a) $7.000 {b) $5,000 fe) $10,000 (4) $115,000 6, Which of the following statements is correct (a) Assets = Liabilities ~ Owner's Equity (b) Working Capital = Current Assets + Current Liabilities (©) Net Profit = Gross Profit — Expenses (@) Revenue = Sales Price + (divided by) Quantity7. When a business is said to be ‘highly geared! this means that itis (a) Returning high profits (b) Owner's Equity ison the increase (©) Tho business is experiencing a rapid groweh rate (@) The business is taking a greater financial risk 8. Which of the following instruments are used to measure a business* liquidity? fal> Exp (b) Accounts receivables (c) Corre (d) Return “Account receivables “Motor vehicles “Owners Equity “Stock Cash at bank 40.000 ‘What isthe vale of Curent Assets for this Bypothetcal business? (a) $135,000 (b) $40,000 {c) $220.000 (a) $145,000 10 Which of the following is a source of equity Finance? (2) Mortgage (b) Reisined profits (©) Debentures (a) Government securities 1. Which of the following best defines a “Derivative market"? (@) Financial products that are used by a business as form of hedging against future risks associated with exchange rates and/or prices uf products; (b) Semi-finished products which businesses may purchase rowards producing finished consumer progicts: (©) A market where the demand for a product is derived from the demand for a related product (e.g. ears and petrol) (@) A foweign exchange market, which deals with curreney transact ns across countries Balance Sheet for Hanna's Pty. Ltd, as at 30 June 201 | ‘Caireent Asses 32 [Garena] Cash at bank 4500 | Accounts payable 3.000 Stock 19300 Accounts receivales 5800 ‘Non-Current Assets NonCurrent Gibilies ‘Equipment 6.000 | Mortgage 80.0007 Land and buildings 70000 | Owner's Bauity Capital 25,000 Retained profit 8,600 Total 5 96,60012. According to the Accounting Equation, which of the following correszonds with the balance sheet above: (a) $96,600 = 63,000 + 33,600 (b) $24,600 = 63,000 ~ 42,400 (e} $76,000 = 63,000 ~ 13,000 (a) 596,600 = 63,000 - 33.600 13. What is the total debt owing by this business? (a) $85,000 (b) $63,000 (©) $60,000 Id) $96,600 14, Which of the following is an example of'a short-term borrowing instrament? (a) Factoring (b) Debentures (©) Venture capital (2) Bank bills In arderio slow down economic activity, he RBA has decided to issue anew series Of government securities onto the financial market, Which section of the financial market will the RBA’s action affect? (a) Share market (b) Primary market (c) Secondary market (@) Forex market 16. Which of the following is an example of a variable cost for a business? (a) Rent (b) Council raies (c) Advertising (d) Insurance premiums 17. Use the following information to answer Question 17: $ | Opening stock 20.000 | Sales 235,000 Closing stock 35,000 Purchases 80,000 L Operating expenses 90,000 | Whuat is the Net Profit Ratio for this business? (a) 72% 4b) 340% () 38% (d) 34%18. In which of the following equations does the Balance Sheet not hold true? (@) OB=A-L (>) A=L40E (e) L=A-0E (d@) A=L-OE 19. Which of the following is not s financial intermediary in the financial market? (a) AMP insurance (b) Commonwealth Bank (c) The Reserve Bank of Aust (d) The Nurses Credit Union 20. Which of the following is an example of an ‘intangible’ 5 (a) Stock (b) Accounts receivables (©) Goodwill {d) Owner’s Equity Short Answers Lawrence & Associates Pty, Lid. is a law firm with an established reputation. The management is considering the updating of computers in their three office outlets toa cost of around $45,000. Their business manager has recommended leasing as an option. The partners, however, are happy to buy them outright through a special deal, by arranging a short-term loan from their local bank. (a) Define what is meant by the term ‘leasing’. (1 Mark) ‘b) Outline ONE cost and ONE benefit of debr financing. (2 Marks) ‘) Recommend a source of funding for Lawrence & Associates andl justity your answer, (3 Marks) ) Describe the financial considerations that the management of Lawrence & Associates Pty. Ltd. needs to make before they commit to a bank loan? (4 Marks)2. Abdul's Kebab Pty Led is inter last two years, They present y sted in identifying reasons for the f ou with the followin ancial performance over the Abdul's Kebab Pry. Lid. Financial Statement tor the Year Ending 30"” June 2011 2011 Sales 194,000 Less COGS Opening Stock Purchases | Closing stock 45,000 Gross Profit 149,000 11,000 23,000 800 Electticity 1,050 35,850 Net Profit - (a) Identity this type of financial statement. (1 Mark) (b) State why it is important to compare a current year's financial statement to previous yeurs. (1 Mark) (c) Outline the role and importance of this type of financial statement toa business. (2 Marks) (d) Calculate the Net Profit Ratio for 2011 (show all working), (2 Marks) (2) Explain TWO possible reasons for the change in profitability from 2010 to 2011. (4 Marks) Extended Response (use own paper to complete response) (20 Marks) Outline the role of financial management in a business. Assess strategies that may be used by a business to ensure effective financial management, Answers Part A: Multiple choice 1B. 2C, 3A. 4B, SC, 6C, 7.0, 8C, 9D, 1B, ILA, 124, 13B 14D, 158. 160, 17, 18D 19D, 200. Part B: Short Answers/ Question 1 (a) Leasing is where a business is able to access an asset without having to give up its own finds or to borrow from external sources. (b) Costs of debt Financing may include: ‘+ Higher risk is involved + Interest costs are a dri on business funds and for profits ‘© Greater burden on business in times of economic dawntum ete“The benefits of debt Gnancing may include: + Easy to arrange 2 loan + foversst payments are d -clared agsinst the business! profits thereby reducing the tax bill * Management has greater freedom in taking financial decisions. (©) Ibis probably bes: for this firm if they see equity finance forthe purchasing of their compoters. Retaining some fof the profits generated i the current year can allow for this. This lessens their financial risk and keeps their debts rence & Associates needs wo consider: ed in seme othe siness which may have a higher priority is wo be paid and oiher banking ch 1 tatia: Can they afford to necumalate more debt? (a) Ther Gh) This i impo lero soe how the business is performing now compared 16 previous years, In doing 50,0 business may be able to appreciate its strengths und weaknesses. {c) This Financial stamement allows a business to ascertain ther sales revenue aver time and to know the bottom tine 1 profit ur Toss atthe end of w period. ‘of whether they are maki (@) NPR= 113,150 x 100) 193,000 (©). Expenses have been reduced in 2011 and their sales have increased considerably, 8% Extended response ‘The role of financial roanagement is planning and monitoring of a business's financi Strategies for effective financial management include: = Cash flow management = Working capital management current sssets and current iabili = Profitability management(cost controls, revenue controls) = Global financial management (exchange rare Muctuations, interest ates. Hedging and devivatives) )More Questions on Human Resource Management and Finance of the key business functions? ‘ancia| assistance for each function ss the profitability of the firm What is a disadvantage of using o global contractor for HRM? a. Itis less costly b. It grants access te cheaper labour ¢. They may speck a different language d. They can provide experience from other countries \ 2. The HR department ot Virgin decides to send its employees on a holiday to Fiji because of their sirong performance. This would involve the HR department working together with: a. Finance b. Marketing c. Operations d All of the above ‘Every business employs people. These are its ‘human resources’. The term covers not only the physical labour they contribute, but their knowledge and skills. Human workers| perform a variety of tasks within a business, such as making products, operating machinery, implementing marketing strategies, and keeping track of the financial situation af the! business.’ CREATIVE BUSINESS STUDIES TEXTBOOK 4 Identify the FOUR human resources functions “The business may decide to outsource some or all of the HR functions ‘This means that some or all of the HR tasks are carried out by an outside company or individual. Like outsourcing in general, this can allow the business to batter focus on its core tasks.” (CREATIVE BUSINESS STUDIES TEXTBOOK 5 Describe how the human resources function impacts on the operations function, 4 Explain cost associoted with outsourcing aspects of the human resources function Describe the problems associated with using global contractors.Extended Response Woof Pty Lid is a dog food manufacturing business with production plants located in four states of Australia It has come to the attention of the CEO, Roland Over, that ‘the performance of his business has slipped in recent months compared with its main competitor, Al Sation Pty Ltd A business consultant identified that Al Sation has outsourced a number of key business functions and adopted a minimcl inventary approach in order to achieve large cost reductions. Rolarid has decided thet in order to remain competitive, Woof must adopt similar practices. Furthermore, in order 10 gain a competitive edge of Al Sotion, Woof has decided to alter its physical distribution approach Prepare a report for the CEO. This report must include the following: Answer only the frst dot point