Fin621 VU Final Term Current Paper (Feb 2011)
Monday, February 21, 2011 Posted In .Final Term Exam (Feb 2011) Edit This
Fin621 VU Final Term Current Paper (Feb 2011)
Short term loan
Long term loan
Common Share holder
Short term loan--------------LIQUIDITY RATIO (Short term Solvency)
Long term loan------------- LEVERAGE/DEBT RATIOS (Long term Solvency)
Common Share holder-----PROFITABILITY RATIOS
Question No: 65 (Marks: 3)
What will be the effect on the book value per share of the common stock of a company, if the corporation obtains a loan?
When a corporation obtains a bank loan there is no effect upon book value per share of common stock. Assets and liabilities both increase by its amount. Therefore, net assets will remain unchanged.
Question No: 66 (Marks: 5)
Following data is given:
Company A
Company B
Cost of Goods Sold
300, 000
450, 000
Beginning inventory
120, 000
130, 000
Ending inventory
160, 000
140, 000
Requirement:Calculate the Inventory Turnover Ratio?
For Company A:
Inventory Turnover Ratio = Cost of goods sold/average inventory
Inventory Turnover Ratio = 300, 000/ [(120,000+160,000)2]
Inventory Turnover Ratio = 300, 000/140, 000=2.14
For Company B:
Inventory Turnover Ratio = Cost of goods sold/average inventory
Inventory Turnover Ratio = 450, 000/ [(130,000+140,000)2]
Inventory Turnover Ratio = 450, 000/135, 000=3.33
Question No: 67 (Marks: 5)
Assume that you are a commercial loan officer at a large bank. One of your clients recently submitted an application for Rs.300, 000 five year loans. You have worked with this business before on numerous occasions and have periodically been forced to deal with late and missed payments attributed to cash flow problems. Thus you are surprised to see in the business plan accompanying the application that the management expects to reduce the company's operating cycle from 190 days to 90 days. A footnote to the business plan indicates that the reduction in the operating cycle will result from a tighter credit policy and the implementation of a just-in-time inventory system.
As the company has reduced its operating cycle from 190 days to 90 days which has tightened the credit policy, as a result of which sales of the company will be reduced which will decrease the revenue of the company and profit of the company will also be decreased. Implementations of just in time inventory system will also tight the liquid position of the company. Keeping in view this situation, application for loan of Rs. 300,000 will not be exceed to by the bank.
Question No: 68 (Marks: 5)
Following data is given:
2010
2009
Net sales
300, 000
400, 000
Cost of Goods Sold
60, 000
90, 000
Operating expense
150, 000
200, 000
Requirement:
Compare the two companies by using vertical analysis?
For 2010:
Net sales 300, 000 100%
Less: COGS 60, 000 20%
Gross profit 240, 000 80%
Less: Operating expense 150, 000 50%
Net income 90, 000 30%
Explanation just for understanding:
100% is assigned to net sales with all revenue and expense accounts related to it.
Net sales=300,000= 100%
COGS=60, 000= 60, 000/300,000*100=20%
Gross profit=240, 000/300,000*100=80%
Operating expense=150, 000/300, 000*100=50%
Net income=90, 000/300, 000*100=30%
For 2009:
Net sales 400, 000 100%
Less: COGS 90, 000 22.5%
Gross profit 310, 000 77.5%
Less: Operating expense 200, 000 50%
Net income 110, 000 27.5%
Explanation just for understanding:
Q.1 Which of accounting system gives more accurate picture of the profitability of the business?(3)
Q.2 Diff Between operating cycle &accounting cycle?(3)
Q.3What is the Big Financial challenge in managing operating cycle?(3)
Q4.Make the following jounal entries(5)
(i)May 10:Purchase Five p-500 facimile machine on account from minitisi corporation at a cost of rupees 5.60 each,payment due,in 30 days.
b)May23,sold four p-500 fasimile machine on account to foster & cole stock brokers sale price rupees 900 per machine,pay due 30 days.
C)june9,paid Rs 2800 cash to minitisi corporation for the fasmile machine purchased on may 10.
d)june 19 sold two p-500 fasmile machine to Tri-stat for cash sale price Rs.950 per machine
Q.5 Determine the coste of sale from the following data.(5)
Current ratio 2.5
Quick ratio 2.0
Current liabilties 400,0000
Inventory turnover 3 times
May be 400,000 not cnfm
Q.6 Find out percentage by assuming 1996 as the base year.(5)
2001 2000 1999 1998 1997 1996
sales 450,000 360,000 330,000 321000 312000 300,000
Net income 22950 14550 21,450 19200 15600 15000
Q.Find Average receivable turnover ratio,(5)
19x2 19x1
Averae account recievables 400,000 416,000
Net credit sale 21600,000 3100,000
Q.2 Diff Between operating cycle &accounting cycle?(3)
Q.3What is the Big Financial challenge in managing operating cycle?(3)
Q4.Make the following jounal entries(5)
(i)May 10:Purchase Five p-500 facimile machine on account from minitisi corporation at a cost of rupees 5.60 each,payment due,in 30 days.
b)May23,sold four p-500 fasimile machine on account to foster & cole stock brokers sale price rupees 900 per machine,pay due 30 days.
C)june9,paid Rs 2800 cash to minitisi corporation for the fasmile machine purchased on may 10.
d)june 19 sold two p-500 fasmile machine to Tri-stat for cash sale price Rs.950 per machine
Q.5 Determine the coste of sale from the following data.(5)
Current ratio 2.5
Quick ratio 2.0
Current liabilties 400,0000
Inventory turnover 3 times
May be 400,000 not cnfm
Q.6 Find out percentage by assuming 1996 as the base year.(5)
2001 2000 1999 1998 1997 1996
sales 450,000 360,000 330,000 321000 312000 300,000
Net income 22950 14550 21,450 19200 15600 15000
Q.Find Average receivable turnover ratio,(5)
19x2 19x1
Averae account recievables 400,000 416,000
Net credit sale 21600,000 3100,000
..............................
Another Paper:
Question No: 63 (Marks: 3)
What is a difference between Profit and profitability?
Profit is one of financial performances of a company and an evidence of its success, which is achieved if the income exceeds the expenses. Profit growth determines the potential growth of the company, increases its business activity.
The term "profitability" has its origin from the rent, which literally means income. Thus, the term "profitability" in broad sense refers to yield, revenue performance and efficiency. Profitability indicators are used for comparative assessment of individual businesses performance and industries that produce different amounts and types of products.
Question No: 64 (Marks: 3)
What are the ratios you suggest for following?
What is a difference between Profit and profitability?
Profit is one of financial performances of a company and an evidence of its success, which is achieved if the income exceeds the expenses. Profit growth determines the potential growth of the company, increases its business activity.
The term "profitability" has its origin from the rent, which literally means income. Thus, the term "profitability" in broad sense refers to yield, revenue performance and efficiency. Profitability indicators are used for comparative assessment of individual businesses performance and industries that produce different amounts and types of products.
Question No: 64 (Marks: 3)
What are the ratios you suggest for following?
Short term loan
Long term loan
Common Share holder
Short term loan--------------LIQUIDITY RATIO (Short term Solvency)
Long term loan------------- LEVERAGE/DEBT RATIOS (Long term Solvency)
Common Share holder-----PROFITABILITY RATIOS
Question No: 65 (Marks: 3)
What will be the effect on the book value per share of the common stock of a company, if the corporation obtains a loan?
When a corporation obtains a bank loan there is no effect upon book value per share of common stock. Assets and liabilities both increase by its amount. Therefore, net assets will remain unchanged.
Question No: 66 (Marks: 5)
Following data is given:
Company A
Company B
Cost of Goods Sold
300, 000
450, 000
Beginning inventory
120, 000
130, 000
Ending inventory
160, 000
140, 000
Requirement:Calculate the Inventory Turnover Ratio?
For Company A:
Inventory Turnover Ratio = Cost of goods sold/average inventory
Inventory Turnover Ratio = 300, 000/ [(120,000+160,000)2]
Inventory Turnover Ratio = 300, 000/140, 000=2.14
For Company B:
Inventory Turnover Ratio = Cost of goods sold/average inventory
Inventory Turnover Ratio = 450, 000/ [(130,000+140,000)2]
Inventory Turnover Ratio = 450, 000/135, 000=3.33
Question No: 67 (Marks: 5)
Assume that you are a commercial loan officer at a large bank. One of your clients recently submitted an application for Rs.300, 000 five year loans. You have worked with this business before on numerous occasions and have periodically been forced to deal with late and missed payments attributed to cash flow problems. Thus you are surprised to see in the business plan accompanying the application that the management expects to reduce the company's operating cycle from 190 days to 90 days. A footnote to the business plan indicates that the reduction in the operating cycle will result from a tighter credit policy and the implementation of a just-in-time inventory system.
As the company has reduced its operating cycle from 190 days to 90 days which has tightened the credit policy, as a result of which sales of the company will be reduced which will decrease the revenue of the company and profit of the company will also be decreased. Implementations of just in time inventory system will also tight the liquid position of the company. Keeping in view this situation, application for loan of Rs. 300,000 will not be exceed to by the bank.
Question No: 68 (Marks: 5)
Following data is given:
2010
2009
Net sales
300, 000
400, 000
Cost of Goods Sold
60, 000
90, 000
Operating expense
150, 000
200, 000
Requirement:
Compare the two companies by using vertical analysis?
For 2010:
Net sales 300, 000 100%
Less: COGS 60, 000 20%
Gross profit 240, 000 80%
Less: Operating expense 150, 000 50%
Net income 90, 000 30%
Explanation just for understanding:
100% is assigned to net sales with all revenue and expense accounts related to it.
Net sales=300,000= 100%
COGS=60, 000= 60, 000/300,000*100=20%
Gross profit=240, 000/300,000*100=80%
Operating expense=150, 000/300, 000*100=50%
Net income=90, 000/300, 000*100=30%
For 2009:
Net sales 400, 000 100%
Less: COGS 90, 000 22.5%
Gross profit 310, 000 77.5%
Less: Operating expense 200, 000 50%
Net income 110, 000 27.5%
Explanation just for understanding:
100% is assigned to net sales with all revenue and expense accounts related to it.
Net sales=400,000= 100%
COGS=90, 000= 90, 000/400,000*100=22.5%
Gross profit=310, 000=310, 000/400,000*100=77.5%
Operating expense=200, 000=200, 000/400, 000*100=50%
Net income=110, 000=110, 000/400, 000*100=27.5%
Question No: 69 (Marks: 5)
Use the following information to make all the September 30 Closing Entries required by ABC Company to prepare for the next accounting cycle.
Revenue
900, 000
Utilities expense
2500
Salaries Expense
4000
Insurance Expense
5000
Materials Expense
456
Miscellaneous expenses
9876
Office Rent expenses
1200
Dividends
56, 000
Depreciation expense
86, 000
Net sales=400,000= 100%
COGS=90, 000= 90, 000/400,000*100=22.5%
Gross profit=310, 000=310, 000/400,000*100=77.5%
Operating expense=200, 000=200, 000/400, 000*100=50%
Net income=110, 000=110, 000/400, 000*100=27.5%
Question No: 69 (Marks: 5)
Use the following information to make all the September 30 Closing Entries required by ABC Company to prepare for the next accounting cycle.
Revenue
900, 000
Utilities expense
2500
Salaries Expense
4000
Insurance Expense
5000
Materials Expense
456
Miscellaneous expenses
9876
Office Rent expenses
1200
Dividends
56, 000
Depreciation expense
86, 000
