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CLASS TEST
FINANCIAL MANAGEMENT
Masters in Management

Date: 15th. April 2011

Name: Muhamad Eddin Syazri B. Hamzah
Time: One Hour

INSTRUCTION: Answer ALL Questions.

You are required to answer in the space provided in
question paper.

QUESTION

1. State FOUR (4) main costs associated with holding inventory.

a. Cost Of Ordering
b. Cost Of Holding
c. Annual Demand
d. Future Price Increase
[4 Marks]

2. Briefly explain any four ways that could improve a firm’s return on equity.

To improve returns on equity, companies need the following:

a) Higher turnover, i.e., Generate More Sales

i) Increased sales that lead to higher profits yield higher returns on equity
capital.
b) Cheaper Cost of Goods Sold
i) The lower your cost of goods sold will generate more profits
c) Lower taxes
i) The lesser Tax you pay it will increase the net profit and this will impact return
on quity.
d) Wider margins on sales.
i) Increasing the margin will resulting in increase of the profits
[8 Marks]
3. GAYA Bhd is a trading company. It has provide you with the following information:

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RM
Accounts Payable 1,200,000 Liabilites
Accounts Receivable 780,000 assets
Stock 700,000 assets
Sales 5,000,000 assets
Purchases 8,000,000 liabilities

You are required to calculate:

(a) Current Ratio

Current Assets/Currents Liabilities

RM 6,480,000/9,200,000 = 0.7

(b) Acid Test Ratio

Current Assets – stock/Currents Liabilities

RM 5,780,000/RM 9,200,00= 0.62

(c) Accounts Receivable Collection Period

Accounts Receivables/(sales/365 days)

RM 780,000/(RM 5,000,000/365) = 56.94

(d) Accounts Payable Payment Period

Accounts Payable / (Purchases / 365)

RM 1,200,000/(8,000,000/365) = 54.75

[ 15 Marks ]

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4.
I. Expected sales is 10,000 units at a price of $8 per-unit Variable costs
are $5.00 per-unit and the fixed costs are $21,000.00
Required: -
Compute the Break-even point, in units and in $ value.

TFC / (SPU - VCU)

RM 21,000/(RM 8 – RM 5) = 7000 units

7000 units X RM 8 = RM 56,000.00

II. Butter Ltd produces a product, with a variable cost of $7.00 per-unit.
Fixed costs are $63,000.00 per-annum. What must the selling price per-unit
be, if the company wishes to break-even by selling 12,000 units of it’s product?

(12000 X $ 7)+ $ 63,000 / 12000 = $ 12.25

III. Riding Ltd makes and sells a single product for which the variable costs are as follows: -
Direct Material $10.00, Direct Labor $8.00, Variable Prod Overhead
$4.00 and Variable Sales Overhead $2.00. The fixed costs per-annum
are $68,000.00 and the agreed selling price is $30.00 per-unit. The
company wishes to make a profit of $16,000.00 p.a.

Required: -
What sales (in units & in value) are required, to achieve this profit
objective?

(Fixed Cost + Desired Profits)/ Contribution Per Unit

($68,000+$16,000)/$24 = 3500 units

3500 X $ 6 = $ 105,000.00
[13 Marks]
TOTAL: 40 MARKS
END OF PAPER

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