Fin 601 – Finance Exam
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FIN 601Principles of FinanceDIGITAL ANSWER SCRIPT (PLEASE PRINT YOUR DETAILS)Course Code:FIN 601Course Title:Principles of FinanceStudent ID:623Name:Daria Perlei GENERAL INSTRUCTIONSAll the answers must be written in this digital answer script.Ensure that your name and student number are written correctly on the digital answer script.You must include a title page that lists your name, Student ID, the unit number, title of unit and pledge.Any published material you refer to must be properly referenced (Harvard Referencing) and included in a reference list at the end of your assignment.Last date of assignment submission is on or before 23rd August 2017 to [email protected] of submission / late submissions of the assignment would lead to a penalty of AED 1000 . (Check Assignment Submission Deadline for the submission dates)Contact [email protected] for any Exam related queries.Read the Question paper carefully before drafting your answers.Any answer scripts found cheated or plagiarized will be graded ‘0’ and the student will have to repeat the examination by paying a penalty of AED 1000.For any extension contact our Student Support team.Mention Correct Question and Sub Question Number for accurate correction.If you have missed any class activities contact Student Support team.START DRAFTING YOUR ANSWERS FROM HERE….Part 1:Q. 1: B Q.2: DQ. 3:E Q. 4: EQ. 5: AQ. 6:AQ. 7:CQ. 8:BQ. 9: EQ. 10:AQ. 11: CQ. 12:DQ. 13: EQ. 14:AQ. 15:CPart 2:Q. 1-a:Performance ratio is type of Key Financial Ratio which shows efficiency and effectiveness of the Organization and can be presented by Gearing Ratio, Number of days Credit Granted, Number of days Credit Taken, Stock Turnover and Overheads as Percentage of Turnover.
Based on results after performed calculations we can determine if Organization’s profitability and efficiency is non-performing, is stagnated and / or it has a strong performance / financial growth.Q. 1-b:To find out if an Organization is performing well we should calculate following Ratios:Gearing Ratio;Number of Days Credit Granted;Number of Days Credit Taken;Stock Turnover;Overheads as a Percentage of Turnover.Gearing Ratio can be calculated through presented below formula:Gearing = Total Borrowings / Net Worth.Calculated Ratio will show how much Organization is Borrowing to Gear performed business. In other words, by having calculated Gearing Ratio we can see the degree to which company’s activities are funded by owner’s funds comparing to creditor’s funds.Number of Days Credit Granted can be calculated by following formula:Number of Days Credit Granted = (Trade Debtors / Annual Sales) x 365 DaysThis Ratio measures the effectiveness of the Organization’s Debt Collection. It sets out the relationship between debtors and sales made on credit. Also, it shows how quickly clients are paying their invoices.Number of Days Credit Taken can be calculated through following formula:Number of Days Credit Taken = (Trade Creditors / Annual Purchases) x 365 DaysThis Ratio measures Effectiveness of the Organization’s Liabilities Payment. It sets out the relationship between creditors and purchases made on credit. Additionally, it shows how quickly the Organization is paying its Liabilities.Stock Turnover can be determined by next formula:Stock Turnover = Cost of Goods Sold / Average Stock Value.This Ratio measures how quickly the Organization turns over Stock into Sales. Also, it shows the Sales Efficiency in the Market. Normally the definition of involved Stocks includes:Finished Goods;Work in Progress;Raw Materials.Overheads as Percentage of Turnover can be calculated by the below formula:Overheads as Percentage of Turnover = Operating Expenses / Average Stock Value.This Ratio measures how Efficiently the Organization is running its Operation. Usually, definition of Overheads refers to Operating Expenses and includes:Rent;Utility Bills;Wages;Administrative Expenses.Q. 1-c:The formula of the Gearing Ratio is presented below:Gearing = Total Borrowings / Net Worth.Calculated Ratio will show how much Organization is Borrowing to Gear performed business. In other words, by having calculated Gearing Ratio we can see the degree to which company’s activities are funded by owner’s funds comparing to creditor’s funds.Q. 1-d:The Cash flow statement is part of least used financial essential statements. It shows categories based on which company acquired and spent its cash during a given span of time. Expenditures are shown on the statement as negative figures, and sources of income are shown as positive. The bottom lines in each category is simply the net total of inflows and outflows, and it can get either positive or negative value.