BF R. Kit as at 25 April 2006

8/12/2019 BF R. Kit as at 25 April 2006

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Business Finance

SUBJECTNO. 9

Revision Kit

STRATHMORE

UNIVERSITY

DISTANCE LEARNING

CENTRE

P.O. Box 59857,00200, Nairobi,

KENYA.


2/255

ii Acknowledgment

Acknowledgment

" rat"#ll acol"d" /"r!issio to #ot" ro! t" /ast "xa!iatio /a/"rs o t"

olloi bodi"s Kena Acco!ntant" and Sec#eta#ie" National Examination Boa#d$KASNEB%& C'a#te#ed (n"tit!te o) *anagement Acco!ntant" $C(*A%& C'a#te#ed

A""ociation o) Ce#ti)ied Acco!ntant" $ACCA%.

" also is to "x/r"ss o#r sic"r" ratit#d" ad d""/ a//r"ciatio to *#. +eo))#e *. Ngene or

i3i is ti!", "x/"rtis" ad 3al#abl" cotrib#tio, ic "r" a it"ral /art i t" iitial

d"3"lo/!"t o tis &"3isio :it. " olds t" olloi acad"!ic oo#rs, *BA, BCO*

$Finance% $at t'e Uni-e#"it o) Nai#oi%, C/A $K%, CFA $E.A.%. " is a s"ior l"ct#r"r at

trat!or" ;i3"rsit, cool o $cco#tac.


3/255

Content" iii

CONTENTSAcknowledgment.......................................................................................................................................ii

/a#t (: (nt#od!ction................................................................................................................................. i-

$PP&O$'N$*'ON...................................................................................................................... ...3

?%%$B;..............................................................................................................................................................3ii

*OP'ocs..................................................................................................................................................19

$s"rs A >ocs....................................................................................................................................................156

/a#t (2: 0e-i"ion 5!e"tion" and An"we#"...........................................................................................689

#"stios.................................................................................................................................................................189

$s"rs...................................................................................................................................................................205


4/255

i- (nt#od!ction

/a#t (: (nt#od!ction

*is r"3isio it addr"ss"s ""ds o st#d"ts /r"/ari to sit O


5/255

A44#oac' toExamination" -

A//0OAC1 TO EA*(NAT(ONS

B"or" t" act#al "xa!iatio dat", it is 3"r i!/ortat tat t" st#d"t

a) $tt"!/ts /ast /a/"r #"stios :oi t" sllab#s cot"t is o" ti, b#t a//li it to !""t

"xa!iatio r"#ir"!"ts is #it" a di"r"t aair alto"t"r. $tt"!/ti /ast /a/"r #"stios

a!iliariD" t" st#d"t it t" t"ci#"s ado/t"d b t" "xa!i"r i t"sti t" sllab#s cot"t.

b) $s ar as /ossibl", or! disc#ssio ro#/s to sol3" /robl"!s to"t"r. ro#/s also

a3ail !or" acad"!ic r"so#rc"s to t" ro#/ !"!b"rs. >"!b"rs also r"aliD" s"ristic ""cts t"do !or" i a ro#/ ta t" co#ld a3" do" alo". ro#/s ar" "s/"ciall ""cti3" i r"3isi /ast

/a/"r #"stios.

$s o# sit t" "xa!iatios

1) s#r" o# #ll co!/r""d t" (NST0UCT(ONS. *" B#si"ss Ciac" /a/"r t/icall r"#ir"s

o" to as"r F(2E #"stios i T10EEo#rs.

2) $ss"ss t" "xa!iatio #"stios ta" t" irst 10E15 !i#t"s to o tro# t" #"stios, s"tcit" as"rs o t" #"stio /a/"r. "i t" as"r o# ar" li"l to /rod#c" /"r #"stio aaist

t" !ars. Not" t" #"stios o# ca do "xc"ll"tl, "ll, airl ad t" diic#lt o"s.

) Bas"d o o#r ass"ss!"t, s"l"ct t" #"stios tat ill "abl" o# to !axi!iD" o#r !ars s#bF"ct

to ti!", !"!or ad ior!atio costrais. O co#rs", o# start b s"l"cti tos" #"stios tat

o# ca tacl" b"st.

4) Pla o#r ti!" $llocat" "3"r #"stio at l"ast 0 !i#t"s, b#t ot !or" ta !i#t"s. Oc"

ti!" is #/, o to t" "xt #"stio so as to !axi!iD" o#r o3"rall scor". &"!"!b"r tat t" old"

r#l" o di!iisi r"t#rs i "coo!ics o/"rat"s 3"r ""cti3"l d#ri "xa!iatio ti!" o#r

rat" o "ari !ars is 3"r i as o# start a #"stio, b#t dro/s s"rio#sl as o# s/"d !or"

ti!" o t" #"stio.

5) ?o# ""d to "s/"ciall /a att"tio to #"stio r"#ir"!"ts s#c as


6/255

(nt#od!ction

1) s#r" o#r adriti is l"ibl", ad o#r or is "at.

14) ' o# or"t a as"r, #"rr o#r !"tal databas". ?o# so#ld l"a3" so!" s/ac" adCONT(NUE as"ri ot"r #"stios. ?o#r !id is a !ar3"llo#s c"tral /roc"ssi #it tat ill

r"tri"3" t" r"#ir"d data b"or" lo

15) ' o# ar" totall sort o ti!", o#tli" t" as"r bri"l, d"/"di o o ac#t" o#r ti!"

sorta" is. B#t a3oid tis sit#atio as !#c as /ossibl".

16)


7/255

Slla!" -ii

SY;;ABUS

C/A /A0T (( = SECT(ON 7

/A/E0 NO. 9 BUS(NESS F(NANCE

*o "#i/ t" cadidat" it a #d"rstadi o iacial !aa"!"t as/"cts o b#si"ss

oraiDatios, ad t" so#rc"s, costs ad #tiliDatio o #ds.

9.> S/EC(F(C OBJECT(2ES

$ cadidat" o /ass"s tis s#bF"ct so#ld b" abl" to

#d"rstad t" coc"/t o b#si"ss iac"

aalD" t" so#rc"s o #ds or b#si"ss

"3al#at" 3ario#s i3"st!"t d"cisio sc"arios or a oraiDatio

a//rais" t" /"ror!ac" o a b#si"ss #si iacial tools

#d"rstad t" c#rr"t d"3"lo/!"ts i b#si"ss iaci strat"i"s.

CONTENT

9.6 Nat!#e o) B!"ine"" Finance

E &"latiosi/ b"t"" b#si"ss iac" ad iacial !aa"!"t

E oals o t" ir!

E $"c t"or

E *ools o b#si"ss iac" *i!" 3al#" o !o", it"r"st rat"s, cas los, ris ad

r"t#r ("xcl#di /ortolio !aa"!"t)

9.? So!#ce" F!nd"

E xt"ral so#rc"s "#it ad loa ca/ital, ir" /#rcas", l"as" ir", trad" cr"dit

E 't"ral so#rc"s &"tai"d "aris, /ro3isios ad r"s"r3"s


8/255

-iii (nt#od!ction

E


9/255

To4ical +!ide to /a"t /a4e# 5!e"tion" ix

TO/(CA; +U(


10/255

6 /a"t /a4e# 5!e"tion" and An"we#"

/a#t ((: /a"t /a4e# 5!e"tion" and An"we#"

5!e"tion" = /a"t /a4e#"

>>

An"we# A;; !e"tion" in SECT(ON ( and ONE !e"tion in SECT(ON ((. *a#k"

allocated to eac' !e"tion a#e "'own at t'e end o) t'e !e"tion. S'ow A;; o!#

wo#king".

SECT(ON (

5UEST(ON ONE

(a) at "coo!ic ad3ata"s ar" cr"at"d b t" "xist"c" o

(i) Pri!ar !ar"ts. ( !ars)(ii) "codar !ar"ts ( !ars)

(iii) Portolio !aa"!"t ir!s. (4 !ars)

(b) x/lai o t" ma#k"%

5UEST(ON TDO


11/255

5!e"tion" = /a"t /a4e#" ?

(c) (i) at is a ma#k"%

5UEST(ON FOU0

(a) >o!boo


12/255


(ii) o#ld o#r 3al#atio ca" i o# "x/"ct"d to old t" stoc or ol

"arsL x/lai. (5

!ars)

$Total: ?> ma#k"%


13/255

5!e"tion" = /a"t /a4e#" @

SECT(ON ((

5UES(TON F(2E

*" iacial data i3" b"lo sos t" ca/ital str#ct#r" o $ab"bi


14/255

/a"t /a4e# 5!e"tion" and An"we#"


15/255

5!e"tion" = /a"t /a4e#"

JUNE ?>>6



wo#king".

SECT(ON (

5UEST(ON ONE

(a) tat" t" circ#!stac"s #d"r ic it o#ld b" ad3ata"o#s to l"d"rs ad toborro"rs ro! t" iss#" o

(i) "b"t#r"s it a loati rat" o it"r"st. (4 !ars)

(ii) M"roEco#/o bods. (4 !ars)

('or" taxatio)

(b) (i) Bri"l disc#ss t" disad3ata"s o t" costat rot di3id"d !od"l as a

3al#atio !od"l. (4

!ars)

(ii) *" di3id"d /"r sar" o >a3aDi %i!it"d as at 1 "c"!b"r 2000 as

.2.50. *" co!/aHs iacial aalst as /r"dict"d tat di3id"ds

o#ld ro at 20K or i3" "ars at"r ic rot o#ld all to a costat

rat" o 7K. *" aalst as also /roF"ct"d a r"#ir"d rat" o r"t#r o 10K

or t" "#it !ar"t. >a3aDiHs sar"s a3" a si!ilar ris to t" t/ical"#it !ar"t.

0e!i#ed:

*" itrisic 3al#" o sar"s o >a3aDi %td. $s at 1 "c"!b"r 2000.

(8 !ars)


16/255


7. 60K o sal"s ar" o cr"dit.

8. *" ross !ari o sal"s is 0K ad is to b" !aitai"d i #t#r".


17/255

5!e"tion" = /a"t /a4e#" 8

0e!i#ed:

(i) ;s" t" i3"tor (Ba#!ol) !od"l to d"t"r!i" t" "coo!ic ord"r #atit

ad t" ord"ri ad oldi costs at t"s" l"3"ls /"r a#!. (8 !ars)(ii) "t"r!i" i t" co!/a so#ld sitc to t" " cr"dit /olic. (4

!ars)

(b) *" $/ollo oda to *#rsda. $t t" clos" o b#si"ss o Crida t" ""Hs

bais ar" itdra ad, to"t"r it CridaHs coll"ctios, ar" r"!itt"d to t""ad oic". *" tais ar" "3"l s/r"ad dail ad ""l. *" b#d"t or t"

"xt "ar sos tat total coll"ctios ill a!o#t to .26 !illio. *" bais ar"

#s"d to r"d#c" a o3"rdrat os" it"r"st rat" is 19K.

*" coll"ctio !aa"r as s#"st"d tat ist"ad o bai coll"ctios, t" b"

r"!itt"d dail to t" "ad oic" b t" coll"ctors.

0e!i#ed:

"t"r!i" t" icr"as" i a#al it"r"st i t" coll"ctio !aa"rHs s#"stio as

ado/t"d. (8 !ars)

$Total: ?> ma#k"%

5UEST(ON T10EE

&aii ardar" *ools >>

?>>>

S'.>>>


18/255


(a) Cor "ac o t" tr"" "ars, calc#lat" t" olloi ratios

$cid t"st ratio, $3"ra" coll"ctio /"riod, i3"tor t#ro3"r, *otal d"bt"#it, N"t

/roit !ari ad r"t#r o ass"ts. (12 !ars)

(b) Cro! t" ratios calc#lat"d abo3", co!!"t o t" li#idit, /roitabilit ad "ari

/ositios o t" co!/a. (8 !ars)

$Total: ?> ma#k"%

5UEST(ON FOU0

(a) x/lai #ll t" ""ct o t" #s" o d"bt ca/ital o t" "it"d a3"ra" cost o

ca/ital o a co!/a. (6

!ars)

(b) >ill"i#! '3"st!"ts %td. is"s to rais" #ds a!o#ti to .10 !illio to

iac" a /roF"ct i t" olloi !a"r

.6 !illio ro! d"btI ad

.4 !illio ro! loati " ordiar sar"s.

*" /r"s"t ca/ital str#ct#r" o t" co!/a is !ad" #/ as ollos

1. 600,000 #ll /aid ordiar sar"s o .10 "ac

2. &"tai"d "aris o .4 !illio

. 200,000, 10K /r""r"c" sar"s o .20 "ac.

4. 40,000 6K lo t"r! d"b"t#r"s o .150 "ac.

*" c#rr"t !ar"t 3al#" o t" co!/aHs ordiar sar"s is .60 /"r sar". *"

"x/"ct"d ordiar sar" di3id"ds i a "arHs ti!" is .2.40 /"r sar". *" a3"ra"

rot rat" i bot di3id"ds ad "aris as b"" 10K o3"r t" /ast t" "ars ad

tis rot rat" is "x/"ct"d to b" !aitai"d i t" or"s""abl" #t#r".

* H l t d b t tl d 100 *


19/255

5!e"tion" = /a"t /a4e#"

6>

5UEST(ON F(2E

(a) *" $ (ar"ts $#torit) as /#t i /lac" s"3"ral tax ic"ti3"s to

"co#ra" i3"st!"ts i ca/ital !ar"ts.

ilit so!" o t" tax ic"ti3"s b t" ar"ts $#torit. (4 !ars)

(b) x/lai t" b""its tat ar" "Fo"d b i3"stors b"ca#s" o t" "xist"c" o

oraiD"d s"c#rit "xca"s. (8

!ars)

(c) Bri"l d"scrib" t" b""its o t"


20/255


>6



wo#king".

SECT(ON (

5UEST(ON ONE

(a) ilit o#r ad3ata"s ad disad3ata"s to a co!/a o b"i list"d o a stoc"xca". (8 !ars)

(b) ' r"latio to t" stoc "xca"

(i) x/lai t" rol" o t" olloi !"!b"rs

Cloor bro"rs (2 !ars)

>ar"t !a"rs (2 !ars)

;d"rrit"rs (2 !ars)

(ii) x/lai t" !"ai o t" olloi t"r!s

B#ll ad b"ar !ar"ts (2 !ars)

BidEas s/r"ad (2 !ars)

ort s"lli (2 !ars)$Total: ?> ma#k"%

5UEST(ON TDO

(a) >#ltiE%i %td., a tradi co!/a, c#rr"tl as "liibl" cas oldis b#t"x/"cts to !a" a s"ri"s o cas /a!"ts totali .150 !illio o3"r t"

ortco!i "ar. *"s" /a!"ts ill b"co!" d#" at a st"ad rat". *o

alt"rati3" as a3" b"" s#"st"d o !""ti t"s" obliatios


21/255

5!e"tion" = /a"t /a4e#"

6?

(a) (i) x/lai t" "a"ss"s o t" Ba#!ol !od"l i t" !aa"!"t o

cas. ( !ars)

(ii) $d3is" >#ltiE%i %td. as to t" b"tt"r alt"rati3" or !aai itscas. (7 !ars)

(b) %x "r3ic"s %td., a d"bt coll"ctio a"c, as "sti!at"d tat t" stadardd"3iatio o its dail "t cas lo is .22,750. *" co!/a /as .120

i trasactio cost "3"r ti!" it tras"rs #ds ito ad o#t o t" !o"

!ar"t. *" rat" o it"r"st i t" !o" !ar"t is 9.465K. *" co!/a

#s"s t" >ill"rEOrr >od"l to s"t its tar"t cas balac". *" !ii!#! cas

balac" as b"" s"t at .87,500.

0e!i#ed:

(i) *" co!/aHs tar"t cas balac". ( !ars)

(ii) *" lo"r ad #//"r cas li!it. (2 !ars)

(iii) %x "r3ic"s %td.Hs d"cisio r#l"s. (5 !ars)

$Total: ?> ma#k"%

5UEST(ON T10EE

>aaribi


22/255


S'.

P#rcas" /ric" (scra/ 3al#" i 10 "ars .4,500,000)

Cr"it ad istallatio

87,000,000

1,000,000

100,000,000

4. *" "sti!at"d a#al o/"rati costs, i all t" c#rr"t o#t/#t is /roc"ss"d o t"

" !aci" ar"

S'. S'.

&a s#ar ca"

%abo#r (o" o/"rator)

-ariabl" "x/"s">ait"ac" ("xcl#di o3"ra#l

"x/"dit#r")

Cix"d "x/"s"s

"/r"ciatio

Cix"d actor o3"r"ad absorb"d

>ait"ac"

9,550,000

7,800,000

162,000,000

,900,000

2,275,000

17,50,000

4,500,000

5. *" co!/aHs cost o ca/ital is 10K.

6. Cor a /roF"ct to b" i!/l"!"t"d, it !#st /ass bot t" /roitabilit t"st, as idicat"db its it"ral rat" o r"t#r ad also satis a iacial 3iabilit t"st, i tat it !#st

/a bac or its"l iti a !axi!#! /"riod o i3" "ars.

0e!i#ed:

(a) (i) N"t /r"s"t 3al#"s o t" /ro/os"d r"/lac"!"t d"cisio #si disco#t rat"s

o 10K ad 20K. (8 !ars)

(ii) *" "sti!at"d it"ral rat" o r"t#r ('&&) o t" r"/lac"!"t d"cisio #si

t" 3al#"s d"t"r!i"d i (i) abo3". (4 !ars)


23/255

5!e"tion" = /a"t /a4e#"

6@

>rs aDiri as a//roac"d o# or ad3ic" ad o# a3" at"r"d t" ior!atio i3"

b"lo r"ardi t" iacial coditio o $B< %td. ad t" iac" s"ctor as a ol".


24/255


ABC ;td. Balance S'eet" a" at 76 Octoe#

6999

S'.>>>

?>>>

S'.>>>

?>>6

S'.>>>

aci"r

Ot"r ix"d ass"ts *otal ass"ts

$cco#ts ad ot"s /aabl"

$ccr#als

*otal c#rr"t liabiliti"s

%o t"r! d"bt

Ordiar sar" ca/ital

&"tai"d "aris

15,250

80,20

98,600194,170

25,20

,800

14,920268,120

4,220

15,700

49,920

60,850

115,000

42,50

268,120

14,400

87,800

158,800261,000

27,600

6,400

18,2004,200

7,760

4,000

107,760

60,858

115,000

59,582

4,200

8,000

14,400

254,00096,400

25,000

0,600

16,400468,400

15,848

67,000

202,848

81,720

115,000

68,82

468,400

ABC ;td. (ncome Statement" )o# t'e ea# ending 76 Octoe#

6999

S'.>>>

?>>>

S'.>>>

?>>6

S'.>>>

al"s (all o cr"dit)


25/255

5!e"tion" = /a"t /a4e#"

6

(nd!"t# Financial 0atio"$?>>6%

#ic ratio


26/255


' a co!/a, a a"c /robl"! !a "xist b"t"" !aa"!"t ad sar"old"rs o o"

ad ad t" d"bt old"rs (cr"ditors ad l"d"rs) o t" ot"r b"ca#s" !aa"!"t ad

sar"old"rs, o o ad cotrol t" co!/a a3" t" ic"ti3" to "t"r ito trasactios

tat !a tras"r "alt ro! d"bt old"rs to sar"old"rs. "c" t" ""d or ar""!"tsb d"bt old"rs i l"di cotracts.

0e!i#ed:

(a) tat" ad "x/lai a o#r actios or trasactios b !aa"!"t ad sar"old"rstat co#ld b" ar!#l to t" it"r"sts o d"bt old"rs (so#rc"s o colict). (8

!ars)

(b) rit" sort ot"s o a o#r r"stricti3" co3"ats tat d"bt old"rs !a #s" to/rot"ct t"ir "alt ro! !aa"!"t ad sar"old"r raids. (10

!ars)

$Total: 68 ma#k"%


27/255

5!e"tion" = /a"t /a4e#"

68

*AY ?>>?



wo#king".

SECT(ON (

5UEST(ON ONE

(a) isc#ss t" drabacs o #si t" olloi a//roac"s i "sti!ati a s"c#ritHs

3al#"

(i) Boo 3al#"I ( !ars)

(ii) &"/lac"!"t 3al#"I ( !ars)

(iii) #bstit#tio 3al#"I ( !ars)

(i3) 'trisic 3al#". ( !ars)

(b) No!oo oldis %i!it"d as i3"st!"t it"r"sts i tr"" co!/ai"s. :iriaa-id"o %i!it"d (:-%), :iloris a#li"rs %i!it"d (:%) ad *#raa Cis"ri"s

%i!it"d (*C%). *" olloi iacial data r"lat" to t"s" co!/ai"s.

1. $s at 1 "c"!b"r 2001, t" iacial stat"!"ts o to o t" co!/ai"s

r"3"al"d t" olloi ior!atio

Com4an /#ice o) "'a#e

S'.

Ea#ning" 4e#

"'a#e

S'.


28/255


(ii) ;si t" di3id"ds rot !od"l, d"t"r!i" t" !ar"t 3al#" o 1,000

sar"s "ld i *#raa Cis"ri"s %td. (*C%) as at 1 "c"!b"r 2001. (4

!ars)

$Total: ?? ma#k"%

5UEST(ON TDO


29/255

5!e"tion" = /a"t /a4e#"

?>

Ordiar sar" ca/ital

&"tai"d "aris

12K loEt"r! d"bt*rad" cr"ditors

$ccr#"d "x/"s"s

84,000

5,200

20,000 6,000

24,000

199,200

Cor t" "ar "d"d 1 "c"!b"r 2001, sal"s a!o#t"d to .240,000,000. *" ir! /roF"cts

tat t" sal"s ill icr"as" b 15K i "ar 2002 ad 20K i "ar 200.

*" at"r tax /roit o sal"s as b"" 11K b#t t" !aa"!"t is /"ssi!istic abo#t #t#r"

o/"rati costs ad it"ds to #s" a at"rEtax /roit o sal"s rat" o 8K /"r a#!.

*" ir! it"ds to !aitai its di3id"d /a o#t ratio o 80K. $ss"ts ar" "x/"ct"d to 3ar

dir"ctl it sal"s il" trad" cr"ditors ad accr#"d "x/"s"s or! t" s/ota"o#s so#rc"s

o iaci. $ "xt"ral iaci ill b" ""ct"d tro# t" #s" o co!!"rcial /a/"r.

0e!i#ed:

(a) "t"r!i" t" a!o#t o "xt"ral iacial r"#ir"!"ts or t" "xt to "ars.

(7 !ars)

(b) (i) $ /roor!a balac" s""t as at 1 "c"!b"r 200. (10 !ars)

(ii) tat" t" #da!"tal ass#!/tio !ad" i o#r co!/#tatios i (a) ad b(i)

abo3". (1 !ars)

$Total: 68 ma#k"%

5UEST(ON FOU0

P. >#li as r"c"tl a//oit"d to t" /ost o i3"st!"t !aa"r o >asada %td. a #ot"dco!/a. *" co!/a as rais"d .8,000,000 tro# a rits iss#".

P. >#li as t" tas o "3al#ati to !#t#all "xcl#si3" /roF"cts it #"#al "coo!ic


30/255

?6 /a"t /a4e# 5!e"tion" and An"we#"

(a) *" cost o "#it o t" ir!. ( !ars)

(b) *" "t /r"s"t 3al#" o "ac /roF"ct. (6 !ars)

(c) *" 't"ral &at" o r"t#r ('&&) o t" /roF"cts. (&"disco#t cas los at 24K

or /roF"ct = ad 25K or ProF"ct ?). (6 !ars)

(d) Bri"l co!!"t o o#r r"s#lts i (b) ad (c) abo3". (2 !ars)

(") 'd"ti ad "x/lai t" circ#!stac"s #d"r ic t" N"t Pr"s"t -al#" (NP-)

ad t" 't"ral &at" o &"t#r ('&&) !"tods co#ld ra !#t#all "xcl#si3"/roF"cts i a colicti a.

(5 !ars)

$Total: ?? ma#k"%

SECT(ON ((

5UEST(ON F(2E(a) at is !"at b t" t"r! ca/ital litL (5 !ars)

(b) a3" $rica "coo!i"s b"" caract"riD"d b !#c ca/ital lit i t" /astL

(8 !ars)

(c) at is t" i!/act o !assi3" ca/ital lit o t" 3al#" o t" do!"stic c#rr"cL

(5 !ars)

$Total: 68 ma#k"%

5UEST(ON S(

(a) isc#ss t" !ai actors ic a co!/a so#ld cosid"r " d"t"r!ii t"


31/255

5!e"tion" = /a"t /a4e#"

??

>?



wo#king".

SECT(ON (

5UEST(ON ONE

a) $ ir! !a ado/t a cos"r3ati3" /olic or a ar"ssi3" /olic i iaci its

ori ca/ital ""ds.

aFi >aD#ri

t"r/ris"s (>>) %td

E %"3"l o a#al sal"s (#ior! /"r !ot) E .600 !illio

E


32/255


*" a3"ra" coll"ctio /"riod ill b" r"d#c"d to 2 das.

Alte#nati-e B: cont#acting t'e "e#-ice" o) a )acto#:

*" actor o#ld car" a "" o 2K o total cr"dit sal"s ad ad3ac" >> %td.

90K o total cr"dit sal"s i3oic"d b t" "d o "ac !ot at a it"r"st rat" o1.5K /"r !ot.

*" ""cts o tis alt"rati3" ar" "x/"ct"d to b" as ollos

No ca" is "x/"ct"d i t" l"3"l o a#al sal"s, /ro/ortio o

cr"dit sal"s ad cotrib#tios !ari ratio. a3is o d"bt ad!iistratio "x/"s"s o .1,400,000 /"r !ot

ill r"s#lt

$ll bad d"bt loss"s ill b" "li!iat"d

*" a3"ra" coll"ctio /"riod ill dro/ to 20 das.

0e!i#ed:

i) 3al#at" t" a#al iacial b""its ad costs o "ac alt"rati3" ($ss#!"

60 Ada "ar) (8 !ars)

ii) $d3is" >> %td. !aa"!"t o t" alt"rati3" to i!/l"!"t. (2 !ars)

iii) x/lai bri"l ot"r actors tat so#ld b" cosid"r"d i r"aci t"

d"cisio i (ii) abo3". (4

!ars)

$Total: ?> ma#k"%

5UEST(ON TDO

(a) ' "3al#ati i3"st!"t d"cisios, cas los ar" cosid"r"d to b" !or" r"l"3at

ta /roitabilit associat"d it t" /roF"ct


33/255

5!e"tion" = /a"t /a4e#"

?@

$ss#!" tat ca/ital alloac"s ar" to b" /ro3id"d or o a straitEli" basis ad

>a!ba %i!it"dHs cost o ca/ital is 12 /"r c"t /"r a#!.

0e!i#ed:

(i) *" iitial cas o#tlo or t" r"/lac"!"t d"cisio. ( !ars)

(ii) *" a#al icr"!"tal at"r tax o/"rati cas los. (4 !ars)(iii) *" NP- o t" r"/lac"!"t d"cisio ad ad3is" >a!ba %i!it"d o

"t"r to r"/lac" t" !aci"r.

(7 !ars)

(i3) *" !ii!#! at"r tax a#al o/"rati cas los tat ill !a" t"

r"/lac"!"t "asibl". ( !ars)

$Total: ?> ma#k"%

5UEST(ON T10EE

(a) x/lai t" t"r! a"c costs ad i3" a tr"" "xa!/l"s o s#c costs. (5

!ars)

(b) O 1 No3"!b"r 2002, >alaba %i!it"d as i t" /roc"ss o raisi #ds to

#d"rta" o#r i3"st!"t /roF"cts. *"s" /roF"cts r"#ir"d a total o .20 !illio.

i3" b"lo ar" d"tails i r"s/"ct o t" /roF"cts

/#oGect 0e!i#ed (nitial (n-e"tment

S'". million

(nte#nal 0ate o) 0et!#n

$(00%

$

B

ma#k"%

5UEST(ON FOU0

>adaa


35/255

5!e"tion" = /a"t /a4e#"

?

&"s"r3"s

>"di#! ad loEt"r! d"bt

90

140

92

Cro! /ast "x/"ri"c", it as b"" disclos"d tat "ac additioal .1 o sal"s !ad" b t"co!/a r"#ir"s, o a3"ra", a total i3"st!"t i ix"d ass"ts, stocs ad d"btors o

.1.50. *" .1 additioal sal"s also r"s#lts i t" ""ratio o a#to!atic iaci o 40

c"ts as 3ario#s cr"ditors s/ota"o#sl aris" it t" icr"as" i sal"s.

*" "t /roit !ari at"r tax ad t" di3id"ds /ao#t ratio ic a//l or t" "ar "d"d

1 Octob"r 2002 ill also b" r"l"3at ito t" or"s""abl" #t#r".

0e!i#ed:

(a) *" a!o#t o "xt"ral iac" tat ill b" ""d"d d#ri t" "ar "di 1

Octob"r 200 i sal"s ar" "x/"ct"d to icr"as" b 15K i t" "ar.

(4 !ars)

(b) *" !axi!#! "x/"ct"d sal"s rot tat ca b" aci"3"d i t" "ar "di 1

Octob"r 200 i ol it"rall ""rat"d #ds ar" #s"d. (6 !ars)

(c) *" !axi!#! rot i sal"s tat ca b" aci"3"d i t" "ar "di 1 Octob"r

200 i t" co!/a is"s to !aitai its c#rr"t l"3"l o iacial "ari. (6

!ars)

(d) Bri"l co!!"t #/o t" "a"ss"s o t" !"tod o or"casti #s"d abo3".

(4 !ars)

$Total: ?> ma#k"%

SECT(ON ((


36/255

? /a"t /a4e# 5!e"tion" and An"we#"

(a) x/lai t" !"ai o crossEbord"r listi. ( !ars)

(b) 'd"ti ad "x/lai six r"asos co!/ai"s i o#r co#tr !a s"" crossE

bord"r listi. (12 !ars)

(c) 'd"ti i3" barri"rs to crossEbord"r listi. (5 !ars)

$Total: ?>ma#k"%


37/255

5!e"tion" = /a"t /a4e#"

?8

JUNE ?>>7



wo#king".

SECT(ON (

5UEST(ON ONE

(a) x/lai t" "it"d a3"ra" cost o ca/ital o a ir! tat #s"s r"lati3"l !or"d"bt ca/ital is ""rall lo"r ta tat o a ir! tat #s"s r"lati3"l l"ss d"bt ca/ital.

(6 !ars)

(b) *" total o t" "t ori ca/ital ad ix"d ass"ts o Caida %td as at 0 $/ril 200

as .100,000,000. *" co!/a is"s to rais" additioal #ds to iac" a

/roF"ct iti t" "xt o" "ar i t" olloi !a"r.

.0,000,000 ro! d"bt.20,000,000 ro! s"lli " ordiar sar"s.

*" olloi it"!s !a" #/ t" "#it o t" co!/a

.,000,000 #ll /aid #/ ordiar sar"s

$cc#!#lat"d r"tai"d "aris

1,000,000 10K /r""r"c" sar"s

200,000 6K lo t"r! d"b"t#r"s

0,000,000

20,000,000

20,000,000

0,000,000

*" c#rr"t !ar"t 3al#" o t" co!/aHs ordiar sar"s is .0. *" "x/"ct"d

di id d di b 0 $ il 2004 i t t 1 20 *


38/255


(iii) *" co!/aHs "xisti "it"d a3"ra" cost o ca/ital. (4

!ars)

(i3) *" co!/aHs !arial cost o ca/ital i it rais"d t" additioal.50,000,000 as it"d"d.

(4 !ars)

$Total: ?> ma#k"%

5UEST(ON TDO

(a) Bri"l "x/lai t" i!/ortac" o ca/ital b#d"ti i a b#si"ss oraiDatio. (4

!ars)

(b) $li!a %td., a !a#act#r"r o "dibl" oils, is cot"!/lati t" /#rcas" o a " oil

/roc"ssi !aci" to r"/lac" t" "xisti o". *" "xisti !aci" as ac#ir"d

to "ars ao at a cost o .4,000,000. t" #s"#l li" o tis !aci" as

oriiall "x/"ct"d to b" i3" "ars it o sal3a" 3al#", b#t at"r a criticalaalsis, t" iacial aalst as o "sti!at"d tat t" !aci" ill a3" a

"coo!ic li" o t" "ars it a sal3a" 3al#" o .500,000. *" " !aci" is

"sti!at"d to cost .8,000,000 ad .400,000 o#ld b" ic#rr"d i istalli t"

!aci". *" " !aci" is "sti!at"d to a3" a #s"#l li" o t" "ars. $ "x/"rti ass"t 3al#atio "sti!at"s tat t" "xisti !aci" ca b" sold at .2,500,000 i

t" o/" !ar"t. *" " !aci" is "x/"ct"d to l"ad to icr"as"d sal"s. *o

s#//ort t" icr"as"d sal"s, d"btors o#ld icr"as" b .20,000, stoc b

.140,000 ad cr"ditors b .00,000. *" "sti!at"d /roit b"or" d"/r"ciatio

ad tax o3"r t" "xt t" "ars or t" to !aci"s is as i3" b"lo.

Yea# New mac'ine

S'.

Old *ac'ine

S'.

12

4

50,000400,000420,000

410 000

280,00000,00020,000

40 000


39/255

5!e"tion" = /a"t /a4e#"

7>

(a) O#tli" o#r li!itatios o t" #s" o ratios as a basis o iacial aalsis. (4

!ars)

(b) *" olloi ior!atio r"/r"s"ts t" iacial /ositio ad iacial r"s#lts o

$>*= %i!it"d or t" "ar "d"d 1 "c"!b"r 2002.

A*ETE ;imited

T#ading, 4#o)it and lo"" acco!nt )o# t'e ea# ended 76 >?

S'.H>>>H S'.H>>>H

al"s A


40/255


&"3"#" r"s"r3"s

10K ba loa

81,500

40,000 QQQQQQ

281,500

Additional in)o#mation:

1. *" co!/aHs ordiar sar"s ar" s"lli at .20 i t" stoc !ar"t.

2. *" co!/a as a costat di3id"d /a o#t o 10K.

0e!i#ed:

"t"r!i" t" olloi iacial ratios

(i) $cid t"st ratio. (2 !ars)(ii) O/"rati ratio (2 !ars)

(iii) &"t#r o total ca/ital "!/lo"d (2

!ars)

(i3) Pric" "aris ratio. (2 !ars)

(3) 't"r"st co3"ra" ratio (2 !ars)

(3i) *otal ass"ts t#ro3"r (2 !ars)

(c) "t"r!i" t" ori ca/ital ccl" or t" co!/a. (4 !ars)

$Total: ?> ma#k"%

5UEST(ON FOU0

(a) ;F#Di %i!it"d is"s to rais" iac" to cat"r or t" /#rcas" o " ix"d ass"ts, as

its sal"s l"3"l as r"atl icr"as"d i t" r"c"t "ars, ad t" d"!ad or its

/rod#cts is "x/"ct"d to icr"as" or t" or"s""abl" #t#r". *" co!/a as

900,000 o#tstadi sar"s ic ar" c#rr"tl tradi i t" stoc "xca" at

.10 a sar". *" iac" !aa"r "sti!at"s tat t" ix"d ass"ts ill cost

.22,500,000 ad " as co3ic"d t" board o dir"ctors to rais" t" !o"tro# a rits iss#". *" board as s"t t" s#bscri/tio /ric" at .75 /"r sar".

0 i d


41/255

5!e"tion" = /a"t /a4e#"

7?

$Total: ?> ma#k"%

SECT(ON ((

5UEST(ON F(2E

(a) Bri"l "x/lai t" di"r"c" b"t"" a bro"r ad a d"al"r i t" stoc !ar"t.

(6 !ars)

(b) at ar" t" ad3ata"s o a3i a d"al"r i a stoc !ar"tL (6 !ars)

(c) (i) at ar" t" ad3ata"s o a c"tral d"/ositor sst"! ( ma#k"%

5UEST(ON S(

(a) O#tli" t" actors ic cotrib#t"d to t" /o/#larit o co!!"rcial /a/"rs o3"r

ba o3"rdrats a!o lar" cor/oratios i t" 1990s. (4!ars)

(b) ma#k"%


42/255


>7



wo#king".

SECT(ON (

5UEST(ON ONE

(a) Bri"l "x/lai o t" o *"or 3i"s t" !o3"!"t o t" !ar"t /ric"s osar"s trad"d o a stoc "xca". (5 !ars)

(b) 'd"ti ad bri"l "x/lai t" actors tat !#st b" ta" ito acco#t i t" d"si

ad costr#ctio o a !ar"t id"x or sar"s. (5!ars)

(c) Jos"/ :i!"# is tri to d"t"r!i" t" 3al#" o Bidii %td.Hs ordiar sar"s. *"

"aris rot rat" o3"r is /la"d sixE"ar oldi /"riod is "sti!at"d to b" 10K,

ad t" di3id"d /ao#t ratio is 60K. *" "di /ric" "aris (P) ratio is

"x/"ct"d to b" 20 ad t" c#rr"t "aris /"r sar" ar" .4. *" r"#ir"d rat" o

r"t#r or tis sar" is 15K.

0e!i#ed:


43/255

5!e"tion" = /a"t /a4e#"

7@

0e!i#ed:

(i) "t"r!i" t" "t /r"s"t 3al#" (NP-) o "ac /roF"ct. (6 !ars)

(ii) a!a %td. o ic /roF"ct to i3"st i, ad F#sti o#r coic".

(4 !ars)

$Total: ?> ma#k"%

5UEST(ON T10EE

(a) isti#is b"t"" iacial ris ad o/"rati ris. (4 !ars)

(b) al" %td. as b"" i o/"ratio or t" last "it "ars. *" co!/a is all "#it

iac"d it 6 !illio ordiar sar"s it a /ar 3al#" o .5 "ac. *" c#rr"t

!ar"t /ric" /"r sar" is .8.40, ic is i li" it t" /ric""aris (P) ratio

i t" id#str o 6.00. *" co!/a as b"" cosist"t i /ai a di3id"d o

.1.25 /"r sar" d#ri t" last i3" "ars o its o/"ratios, ad idicatios ar" tatt" c#rr"t l"3"l o o/"rati ico!" ca b" !aitai"d i t" or"s""abl" #t#r".

*ax as b"" at a rat" o 0K.

*" !aa"!"t o al" %td. is cot"!/lati t" i!/l"!"tatio o a "

/roF"ct ic r"#ir"s .10 !illio. ic" o it"ral so#rc"s o #ds ar"

a3ailabl", !aa"!"t is to d"cid" o to alt"rati3" so#rc"s o iac", a!"l

Alte#nati-e A*o rais" t" .10 !illio tro# a rits iss#". >aa"!"t is o t" o/iio tat

a /ric" o .6.25 /"r sar" o#ld b" air.


44/255


(iii) >>

*otal ix"d ass"ts (N"t boo 3al#")

O/"rati costs ("xcl#di d"bt it"r"st)

i3id"ds d"clar"d ad /aid


45/255

5!e"tion" = /a"t /a4e#"

7

0e!i#ed:

ma#k"%

5UES(TON S(

(a) i"r"tiat" b"t"" t" olloi /airs o t"r!s

(i) >ar"t 3al#" ad itrisic 3al#" o a sar". (4 !ars)


46/255


JUNE ?>>@



wo#king".

SECT(ON (

5UEST(ON ONE

(a) x/lai t" !"ai o t" t"r! cost o ca/ital ad "x/lai a co!/a so#ldcalc#lat" its cost o ca/ital it car". (4 !ars)

(b) 'd"ti ad bri"l "x/lai tr"" coditios ic a3" to b" satisi"d b"or" t" #s"

o t" "it"d a3"ra" cost o ca/ital ($


47/255

5!e"tion" = /a"t /a4e#"

78

(a) ' t" cot"xt o ca/ital b#d"ti, "x/lai t" di"r"c" b"t"" ard ratioi

ad sot ratioi. (6

!ars)

(b) *" iac" !aa"r o Bidii 'd#stri"s %td., ic !a#act#r"s "dibl" oils, as

id"tii"d t" olloi tr"" /roF"cts or /ot"tial i3"st!"t

/#oGect (

*" /roF"ct ill r"#ir" a iitial i3"st!"t o.18 !illio ad a #rt"r

i3"st!"t o .25 !illio at t" "d o to "ars.


48/255


(ii) ic o t" tr"" /roF"cts so#ld Bidii 'd#stri"s %td. acc"/tL (2 !ars)

$Total: ?> ma#k"%

5UEST(ON T10EE

(a) at is !"at b t" t"r! !atci a//roac i iaci ix"d ad c#rr"t

ass"tsL

(4 !ars)

(b) Bri"l "x/lai o t" >ill"rEOrr cas !aa"!"t !od"l o/"rat"s. (4 !ars)

(c) aa!# %td., ic o/"rat"s i t" r"tail s"ctor s"lli a sil" /rod#ct, is

cosid"ri a ca" o cr"dit /olic ic ill r"s#lt i a icr"as" i t" a3"ra"

coll"ctio /"riod o d"bts ro! o" to to !ots. *" r"laxatio o t" cr"dit/olic is "x/"ct"d to /rod#c" a icr"as" i sal"s i "ac "ar, a!o#ti to 25K o

t" c#rr"t sal"s 3ol#!". *" olloi ior!atio is a3ailabl".

1. "lli /ric" /"r #it o /rod#ct A .1,0002. -ariabl" cost /"r #it o /rod#ct A .850

.


49/255

5!e"tion" = /a"t /a4e#"

@>

%oEt"r! d"bt

C!##ent liailitie"


50/255

@6 /a"t /a4e# 5!e"tion" and An"we#"

5UEST(ON S(

(a) at ar" t" d"t"r!iats o t" /ric" o a bodL (4!ars)

(b) 'd"ti six as i ic a co!/a co#ld !a" /r""r"c" sar"s !or" attracti3"

to a /ot"tial i3"stor. (6 !ars)

(c) (i) %ist ad bri"l disc#ss tr"" /ossibl" r"asos co!/ai"s i t" sa!"

t/" o b#si"ss !a a3" di"r"t /ric""aris (P) ratios. (6

!ars)

(ii) ma#k"%

>@



wo#king".

SECT(ON (

5UEST(ON ONE

(a) isti#is b"t"" a cr"dit /olic ad a ori ca/ital /olic. (4 !ars)

(b) %ist o#r actors tat so#ld b" cosid"r"d i "stablisi a ""cti3" cr"dit /olic.


51/255

5!e"tion" = /a"t /a4e#"

@?

5UEST(ON TDO

(a) "3"ral !"tods "xist or "3al#ati i3"st!"t /roF"cts #d"r ca/ital b#d"ti.

'd"ti ad "x/lai tr"" "at#r"s o a id"al i3"st!"t a//raisal !"tod. (6

!ars)

(b) >a/ato %i!it"d is a co!/a i3ol3"d i t" /roc"ssi o cooi oil. *"

!aa"!"t is cosid"ri "t"r to r"/lac" a "xisti cool"r it a " o".

*" old cool"r is #ll d"/r"ciat"d ad as o sal3a" 3al#". ' ot r"/lac"d, t"co!/a ill coti#" to ic#r .1.8 !illio as a#al o/"rati "x/"s"s ad a

additioal .500,000 i r"/air costs /"r a#! o3"r t" "xt it"" "ars.

*" " cool"r costs .,150,000. 'ts a#al o/"rati "x/"s"s ad r"/air costs

ar" "sti!at"d at .1. !illio ad .50,000 r"s/"cti3"l o3"r its "sti!at"d

"coo!ic li" o it"" "ars. 't is "x/"ct"d to b" ortl"ss at"r t" "x/ir o tis

/"riod.

*" cost o ca/ital is 10K ad t" co!/a d"/r"ciat"s its ass"ts #si t" straitEli" !"tod.

$ss#!" a 0K cor/oratio tax rat".

0e!i#ed:

(i)


52/255


*" co!/a /aid a di3id"d o .4.5 i t" /r"3io#s iacial "ar. *is di3id"d,

to"t"r it t" co!/aHs "aris is "x/"ct"d to ro b 5K a#all at"r

i3"sti i t" "x/asio /roF"ct.

0e!i#ed:

(i)


53/255

5!e"tion" = /a"t /a4e#"

@@

(ncome "tatement )o# t'e ea# ended 7> J!ne ?>>@

S'.al"s (all o cr"dit)

O/"rati /roit

%"ss d"b"t#r" it"r"st


54/255

@ /a"t /a4e# 5!e"tion" and An"we#"

0e!i#ed:

(a) ma#k"%

SECT(ON ((

5UEST(ON F(2E

(a) $lto# /roit !axi!iDatio as lo b"" cosid"r"d as t" !ai oal o a ir!,sar"old"r "alt !axi!iDatio is aii acc"/tac" a!ost !ost co!/ai"s as

t" " oal o a ir!.

0e!i#ed:

(i) isti#is b"t"" t" oals o /roit !axi!iDatio ad sar"old"r "alt

!axi!iDatio. (4 !ars)

(ii) x/lai tr"" li!itatios o t" oal o /roit !axi!iDatio. (6 !ars)

(b) x/lai tr"" " rol"s o a ca/ital !ar"ts r"#lator i o#r co#tr. (6 !ars)

(c) ilit t" i!/ortac" o t" olloi t"r!s i i3"st!"t a//raisal


55/255

5!e"tion" = /a"t /a4e#"

@


56/255

@ /a"t /a4e# 5!e"tion" and An"we#"

KENYA ACCOUNTANTS AN< SEC0ETA0(ES NAT(ONA; EA*(NAT(ONS

BOA0> Time Allowed: 7 'o!#"



wo#king".

SECT(ON (

5UEST(ON ONE

(a) isti#is b"t"" t" olloi t"r!s

(i)


57/255

5!e"tion" = /a"t /a4e#"

@8

*" co!/aHs "#it sar"s ar" c#rr"tl s"lli at s. 100 /"r sar". O3"r t"

/ast i3" "ars, t" co!/aHs di3id"d /aEo#ts ic a3" b"" a//roxi!at"l60K o t" "aris /"r sar" "r" as ollos

Yea# ended 7> Se4teme#


58/255


(a) isti#is b"t"" t" olloi t"r!s as #s"d i t" !aa"!"t o ori

ca/ital

(i) O3"rtradi ad o3"rca/italiDatio. (4 !ars)

(ii) Cactori ad /l"di o d"btors (4 !ars)

(b) *" olloi ior!atio r"lat"s to >a#ta ai %i!it"dS'". I>>>

P#rcas" o ra !at"rials 6,700

;sa" o ra !at"rials 6,500

al" o iis"d oods (all o cr"dit) 25,000

ma#k"%

5UEST(ON FOU0

(a) >ooDo %i!it"d as a//roac"d o# or ad3ic" o a "#i/!"t to b" /#rcas"d

or #s" i a i3" "ar /roF"ct.

*" i3"st!"t ill i3ol3" a iitial ca/ital o#tla o s. 1.4 !illio ad t""x/"ct"d cas los ar" i3" b"lo

Yea# Ca"' in)low" Ca"' o!t)low"

S'". S'".


59/255

5!e"tion" = /a"t /a4e#"

>

istal!"ts o s. 1,125,000 /aabl" at t" "ar "d. *" co!/aHs r"#ir"d rat"

o r"t#r is 1K ad t" co!/a is i t" 0K tax brac"t.


60/255


0e!i#ed:

(i) *" "t /r"s"t 3al#" (NP-) o t" !aci" i #ll iac"d b "#it to

ac#ir" t" !aci". $d3is" t" !aa"!"t o "t"r to iac" it b"#it or loa. (4 !ars)

(ii) *" "t /r"s"t 3al#" (NP-) o Rt" !aci" it /art d"bt iaci.

o#ld o#r ad3ic" to t" !aa"!"t i (b) (i) abo3" ca"L (8

!ars)

$Total: ?> ma#k"%

SECT(ON ((

5UEST(ON F(2E

(a) isti#is b"t"" /ri!ar ad s"codar s"c#riti"s !ar"t. (4 !ars)

(b) "s/it" t" lar" i3"st!"t i t" stoc "xca" ad t" 3ario#s o3"r!"t

ic"ti3"s, ol a " co!/ai"s ar" list"d at t" stoc "xca" o t" tr"" ast$rica co#tri"s.

*is as t" o/"i r"!ar b t" #"st s/"a"r i a s"!iar os" t"!" as

"3"lo/i o#r ca/ital !ar"t.

0e!i#ed:

(i) *" ad3ata"s o b"i list"d at t" stoc "xca". (8 !ars)

(ii) ilit o#r actors tat !a id"r co!/ai"s ro! b"i list"d at t"

stoc "xca". (8 !ars)

$Total: ?> ma#k"%

5UEST(ON S(

(a) rit" sort ot"s o t" olloi

(i) st"!atic ad #sst"!atic ris. (4

!ars)

(ii)


61/255

5!e"tion" = /a"t /a4e#"

?

KENYA ACCOUNTANTS AN< SEC0ETA0(ES AN< NAT(ONA; EA*(NAT(ONS

BOA0 Time Allowed: 7

'o!#".



wo#king".

SECT(ON (

5UEST(ON ONE

(a) "i" t" olloi iac" t"r!s

(i) *"r! str#ct#r" o it"r"st rat"s. (2 !ars)

(ii) cri/ di3id"ds. (2 !ars)

(iii) ar" s/lits (2 !ars)

(b) Mat"x %td. ad t" olloi ca/ital str#ct#r" as at 1 >arc 2005S'".

Ordiar sar" ca/ital (200,000 sar"s) 4,000,00010K Pr""r"c" sar" ca/ital 1,000,000

14K "b"t#r" ca/ital ,000,000

8 000 000


62/255


(4 !ars)

(c) Jaso %td. /aid a ordiar di3id"d o s. .60 /"r sar" or t" "ar "d"d 1

>arc 2005. *" !aa"!"t o t" co!/a /roF"cts tat t" "aris o t"co!/a ill icr"as" i t" co!i "ars as ollos

Yea# ending 76


63/255

5!e"tion" = /a"t /a4e#"

@

(i) ma#k"%

5UEST(ON T10EE

(a) Bri"l "x/lai t" o/"ratios o t" c"tral d"/ositor sst"! (arc 2009.

$ll "aris o#ld coti#" to b" /aid o#t as di3id"ds to sar"old"rs. *" cost o

ca/ital is 20K.

0e!i#ed:

(i) arc 2005. (2 !ars)


64/255


*" /roit /"r #it o t" co!/aHs /rod#ct is so b"lo

S'". S'".

"lli /ric" 25%"ss !at"rials 10

a"s 9.5

-ariabl" costs

Cix"d costs 0.5 2

Proit 2

*" co!/a as t" o//ort#it to icr"as" its sal"s b s. 10,000,000 /"r a#!,

s/lit b"t"" cat"ori"s < ad o t" d"btors i t" /ro/ortio 2 r"s/"cti3"l.*" co!/a borros at a it"r"st rat" o 11.5K /"r a#! (ass#!" a "ar as 65das).

0e!i#ed:

(i)


65/255

An"we#" /a"t 4a4e#"

An"we#" = /a"t /a4e#"

SU++ESTE< SO;UT(ONS TO T1E /AST /A/E0 5UEST(ONS

>>

5UEST(ON ONE

(a) (i) /0(*A0Y *A0KET

&aisi


66/255


5UEST(ON TDO

Alte#nati-e

(a) (i) $3"ra" i"ld T 9.10 + 9 T 9.05

2

Cor !ots t" i"ld T 9.05 T .02

Par 3al#" T 1QQQQQ T 97.07K

1 + 0.002

(ii) $3"ra" i"ld or J#" 18.55 T 9.275K

2

9.275K or 4 !ots T 2.1875 /"r !ot

Par 3al#" T 1QQQQQ T 97.7K

1 + 0.02875

&at" o r"t#r T 97.7 E 97.07

97.07

T >.8

(b) (i) $ id"x i ""ral t"r!s is a !"as#r" o r"lati3" ca" ro! o" /oit i /ric" to

aot"r. toc idic"s !"as#r" ca"s i /ric" or 3al#".

(ii) rabacs o NE 20 co!/ai"s ot tr#" r"/r"s"tati3"s

*i t t ll i t ti t t d t b


67/255

An"we#" /a"t 4a4e#" 8

5UEST(ON T10EE

(a) iic#lti"s ac"d i ca/ital b#d"ti

E ;c"rtait o 3ariabl"s ". a#al cas los, disco#ti rat"s, ca"s i

t"colo, ilatio rat", ca"s i tax rat"s "tc.E %ac o ad"#at" ca/ital to #d"rta" all 3iabl" /roits (ca/ital ratioi)

E %ac o ad"#at" ior!atio o t" a3ailabl" i3"st!"t o//ort#iti"s ".

i cas" o !#t#all "xcl#si3" /roits NP- ad '&& ill a3" colict i

bai o /roits #d"r so!" circ#!stac"s.

E 'd"tiicatio o all t" #atiiabl" ad o #atiiabl" costs ad b""its

associatio it a /roF"ct.

(b) *" old rid"r still as 5 !or" "ars. "t"r!i" t" NB- (toda) at"r t" la/s" o

"ars #si 15K d"/r"ciatio rat".

.H000H

Cirst "ars ao

%"ss "/r"ciatio 15K

?"ar 1

?"ar 2

?"ar NB- toda "d o "ar

,500

5252,975

446

2,529

792,150

*" d"/r"ciatio or t" irst "ars is a s# or istorical 3ariabl", irr"l"3at i

r"/lac"!"t d"cisio.


68/255


(ii)


69/255

An"we#" /a"t 4a4e#" >

.H000H

?"ar B*(1E*) * O/"rati


70/255


?"ar rot

i3id"d

P+

P+P T ? x >P

i3" >P T .45 ad ? T 5K (0.05)

P T .45 x 0.05

T .2.25

(b) ic" t" co!/a is raisi " : d"t"r!i" t" a!o#t to rais" ro! "ac so#rc".*" a!o#t ro! d"b"t#r"s ad &"tai"d aris ar" s/"cii"d.

*" a!o#t to rais" ro! ordiar sar"s ca b" d"ri3"d ro! t" "xisti ca/ital

t t

A / t ?


71/255

An"we#" /a"t 4a4e#" ?

N#!b"r o sar"s to b" iss#"d to rais" .10.464> ro! iss#" o ordiar sar"s at

9.60 >P

No. o sar"s TB9.6010.464 T 0.264242> sar"s

T 264,242 sar"s

$c% *a#ginal co"t o) ca4ital

Cor "ac o t" 4 so#rc"s o ca/ital co!/#t" t" /"rc"ta" >


72/255


(iii) *a#ginal Co"t o) O#dina# S'a#e Ca4ital $Ke%

100

oP

od

:" xFc

=

do T .2.25

PoCc T .9.60

1009.60

2.25:" x= T 5.68K

(i3) *a#ginal Co"t o) /#e)e#ence S'a#e Ca4ital $K4%

100

oP

d

/: x

Fcp=

d/ T Pr""r"c" P T 10K co#/o rat" x 20 /ar 3al#" T .2

Po T arial


73/255

An"we#" /a"t 4a4e#" @

(ii) Pro3isio or d"/r"ciatio is a a//ro/riatio ro! t" co!/aHs /roits.

*is a//ro/riatio is tras"rr"d to a sii #d ic b"co!"s a so#rc"

o ca/ital or r"/laci a "xisti ass"t. 't is a it"ral so#rc" o iac".

5UEST(ON S(

(a

)

$ a"t is a idi3id#al or /art acti o b"al. ' t" cot"xt o /#blic li!it"d a"c

r"latiosi/ !a ta" to !ai or!s.

(i) $"c r"latiosi/ b"t"" ar"old"rs ad >aa"!"t.

*" sar"old"rs ar" t" o"rs o t" co!/a tro# "#it ca/ital cotrib#tio.o"3"r, t" !a ot b" i3ol3"d i !aa"!"t. *" sar"old"rs !a ot a3"

t" "c"ssar sills or ti!" r"#ir"d. $s a r"s#lt, t" a//oit ot"r /arti"s to r# t"

co!/a o t"ir b"al (!aa"rs). *" sar"old"rs ar" t" /rici/l"s ad t"

!aa"!"t costit#t" t" a"ts.

(ii) $"c r"latiosi/ b"t"" t" sar"old"rs ad cr"ditors.

*" cr"ditors ar" t" cotrib#tors o d"bt ca/ital *" ar" ot allo"d to b" i3ol3"d i

!aa"!"t o t" co!/a dir"ctl. $t"r /ro3isio o #ds t" sar"old"rs ar"

"x/"ct"d to !aa" t" #ds alo it t" !aa"!"t o b"al o t" cr"ditors.

*" cr"ditors costit#t" t" /rici/l"s ad t" sar"old"rs t" a"ts.

*" !aa"!"t !a b" i3ol3"d i #ds ad irr"#lariti"s. *is ill r"d#c" t" "t

"aris accr#i to t" sar"old"rs.

(iii) Ot"r a"c r"latiosi/s is b"t"" sar"old"rs ad o3"r!"t a#ditors,

"!/lo""s ad cos#!"rs.

(b

)

E ;s" o /"ror!ac" bas"d r"ardco!/"satio

* t i i



74/255


JUNE ?>>6

5UEST(ON ONE

(a)


75/255

An"we#" /a"t 4a4e#"

T0.07E0.10

)16.22(1.07T 221.85 0.621 17.77

T 'trisic 3al#" T *otal /r"s"t 3al#" T 154.11

5UEST(ON TDO

(a) *" Ba#!ol >od"l o cas !aa"!"t is t" O !od"l or stoc !aa"!"t.

$ccordi to O !od"l, t" o/ti!al stoc to old (O) T


76/255


ic" a P !ari o 0K is i3" t" /roitabilit associat"d it t" ca" i

cr"dit /olic ill b" aals"d ro! icr"a!"tal P.

' K P !ari Tross Proit x 100 t" ross /roitT K P !ari al"s al"s

*" cost o iaci d"btors T 18K rat" o

xisti

/olic

N" /olic 'cr"a!"tal

P T 0K x 540 162! 0K x 648 194.4 2.40 (b""it)


77/255

An"we#" /a"t 4a4e#" 8

>odas coll"ctios

*#"sdas coll"ctios

"d"sdaHs coll"ctios

*#rsdaHs coll"ctios

E

E

E

E

0.1! x 0.0521K x 4 das

T

0.1! x 0.0521K x das

T0.1! x 0.0521K x 2 das

T

0.1! x 0.0521K x 1 da T

208.4

156.

104.2

52.1

*otal it"r"st car"s or"o" /"r "" 521

i3" 52 ""s /.a. a#al icr"a!"tal it"r"st car"s T 521 x 52 T 27,092.

5UEST(ON T10EE

$a% 0atio Fo#m!la# 6998 6999 ?>>>

$cid t"st

#ic ratio


78/255


(ii) tat" t" obs"r3atio !ad" ". ratios ar" d"clii or icr"asi i cas" o

tr"d or ti!" s"ri"s aalsis.

(iii) tat" t" r"asos or t" obs"r3atio.

(i3) tat" t" i!/licatios o t" obs"r3atio.


79/255

An"we#" /a"t 4a4e#" >

1998 20+ 200 + 100 + 00 x 100

1,40

T 58.04K

1999 00 + 210 + 100 + 00 x 100 1,560

T 58.K

2000 80 + 225 + 140 + 00 x 100

1,695

T 61.65K

5UEST(ON FOU0

(a) $t iitial sta"s o d"bt ca/ital t" $


80/255


:d T 100x125

6.8

2

1100)(150

100

1100)E(1500.)E9(1

=

+

+T

5.441K

ro! sar"s

ic" t"r" ar" o loatatio costs i3ol3"d t"

>arial cost o d"bt T 5.4K

>arial cost o ordiar sar" ca/ital T 14K

An"we#" /a"t 4a4e#" ?


81/255

4 4

E *" ir!s ar" abl" to iss#" " sar"s ad rais" ca/ital "asil

E *" "xca" is a 3"icl" o !obiliDi sa3is i t" "coo!

E ic" i3"stors ca b# " sar"s, tis "abl" t"! to di3"rsi t"ir

i3"st!"ts ad r"d#c" risE 't is a !"as tro# ic or"i dir"ct i3"st!"t (CO') ca lo ito t"

"coo!

E '3"stors ar" abl" to o t" /ric" o t"ir s"c#riti"s as d"t"r!i"d b

d"!ad ad s#//l orc"s i t" stoc "xca".E ic" i3"stors caot b# or s"ll sar"s t"!s"l3"s, t" it"ract it

stocbro"rs ad "t i3"st!"t ad3ic"

(c) *" b""its o c"tral d"/ositor sst"! (


82/255

4 5

>6

5UEST(ON ONE(a) Ad-antage" o) eing li"ted

N" #ds !a b" "asil obtai"d ro! t" stoc "xca"

as /rici o sar"s

$ b"tt"r cr"dit stadi obtai"d

as sar" /"r tras"r (o"rsi/)

B#i ot"r co!/ai"s is "asi"r

id" o"rsi/ o t" ir!

&"d#ctio i /"rc"i3"d ris b sar"old"rs

r"at"r /ro!i"c" ad stat#s i3" to #ot"d co!/ai"s !a cr"at" oodillor t" co!/a.


83/255

4 4

co!/aHs sar"s d#ri a /ri!ar iss#".

" "s#r"s tat t" co!/a "ts t" tar"t"d #ds so!"ti!"s a3i tota" #/ t" sortall i d"!ad.

(b) (i) B#ll ad b"ar !ar"ts

$ b#ll !ar"t is a !ar"t caract"riD"d b risi /ric"s, "co#rai /"o/l" tob# o i t" o/" o !ai a /roit " t" s"ll lat"r at"r /ric"s a3"

cli!b"d #/.

$ b"ar !ar"t is caract"riD"d b alli /ric"s "co#rai b"ars to s"ll oi ord"r to a3oid #t#r" loss"s " /ric"s o#ld a3" all".

(ii) Bid as s/r"ad

's t" di"r"c" b"t"" t" o"r /ric" ad t" b#i /ric" o a sar".

(iii

)

ort s"lli

E 's t" act o s"lli a sar" ic o" do"s ot alr"ad /oss"ss.

E *" d"al"r co#ld borro t" sar"s, s"ll t"! " /ric"s ar" i ad

i atici/atio o d"cli" i /ric"s, t" sar"s ill b" bo#t bac atlo"r /ric"s ad r"#d"d to t" l"d"r

5UEST(ON TDO

(a) (i) "a"ss"s o Ba#!ol >od"l i !aa"!"t o cas.

Ba#!ol >od"l is t" O a//roac i cas !aa"!"t accordi to tis

!od"l, t" o/ti!al cas balac" o"d.

2*b< =



84/255

4

(i3) $ ir! as a st"ad cas ilos ad o#tlos ic occ#rs at

r"#lar it"r3als.

(3) $ ir! do"s ot ic#r a cost d#" to sorta" o cas ". lost

i3"st!"t o//ort#iti"s.

(ii) *" /ras" idicati tat cas balac"s ill b" r# do at a "3" rar"

tro#o#t t" "ar !"as tat o a3"ra" t" ir! ill "ar it"r"st o 9K

o t" a!o#t o loa borro"d. *" ir! /as it"r"st at 18K, it ill""rat" it"r"st ico!" at 9K it"r"st rat", " t" borro"d #d is

/lac"d i a otic" d"/osit X

Alte#nati-e ((

't"r"st car"s /aabl"T 18K x 150! (27.00!)'t"r"st ico!" o d"/osit T 9K x 650! 1.50!

N"t costit"r"st car"s 1.50!

$dd Clat arra"!"t ""s (50,000) 0.50!

N"t cost o t" o/tio (1.55!)

Alte#nati-e (

*" .150! ill b" rais"d ro! sal" o sort t"r! !ar"tabl" s"c#riti"s.

*"r"or" t"r" ill b" co3"rsio costs "3"r ti!" t" s"c#riti"s ar" sold tor"aliD" cas. *is ca b" d"t"r!i"d #si Ba#!ol >od"l. "r"

$#al cas r"#ir"!"t T 150! *

*rasactioco3"rsio "" T 15,000 b

't"r"st rat" o sort t"r! s"c#riti"s T 12K '

O/ti!al cas balac"i

2*b


85/255

*" ir! r"#ir"s 150! /.a.

o"3"r, t" cas ilo ad o#tlo occ#rs at a st"ad rat". *"r"or" t"

a3"ra" cas o#tlo T W x 150! T 75!*" it"r"st rat" or"o" o sort t"r! !ar"tabl" s"c#riti"s at 12K

12K x 75 T (9,000,000) A a cost

$dd co3"rsio cost (67,42)'t"r"st ico!" o sort t"r! d"/osit 214,0

N"t cost (9,15,09)

*" $lt"rati3" 1 is b"tt"r.

(b) (i) $ccordi to >ill"r Orr >od"l o cas !aa"!"t

O/tioal cas balac" M T Li

+4

6

"r" b T tras"r (co3"rsio cost) T 120

i T 't"r"st rat"da o sort t"r! s"c#riti"s T 65

9.465K/.a

T0.00026

YZ T -ariac" o dail cas los T (stadard d"3iatio)Z

T 22.750Z T 517,562,500

% T %o"r!ii!#! cas balac" T 87,500

M T 87,5004x0.00026

562,500x120x517,+

T 56,7.8 + 87,500



86/255

M

%

*" d"cisio crit"ria or tis !od"l is(i) ' t" cas balac" !o3"s ro! M A , t" ir! as "xc"ss cas T A M ic

so#ld b" i3"st"d b b#i sort t"r! s"c#riti"s.

(ii) *" ir! so#ld s"ll sort t"r! !ar"tabl" s"c#riti"s to r"aliD" cas i t" cas

balac" d"cli"s to lo"r li!it %. *" a!o#t r"aliD"d T M E %(iii) *" ir! so#ld !aitai a cas balac" ra" (s/r"ad T A %) i." 255,662 A 87,500

B#o s"c#riti"s

EMT256662E14874T112,788

ME%T14,874E87,500T56,74

%o"r li!it T87 500

O/ti!al T 14,874

;//"r li!it T

256 622

An"we#" /a"t 4a4e#" 8


87/255

E P t"r!s)

'cr"a!"tal iitial ca/ital

Not" 1

87,000 1,000

100,000

(,000)E

(5,000)

92,000

Note: ' t" " !aci" is ac#ir"d, t" o3"ra#l cost ill ot b"ic#rr"d sic" "xisti !aci"s ill b" dis/os"d o. ' t" abs"c" o tax

rat", t" ir! ill ot ""rat" a tax si"ld or ill ot /a additioal taxro! t" dis/osal o t" "xisti ass"t.

&"call *ax si"ld T %oss o dis/osal o ass"t x tax rat"

*ax /aabl" A ai o dis/osal o $ x tax rat" (o#t lo)

E


88/255

O4e#ating

co"t"

New mac'ine"

O4e#ating co"t

7 exi"ting mac'ine"

Sa-ing"

&a s#ar ca"

%abo#r

-ariabl"

"x/"s"sCix"d "x/"s"s

Cactor o3"r"ad

>ait"ac"

162,000

,900

2,275

7,800

4,500

60,000 x T 180,000

150 x T 4,050

925 x T 2,775

2,700 x T 8,100

2,000 x T 6,000

18,000

150

500

00

1,500

'cr"a!"tal sa3is T "aris b"or" d"/r"ciatio S tax%"ss icr"a!"tal d"/r"ciatio /.a. (o cas it"!)

'cr"a!"tal "aris b"or" tax*ax

'cr"a!"tal "aris at"r tax

$dd bac icr"a!"tal d"/r"ciatio /.a.

$#al o/"rati cas los

20,450 9,25

11,125E

11,125

9,25

20,450

Note: ' tax is ior"d t" a#al o/"rati cas los T B*. *" "!aci" as 10 "ars o "coo!ic li" ic t" "xisti !aci"s still a3"10 "ars to o (t" "r" bo#t 5 "ars ao ad ar" b"i d"/r"ciat"d o3"r

a 15 "ar "coo!ic li". *"r"or" disco#t t" cas los ad sal3a"

3al#" at 10K cost o ca/ital ad 20K as r"#ir"d #si 10 "ar /"riod.

(tem Amo!nt Timing /26>,

n

/2 /2F?>,

n

/2

'c. o cas los

'c. sal3a" 3al#"

*otal 'cr"a!"tal P-

20,450

2,700

1 A 10

/.a

10

6.145

0.86

125,665

1,042

126 707

4.192

0.162

85,726

47

86 16


89/255



90/255

*r"d is" it is cl"ar t" co!/aHs /roitabilit as d"cli"d o3"r t" "ars


91/255

E Pro3id" lo"r cost o d"bt

E No i!!"diat" dil#tio o o"rsi/ ad P

E Pro3id"s "#it iac" o co3"rsio

E 't"r"st car"s ar" tax alloabl" "c" tax si"ld.

5UEST(ON S(

(a) (i) Borroi additioal d"bt ca/ital ic ta" /riorit car" i cas" o

li#idatio.

(ii) is/osal o ass"ts #s"d as collat"ral or loas

(iii) Pa!"t o i di3id"ds ic r"d#c" t" cas or i3"st!"t.

(i3) $ss"t s#bstit#tio

' a ir! s"lls bods or t" stat"d /#r/os"s o "ai i lo 3ariac" /roF"cts,t" 3al#" o t" sar"old"rs "#it ris"s ad t" 3al#" o bodold"rs clai! is

r"d#c"d b s#bstit#ti /roF"cts ic icr"as" t" ti!" 3ariac" rat".

(3) ;d"r i3"st!"t

$ ir! it o#tstadi bods ca a3" ic"ti3" to r"F"ct /roF"cts ic a3" a/ositi3" NP- i t" b""it or! acc"/ti t" /roF"ct accr#"s to t"

bodold"rs.

'ad"#at" disclos#r"

al" o ass"ts #s"d to s"c#r" cr"ditors

(b

)

&"str#ct#r" bod co3"ats icl#d" t" olloi

(i) &"strictio o i3"st!"ts, lats /roits !o3"!"t i s#c ris 3"t#r"s. *"ai! to disco#ra" ass"ts s#bstit#tio.



92/255


93/255

*AY ?>>?

5UEST(ON ONE(a) Boo 3al#" A istorical or balac" s""t 3al#"

Boo 3al#" o a ass"t is d"t"r!i"d #si t" "t ass"t basisli#idati !"tod

"r", t" 3al#" o a sar" i."

-al#" o a sar" T N"t ort ("#it)QQQ T *otal $ss"ts A *otal %iabiliti"s

No. o ordiar sar"s No. o ordiar sar"s

*" !ai "a"ss o t" boo 3al#" 3al#atio is tat t" data #s"d is istorical.

0e4lacement 2al!e:

'ts bas"d o t" cost o r"/laci t" "xisti ass"ts. o"3"r, ol t" /rod#cti3"ix"d ass"ts ca b" r"/lac"d at ao sic" c#rr"t ass"ts ar" circ#lati ori

ca/ital.

&"/lac"!"t 3al#" T &"/lac"!"t


94/255

i3id"d co3"r T

P

P

8 T 1 ti!"

8

18 T 2 ti!"s

9

E :-% as i"r di3id"d b"ca#s" o t" i P ad lo"r >P.

E Cor P ratio a i3"stor ill ta" 20 "ars to r"co3"r is i3"st!"t

ro! :-% as co!/ar"d to 15 "ars i :%. :% is t"r"or"/r""rabl", b"ca#s" it o"rs a sort"r /abac /"riod.

E Cor di3id"d co3"r :% is b"tt"r sic" di3id"ds ar" !or" s"c#r"

sic" t" ca b" /aid tic" ro! "aris attrib#tabl" to ordiar

sar"old"rs.

:-% as a /"rc"ta" di3id"d /ao#t ratio (P T P T .8)

ad t#s a lo"r di3id"d co3"r.

(ii) ic" " ar" #si di3id"d rot !od"l s/"ciicall, t" 3al#" o a

sar" P0T

P0T ( )"10d

+

d0T P or t" "ar F#st "d"d T 5 "ars

"T


95/255

5UEST(ON TDO

(a) (i) O T cost/#rcas"xcost


96/255

18K

?"ar 0[140,000 x (1 A 0.25)\ x

1.0

?"ar 1 A 8 (67,500 x 4.078)NP- or r"Eoraisatio

T 94,50

T 275,265

T 180,765

(b) J'* r"/r"s"ts a co!/l"t" !aa"!"t /iloso/ ad is !or" ta F#st a coll"ctio

o t"ci#"s. 't ai!s to !a#act#r" to ord"r or "ac c#sto!"r ad to "li!iat" idl"r"so#rc"s i all ar"as o t" co!/a. 't is a t"ci#" ic "abl"s !aa"!"t to

ord"r ad b# at it r"#ir"s at tat /artic#lar /oit i ti!".

' t"r!s o /#rcasi, a J'* sst"! ai!s to "s#r" tat co!/o"ts ar" d"li3"r"d

F#st i!!"diat"l /rior to t" ""d to #s" t" i t" /rod#ctio /roc"ss. 't t"r"or"r"#ir"s a clos" r"latiosi/ to b" b#ilt #/ b"t"" c#sto!"r ad s#//li"r, t" lat"r

b"i r"#ir"d to d"li3"r #alit ass#r"d co!/o"ts to !atc /rod#ctio sc"d#l"s.

#//li"rs i t#r so#ld b""it it ro! air loEt"r! sal"s as t" /#rcas"r r"d#c"s

its #!b"r o so#rc"s. *is so#ld allo t" s#//li"r to aci"3" scal" "coo!i"s ad

i!/ro3" /rod#ctio /lai. *" c#sto!"r so#ld aci"3" a r"d#ctio i ord"ri

costs ad stoc l"3"ls ad associat"d carri costs.

5UEST(ON T10EE(a) 't"! dir"ctl 3ari it sal"s T Ko 2001 sal"s

N"t ix"d ass"tsT

240,000

124,800x 100 T

52K

tocT

240,000

B8400x 100 T

16K

b

An"we#" /a"t 4a4e#" 88


97/255

*otal icr"as" i sal"s T 1,200,000 A 240,000,000 T

(22,800,000)

'cr"as" i total ass"ts T 8K x 91,200,000 T 75,696,000;e"": icr"as" i c#rr"t liabiliti"s T 25K x 91,200,000 T

(22,800,000)

;e"": r"tai"d "aris

?"ar 2002 N"t Proit T 8K x 276,000,000 T 22,080,000

;e"": 80K di3id"ds T (17,664,800) (4,416,000)

&"tai"d "aris

?"ar 200 N"t Proit T 8K x 1,200,000 T 26,496,000

;e"": 80K di3id"ds T (21,196,800)

&"tai"d "aris (5,299,200)

xt"ralI iacial ""ds (co!!"rcial /a/"r) 4,180,000

(b) (i) /#o)o#ma Balance S'eet a" at 76 >7

Net )ixed a""et"

toc

"btors


98/255

(b) /#oGect

Yea# Ca"' )low" /2(F?>, n /.2

12

4

56

7

2,000,0002,200,000

2,080,000

2,240,000

2,760,000,200,000

,600,000

*O*$% P.-

%"ss iitial ca/ital

N,P.-. (+3")

0.80.694

0.579

0.482

0.4020.5

0.279

1,666,0001,526,800

1,204,20

1,079,680

1,109,5201,072,000

1,004,400

8,662,720

(8,000,000)

662,720

/#oGect Y

Yea# Ca"' )low" /2(F?>, n /.2

1

2

4

4,000,000

,200,000

4,800,000

800,000

0.8

0.694

0.579

0.482

,2,000

2,082,000

2,779,200

85,600

8,578,800(8,000,000) 578,000

(c) /#oGect

N.P.- @N.P.- @

'.&.& T

T

24K T20K T

20K +

20K + 2.8 T

E296,120662,720

( 20K24K296,120662,720

662,720

+

22.8K

An"we#" /a"t 4a4e#" 9>


99/255

5UEST(ON F(2E

(a) C or sal3atio o

t" 3"r costatl ors"i Balac" o Pa!"t /robl"!

5UEST(ON S(

(a) (i) *atc'ing

*" traditioal 3i" is tat ix"d ass"ts so#ld b" iac"d b t"r! so#rc"s

o iac" ad c#rr"t ass"ts b a !ixt#r" o lo t"r! ad sort t"r!



100/255

' t" iss#" is s#cc"ss#l it ill ot siiicatl ca" t" 3oti str#ct#r".

' #d"rrit"rs ar" rais"d t" t" a!o#t o iac" tat ill b" o ad#arat""d

' t" !ar"t is i, >alidi %"is#r" 'd#stri"s so#ld b" abl" to aci"3" a rits

iss#" at a r"lati3"l lo cost sic" l"ss sar"s ill b" iss#"d. (%o"r loatatio costs)

%"ss ad!iistrati3" /roc"d#r"s ". o ""d or /ros/"ct#s.


101/255

>?

5UEST(ON ONE(a) $ cos"r3ati3" /olic ad a ar"ssi3" /olic

(i) A con"e#-ati-e 4olic

' a cos"r3ati3" ori ca/ital !aa"!"t /olic, a oraiDatio #s"s !or"

o loEt"r! so#rc"s o iac". %oEt"r! so#rc"s ar" #s"d to iac" all

/"r!a"t ori ca/ital (c#rr"t ass"ts) ad /art o t"!/orar c#rr"t ass"ts.

*" ir! is t"r"or" !or" li#id b#t sacriic"s /roitabilit as it"r"st car"s

a3" to b" /aid o lo t"r! iac" "3" " it is ot r"#ir"d.

(ii) An agg#e""i-e 4olic

$ ar"ssi3" /olic #s"s !or" o sortEt"r! iac". $ll s"asoal ori

ca/ital r"#ir"!"ts ad /art o /"r!a"t c#rr"t ass"ts ar" iac"d ro!sortEt"r! so#rc"s. *is /olic l"ad to i"r l"3"ls o /roitabilit at t"

"x/"s" o li#idit.

$% $i% /#o4o"al A


102/255

Co"t"

isco#ts "x/"s"


103/255

(a) D' ca"' )low" a#e con"ide#ed to e mo#e #ele-ant )o# t'e )ollowing #ea"on":

*" ar" ot a"ct"d b t" acco#ti /olici"s ado/t"d i /r"/ari iacial

stat"!"ts


104/255

$iii%.

P -al#" o a#al o/"rati caslos @12K T (9985 x ,605)

P.- o t"r!ial cas los @ 12K T 1.000 x 0.567

*otal P.-

;e""iitial ca/ital

NP- "ati3"

5.996

7,71

4.67

(60.125)

(16.758)

ic" t" NP- is "ati3", t" "xisti "#i/!"t so#ld ot b" r"/lac"d.

(i3

)

*" !ii!#! at"r tax a#al caslo to !a" t" /roF"ct

acc"/tabl"

S'.>>>


105/255

$ii% Deig'ted ma#ginal co"t o) ca4ital )o# eac' o) t'e #ange" o) )inancing:

Cro! 0 . 12 !illio


106/255

(iii

)

+#a4'ical ill!"t#ation o) D*CCin-e"tment 4#oGect" (00 and le-el o) )inancing.

5UEST(ON FOU0

(a) (nc#ea"e 6

'cr"as"d i ass"ts 00 x 0.15 x 15

'cr"as"d i liabilit 00 x 0.15 x 0.4

&"tai"d "aris 00 x 1.15 x 0.12 x 0.75

$dditioal #ds r"#ir"d

Cor aci"3" rot o 15K

S'.m

67.5

(18)

(1.05)

18.45

25

24

2

22

21

20

19

18

17

16

15

2 4 6 8 10 12 14 16 18 20

$


107/255

$d% ;imitation o) )o#eca"ting met'od

*" "t /roit !ari !a 3ar ro! t" c#rr"t 12K


108/255

$a% C#o""o#de# li"ting

%isti o s"c#riti"s iss#"d b a or"i iss#"r o a do!"stic s"c#riti"s "xca".

*" iss#"rco!/a is #s#all list"d o !or" ta o" "xca" i s"3"ral di"r"t

co#tri"s. xa!/l"s E ast $rica Br""ri"s %td. ($B%) ad :"a $iras ar" list"d o

t" N ad ;ada toc xca".

$% D' "eek c#o""oa#de# li"ting

&ais" d"bt or "#it ca/ital "s/"ciall "r" #ds a3ailabl" i do!"stic !ar"t ar"is#ici"t or !or" costl.

i3"rsiicatio ad s/r"adi ris cr"ati icr"asi stabilit o sar" /ric"s.

'cr"as" tradi 3ol#!" o sar"s sic" sar"s ar" o"r"d i a id"r !ar"t. Boost t" co!/a stat#s as a tr#l lobal /la"r.


109/255

JUNE ?>>7

5UEST(ON ONE

(a) &""r to #"stio to 4 J#" 2001

(b) (i). x/"ct"d rat" r"t#r o ordiar sar"s is "#al to cost o "#it, "

:" A do(i +) +

Po

do(1+) T x/"ct"d .P. T .1.20

/o T c#rr"t >.P.. T 0

T rot rat" T 10K

" E 1.20 + 0.10 A 0.14 T 14K

0

(ii). "ct o cost os

E "bt d

E "b"t#r"s a3" a d"iit" !at#rit /"riod "c"

:d T 't (' A *) + (! A 3d) 1

(! + 3d)2 T (6K x 150)( 1 A 0.) + (150 A 100)1100

(150 + 100) W

T 6. +0.5 T 6.8 x 100 T 5.44K

125 125

3d T c#rr"t !a" 3al#" ad ! T /ar!at#rit 3al#"

E cost o /r""r"c" sar" ca/ital / /r""r"c" sar"s ar" s"lli at /ar "c"

!ar"t /ric" T /ar 3al#" ad / T co#/o rat" T 10K

(iii). >.-. o "#it T . 0 x ! sar"s T 90 !

> - d bt 100 0 2 d b t 20

6>6 /a"t /a4e# 5!e"tion" and An"we#"


110/255

5UEST(ON TDO

(a). '!/ortac" o ca/ital b#d"ti d"cisio

E *" a3" lo t"r! i!/licatios to t" ir! ".. t" il#"c" lo t"r!

3ariabilit o caslosE *" ar" irr"3"rsibl" ad 3"r costl to r"3"rs"

E *" i3ol3" siiicat a!o#t o iitial ca/ital.

(b) (i). *" "t boo 3al#" (NB-) o "xisti ass"t at"r

2 "ars is 4! A (4!5rs x 2 "ars) T 2.4!

E *" . 2.4! ill b" d"/r"ciat"d or 10"ars i.". 0.240! /.a.

E


111/255

?"ar 'cr"!"tal B* ('E*) *ax

i"ld

O/"rati

caslo

P-'C

10K

P-

1

2

45

6

7

8

910

10

(0.5 A 0.28)(0.7) T 0.049

(0.40 E 0.0)(0.7)T0.070

(0.42 A 0.2)(0.7)T0.070

(0.41 A 0.4)(0.7)T0.049(0.41 A 0.4)(0.7)T0.049

(0.8 A 0.2)(0.7)T0.042

(0.8 A 0.1)(0.7)T0.049

(0.5 A 0.28)(0.7)T0.049

(0.0 A 0.26)(0.7)T0.028(0.28 A 0.24)(0.7)T0.028

*"r!ial caslo A

*otal icr"!"tal P.-

%"ss icr"!"tal iitial ca/ital

'cr"!"tal N.P.- A3"

0.18

0.18

0.18

0.180.18

0.18

0.18

0.18

0.180.18

E

0.229

0.250

0.250

0.2290.229

0.222

0.229

0.229

0.2080.208

(0.4)

0.909

0.826

0.751

0.680.621

0.564

0.51

0.467

0.4240.86

0.86

0.208

0.207

0.188

0.1560.142

0.125

0.118

0.107

0.0880.050

(0.11

)

1.288

(5.71)

(4.422

)

't is ot ortil" to r"/lac" t" !aci".

5UEST(ON T10EE

(a) %i!itatios o ratios

E *" ar" bas"d o istorical data

E *" ar" "as to !ai/#lat" d#" to di"r"t acco#ti /olici"s ada/t"d b t" ir!s

E *" ar" ol #atitati3" !"as#r"s b#t ior" #alitati3" iss#"s s#c as #alit o

s"r3ic", t"coloical io3atios "tc

E *" costatl ca" "c" ar" co!/#t"d at o" /oit i ti!" ".. li#idit ratiosca" o ad t"

* d Ht i t t t i l ti



112/255

T 2.14 ti!"s

(c) ori ca/ital ccl"T tocoldi /"riod "btors

+coll"ctio/"riod


113/255

4i

Y2T dail 3ariac" o cas lo T (20000)2 T 40,000,000,000

l T !ii!#! cas balac" T . 500,000

b T trasactio cost T . 150i T dail it"r"st rat" T 14K T 0.086K T 0.00086

65

D T x 15 x 40000000000 + 500000 T 10546 T 510,547 4 x 0.00086

(c) E O3"rtradi r""rs to a att"!/t b t" ir! to aci"3" too !#c sal"s 3ol#!" too#icl ito#t ad"#at" ca/ital to s#//ort t" icr"as" i sal"s

E *" s!/to!s o o3"rtradi ar".

E ra/id icr"as" i sort t"r! iaci to iac" sal"sE i c#rr"t liabiliti"s ad lo li#idit ratios

E ra/id icr"as" i sal"s 3ol#!" o3"r t" "ar

E icr"as" i t" "ari o t" ir! as "#it ca/ital r"!ai costat.

5UEST(ON F(2E

(a) i"r"c" b"t"" a bro"r ad a d"al"r

E a bro"r b#s ad s"lls sar"s o b"al o t" i3"stors as a a"t. $ d"al"r b#s

sar"s o is o b"al as a /rici/alE a bro"r "ars co!!issio bas"d o K o 3al#" trasactio. $ d"al"r "ars /roits

b"i t" di"r"c" b"t"" s"lli ad b#i /ric"s.

E *" r"t#rs o bro"rs is ot il#"c"d b ca"s i sar" /ric" #li" tat o

d"al"rs.E Bro"rs i3" i3"st!"t ad3ic" to !"!b"rs o t" /roit b#t d"al"rs caot.

(b) $d3ata"s o a3i a d"al"r i t" !ar"t

E " !a"s sar"s a3ailabl" to stoc bro"rE " is a !ar"t !a"r

E " icr"as"s t" li#idit ad !ar"tabilit o sar"s.

6> /a"t /a4e# 5!e"tion" and An"we#"


114/255

(b). Cactori ad i3oici disco#ti actori.

E '3ol3"s sal" o d"btors to a l"d"r

call"d actor.E *" actorl"d"r ta"s t"

r"s/osibilit or bad d"bts o d"bts

actor"d

E %"d"ractor ta" t" r"s/osibilito coll"ctio o d"bt.

E *" b#"rd"btor is otii"d o t"

actori arra"!"t.

E '3oic" disco#ti

E '3ol3"s #s" o d"btors as acollat"rals"c#rit or sort t"r!

borroi

E t" l"d"r as o o#s o bad d"bts.

E *" s"ll"rborro"r still a3" t"o#s o d"bt coll"ctio.

E *" b#"rd"btor is ot otii"d o

t" i3oic" disco#ti arra"!"t.

(c). $ #d"rrit"r is a iacial istit#tio tat #d"rta"s to b# all sar"s ot bo#t b

!"!b"rs o t" /#blic . *" istit#tio t"r"or" act as a is#r"r ad "s#r"s tat.(i). $ll sar"s ar" s#bscrib"d or

(ii) t" ir! is abl" to rais" t" r"#ir"d ca/ital

*" #d"rrit"r is /aid a #d"rtai ""s or is s"r3ic"s. " co#ld lat"r s"ll t"

sar"s to /ot"tial i3"stors at a ai (/ric" abo3" t" iss#" /ric").

An"we#" /a"t 4a4e#" 6>


115/255

>7

5UEST(ON ONE

$a%


116/255

$% Com4!tation o) t'e mean

>ost s"c#rit !ar"t idicators ar" calc#lat"d as so!" sort o arit!"tic

a3"ra". *" "o!"tric a3"ra" is a alt"rati3" co!/#tatioal /roc"d#r", itr"s#lts i a s!all"r b#t si!ilar 3al#" tat is l"ss 3olatil" ta a arit!"tic !"a

calc#lat"d ro! t" sa!" sa!/l" o s"c#riti"s.

(6) *i!i it"r3al o ic calc#latios o id"x ar" bas"d.

(7) *" /ric"s to #s" or co!/#tatio " clos", !"a, lo, i.

$c% Finite ea#ning" g#owt' model:

Po T N o(1+)1

(Po) + o(1+)N

(P)N EEEEEEEEEEEEEEEEEEEEEE EEEEEEEEEEEEEEEEEEEEEEEE tT1 (1+)1 (1+)N

o T


117/255

5UEST(ON TDO

(a) >>

P.-. o ilos(87,0000.16)'itial cas o#tlo

Net /#e"ent 2al!e

54,750

400,00

0

6@7,

>

(ii) Cor "ac /roF"ct t" '&& so#ld b" r"at"r sic" NP- is /ositi3" at 16K.

Cor /roF"ct $, " #s" 2 rat"s, 20K ad 28K to a//roxi!at" '&&.

?>

S' >>>

28K 000



118/255

#d"r tis /roF"ct. '&& i3"s /ro/ortioat" r"t#rs ad /r"s#!"s tat cas los

ar" r"Ei3"st"d at t" '&& ic is ot r"alistic.

5UEST(ON T10EE

$a% Financial #i"k

*is r""rs to t" 3ariabilit i "aris a3ailabl" to ordiar sar"old"rs asa r"s#lt o #si d"bt iac" ic as a ix"d it"r"st car".

' ti!"s o "xc"ssi3" /roits, t" "aris ar" "ac"d d#" to lo"r car"sor it"r"st. o"3"r d#ri /"riod o lo /roits, t" sar"old"rs ris ot

"tti a r"t#r sic" it"r"st o d"bt is to b" /aid irr"s/"cti3" o /roits

"ar"d.

O4e#ating #i"k

O/"rati ris o t" ot"r ad is ca#s"d b ic#rr"c" o ix"d costs i/rod#ctio /roc"ss. 't is t" 3ariabilit i o/"rati ico!" as a r"s#lt o

ic#rri ix"d o/"rati costs.

" ix"d costs ar" i, tis 3ariabilit ill b" i"r or a ca" or!o3"!"t i sal"s ad "c" o/"rati ris is i"r.

$% (i) aris /"r sar" T *a#keting 4#ice"'a#e

/E #atio

T 8.4

6

T S'.6.@

O/"rati ico!" is t" "aris b"or" it"r"st ad tax

0.7 x

x

T 6 !illio x 1.4

T 8,400,000

T .8400

An"we#" /a"t 4a4e#" 66>


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N" /roF"ctO/"rati ico!"

%"ss it"r"stN"t /roit b"or" tax

%"ss *ax (0K)Proit at"r tax

arissar"s

5,60017,600

E17,600

5,28012,2012,207,600

6.?6

5,60017,600

(12K x 10!) 1,20016,400

4,92011,48011,4806,000

S'.6.967

't is b"tt"r to iac" #si d"bt iac" sic" it r"s#lts i lo"r costs ad "c"

a i"r "aris /"r sar".

(i3) *" stat"!"t is tr#" " t" o/"rati ico!" is i. ;d"r s#c

circ#!stac"s P ill icr"as" as a r"s#lt o #si d"bt iac". o"3"r, it" l"3"l o o/"rati ico!" is lo, d"bt iac" ill b" "x/"si3" sic"

it"r"st as to b" /aid, *" P or a "ar"d co!/a #d"r s#c circ#!stac"s

!a b" "3" "ati3". *is !a b" ill#strat"d as ollos

i.". t"r" is o ""d to #s" d"bt iac" i o/"rati ico!" is b"lo x. P

o#ld b" i"r i t" co!/a as allE"#it iac"d. B"od o/"rati

ico!" o .x d"bt o#ld r"s#lt i icr"as"d P.

( ) (i) t d >P t d 6 t d P P

x

"ar"d


120/255

End o)

ea#

Ex4ected P T 80 0.42 4.56

46.92

5UEST(ON FOU0

(a) Cix"d $ss"ts

*#ro3"r

al"sQ Q

Cix"d $ss"ts

T C$ *O x C$

T 1.8 x 15,000

T 15,000

ross Proit >ari

T

ross Proit x 100

al"s

T al"s x ross /roit !ari

T 15,000 x 45K

T 60,750


121/255

't"r"st car"s T4

21,600T 5,400


122/255

tat t"r" o#ld ot "xist o3"r3al#"d or #d"r3al#"d s"c#riti"s.

(d) Facto#" !nde#ling t'e low #ate o) li"ting o# com4anie" in a "tock exc'ange:

Unde#-al!ed "'a#e"#" to !ar"t i"ici"c t" sar"s o t" co!/ai"s ar" at ti!"s #d"r3al#"d

bas"d o t" !ar"t 3al#". *is l"ads to lo !ar"t 3al#" o t" co!/a.

;i"ting #e!i#ementtri"t coditios a3" to b" !"t b a co!/a to #ali or listi. o!"

co!/ai"s a3" cosid"r"d tis /roibiti3".

Com4liance mea"!#e"trict r#l"s ad r"#latios !#st b" co!/li"d it b t" #ot"d co!/ai"s.

*"r" "xists coti#"d scr#ti ad s#r3"illac" o t" #ot"d co!/ai"s b t"

ar"t ad t" Nairobi xca".

;ack o) 4#i-ac$ lot o ior!atio ""ds to b" disclos"d or t" #ot"d co!/ai"s. *"

co!/ai"s ar" s#bF"ct"d to a lot o /#blic scr#ti. Pros/"cti3" co!/ai"s !a"ar loss o /ri3ac associat"d it listi.

;imited and 4!lic com4an #e!i#ement.Ol li!it"d ad /#blic co!/ai"s ar" allo"d or listi. $ #!b"r o

co!/ai"s ar" /ri3at" co!/ai"s ad !a t"r"or" ot #ali.


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Ciacial str#ct#r" is t" /ro/ortio o "ac so#rc" o iac" i a ir! bas"d

o bot loEt"r! ad sortEt"r! so#rc"s o ca/ital ("tir" l"t ad sid" o t"

balac" s""t).

$i-% Fo#mal ma#ket" and o-e#t'eco!nte# ma#ket"

Cor!al !ar"ts ar" oraiD"d s"c#rit "xca"s ic d"al it s/"ciic

istr#!"ts. *" o/"ratio o s#c or!al !ar"ts is il r"#lat"d,acc"ssibl" to a " ad d"al it stadardiD"d istr#!"ts.

O3"r t" co#t"r !ar"ts ar" or!al arra"!"ts tro# ic t" it"r"st"d

/arti"s trasact. *" d"als i tis !ar"t !a b" cocl#d"d o3"r t" /o" or

tro# co!/#t"r t"r!ials.

$% Facto#" t'at 'a-e limited t'e de-elo4ment o) t'e -ent!#e ca4ital ma#ket:

-"t#r" ca/ital is a or! o i3"st!"t i " s!all ris "t"r/ris"s r"#ir"d to "t

t"! start"d b s/"cialists call"d 3"t#r" ca/italists. -"t#r" ca/italists ar"

i3"st!"t s/"cialists o rais" /ools o ca/ital to #d " 3"t#r"s ic ar"

li"l to b"co!" /#blic cor/oratios i r"t#r or a o"rsi/ it"r"st. -"t#r"

ca/italists b# /art o t" stoc o t" co!/a at a lo /ric" i atici/atio tat

" t" co!/a o"s /#blic, t" o#ld s"ll t" sar" at a i"r /ric" ad

t"r"or" !a" a cosid"rabl" /roit.

%ac o ric i3"stors. *is l"ads to iad"#at" "#it ca/ital.

'"ici"t stoc !ar"t. *is i!/airs t" abilit o t" co!/a to dis/os" osar"s at a lat"r dat".

%ac o !aa"rial sills b t" o"rs o t" ir!.

il cos"r3ati3" a//roac b t" 3"t#r" ca/italists.



124/255

JUNE ?>>@

5UEST(ON ONE$a% Co"t o) ca4ital

*is is t" rat" #s"d to disco#t t" #t#r" cas los o a b#si"ss, tod"t"r!i" t" 3al#" o t" ir!. *" cost o ca/ital ca b" 3i""d as t"

!ii!#! r"t#r r"#ir"d b i3"stors ad so#ld b" #s"d " "3al#ati

i3"st!"t /ro/osals.

' ord"r to !axi!iD" t" "alt o sar"old"rs, t" basic d"cisio r#l" istat i cas los r"lati to a i3"st!"t /ro/osal ar" "ati3", t"

/ro/osal so#ld b" r"F"ct"d. o"3"r, i t" disco#t"d cas los ar"/ositi3", t" /ro/osal so#ld b" acc"/t"d. *" disco#ti is carri"d o#t

#si t" ir!Hs cost o ca/ital.

D' co"t ca4ital "'o!ld e calc!lated wit' ca#e:

Cail#r" to calc#lat" t" cost o ca/ital corr"ctl ca i icorr"ct i3"st!"td"cisios b"i !ad".

"r" t" cost o ca/ital is #d"rstat"d, i3"st!"t /ro/osals ic so#ld

b" r"F"ct"d !a b" acc"/t"d. i!ilarl, "r" t" cost o ca/ital is o3"rstat"d, i3"st!"t /ro/osals !ab" r"F"ct"d ic so#ld b" acc"/t"d. ' bot cas"s, t" sar"old"rs o#ld

s#"r a loss.

Note *"r" is a i3"rs" r"latiosi/ b"t"" N.P.-. ad cost o ca/ital. *" i"rt" cost o ca/ital, t" lo"r t" N.P.-. ad 3ic" 3"rsa.

$% 0e!i#ed condition" )o# !"ing t'e DACC

*" $


125/255

Ordiar sar" ca/ital a!o#t to b" rais"d T .525 E4! T 29.525!

N#!b"r o ordiar sar"s T+.40!

29.525! T 78,125 sar"s

/"ciic cost o r"tai"d "aris

P T 8 P T 5

>ar"t /ric" T 8 x 5 T 40

:" T 5(1.06)140+ 0.06 T 19.25K

Pr""r"c" sar"s10100x 100 T 10K

"b"t#r" 10100x 1000 T100

1001000x 100 T 10K

""cti3" cost T 10K (1 A 0.) T 7K

So!#ce Amo!nt /#o4o#tion S4eci)ic co"t Deig'ted co"t

&"tai"d "aris 4 8.9K 19.25K 1.7K

Ordiar sar" ca/ital 29.525 65.6K 20.72K 1.6K

10K /r""r"c" sar"s 10 22.2K 10K 2.22K

10K d"b"t#r"s 1.475 .K 6K 0.2K

45! 100 17.72K

$


126/255

/#oGect ((

O#tla 50,000,000 + 18,000,000 T 68,000,000 T 68!

$dditioal o#tla 2,000,000 P-'C12K,2 T 2,000,000 x 0.797 T 1,594,000 T

1.594!

*otal o#tla T 68! + 1.594 T 69.594!

Ca"' in)low

T P.- o a#al x P-$C12K,5 T 20 x .605 T

72.10

T P.- o sal3a" 3al#" @12K T 20! x P-'C12K,5 T 20 x 0.567 T 11.4

*otal P.-8.44

%"ss iitial ca/ital

(69.594)

N.P.- 1.846

/#oGect (((

.H>'t"!


127/255

=

M

$% *ille#O## ca"' management model

' or!al circ#!stac"s, casElos o a b#si"ss o #/ ad do i airl rado!

!a"r. *"r"or", ist"ad o ass#!i tat dail balac"s caot b" /r"dict"d

b"ca#s" t" !"ad"r i a rado! asio. *is i3"s ris" to a cas /ositio li" t"o" b"loI


128/255

'cr"as" i cotrib#tio ad

Proit T 0.15 x 60 ! T .9!

$i% Ext#a in-e"tment, i) all deto#" take two mont'" c#edit

$3"ra" d"btors at"r sal"s S'". 'cr"as" (212x 00,000,000) 50,000,000

%"ss .66.?>>7

S'". >>>H

7>.66.?>>@

S'". >>>H

7>.66.?>>

S'". >>>HE!it ea#ning":

N P

An"we#" /a"t 4a4e#" 6?>


129/255

Cor t" "ar "d"d 0 No3"!b"r 2004, t"r" o#ld b" s#ici"t "aris to ""ct

t" bo#s iss#".

o"3"r, tis bo#s o#ld iss#" o#ld a3" t" ""ct o dil#ti t" P asollos

aris("ar "d"d 0 No3"!b"r 2004) .12,000,000

*otal #!b"r o sar"s$t"r t" bo#s iss#" (6,000,000 + 1,500,000 7,500,000

*"r"or" P T 12,000,000 T . 1.60

7,500,000

*" ""ct o t" dil#tio o t" P !it b" a r"d#ctio i t" !ar"t 3al#" o t"

sar"s. o"3"r t" bo#s iss#" !it b" 3i""d b t" !ar"t as a3i a

a3o#rabl" ior!atioal cot"t ad t" 3al#" o t" sar"s !it b" s#stai"d or

"3" icr"as". $ot"r as/"ct to cosid"r is t" cas di3id"d "x/"ctatios o t"

sar"old"rs ad at ""ct oE/a!"t o t" cas di3id"d !a a3" o t"

!ar"t 3al#" o t" sar"s.

$c% 't !it b" /r#d"t to /a a cas di3id"d o a r"d#c"d scal" ad /"ra/s

co!/li!"t it it a s!all bo#s iss#" ic so#ld ot ra or di3id"d #til t""ar "d"d 0.11.2005, " t" "aris o t" co!/a b"i to so a

i!/ro3"!"t. *"r" is "!/irical "3id"c" soi tat ir!s "x/"ri"ci li#idit

/robl"!s or d"siri to r"tai "aris or r"i3"st!"t ca "3"rt"l"ss #s" bo#s

iss#" o sar"s ad co!bi" it it so!" cas di3id"d to a3" a /ositi3" i!/act ot" ar"at" !ar"t 3al#" o t"ir sar"s.

5UEST(ON F(2E

$a% Agenc #elation"'i4"ar"old"rs ad !aa"!"t

6?6 /a"t /a4e# 5!e"tion" and An"we#"

Ciacial !ar"ts /ro!ot" sa3is ad i3"st!"t b /ro3idi !"cais!s


130/255

Ciacial !ar"ts /ro!ot" sa3is ad i3"st!"t b /ro3idi !"cais!s

b ic t" iacial r"#ir"!"ts o l"d"rs (s#//li"rs o #ds) ad

borro"rs (#s"rs o #ds) ca b" !"t. Ciacial istit#tios (s#c as /"sio

#ds, is#rac" co!/ai"s, bas, b#ildi soci"ti"s, #it tr#sts ad

s/"cialist i3"st!"t istit#tios). *"s" coll"ct #ds ro! sa3"rs to l"d tot"ir cor/orat" ad ot"r c#sto!"rs tro# t" !o" ad ca/ital !ar"ts or

dir"ctl tro# loas, l"asi ad ot"r or!s o iaci.

$ii% Se#-ice" t'at )inancial inte#media#ie" 4#o-ide:

*" ""ds o l"d"rs ad borro"rs rar"l !atc. *"s" di"r"c"s i

r"#ir"!"ts b"t"" l"d"rs ad borro"rs !"a tat t"r" is a i!/ortat

rol" or iacial it"r!"diari"s i t" iacial !ar"ts ar" to o/"rat"

"ici"tl.

1

.

0e4ackaging "e#-ice"

at"ri s!all a!o#ts o sa3is ro! a lar" #!b"r o idi3id#als ad r"E

/acai t"! ito lar"r b#dl"s or l"di to b#si"ss.

2 0i"k #ed!ction

Placi s!all s#!s ro! #!"ro#s idi3id#als i lar", "llEdi3"rsii"d

i3"st!"t /ortolios, s#c as #it tr#st.

;i!idit t#an")o#mation

Brii to"t"r sortEt"r! sa3"s ad loEt"r! borro"rs (".. b#ildi

soci"ti"s ad bas). Borroi sort ad l"di lo is ol acc"/tabl"

"r" r"lati3"l " sa3"rs ill at to itdra #ds a i3" ti!".

4 Co"t #ed!ction

>ii!iDi trasactio costs b /ro3idi co3"i"t ad r"lati3"l

i"x/"si3" s"r3ic"s or lii s!all sa3"rs to lar"r borro"rs.

5 Financial ad-ice

An"we#" /a"t 4a4e#" 6??

*" !or" distat t" !at rit dat" o a bod t" art"r b"lo or abo " /ar al "


131/255

*" !or" distat t" !at#rit dat" o a bod, t" art"r b"lo or abo3" /ar 3al#"t" /ric" ill b" i3" t" co#/o rat" ad !ar"t rat" r"latiosi/.

coo!ic "3iro!"t /olic

(b) T'e "'a#e" co!ld e made mo#e att#acti-e in t'e )ollowing wa":

*" sar"s co#ld b" Rco3"rtibl" /r""r"c" sar"sH, alloi t" old"rs to a3" acac" to co3"rt it ito "#it sar"s.

*" sar"s co#ld b" c#!#lati3" so tat di3id"ds caot b" /aid a o" "ar, t"/r""r"c" sar"old"r ill still a3" t" /ossibilit o r"c"i3i /r"3io#s /"riods

di3id"ds " #ds ar" a3ailabl".

*" co!/a co#ld o"r a i rat" o di3id"ds o t" sar"s a rat" "ll abo3" t"it"r"st i"ld o ix"d it"r"st s"c#riti"s.

*" /r""r"c" sar"s co#ld b" !ad" r"d""!abl".

*" /r""r"c" sar"s co#ld b" o t" /artici/ati id, "titli t" old"r to/artici/at" i #rt"r sar" o t" /roits at"r t" a3" r"c"i3"d t"ir ix"d /"rc"ta"

i3id"ds rat".(c ) (i) $ P ratio is t" ratio o t" !ar"t 3al#" o a sar" to "aris /"r sar" it is ot"

d"scrib"d as t" #!b"r o "ars "aris r"#ir"d b"or" a i3"stor r"co3"rs t"

/#rcas" /ric" o a sar" (o t" ass#!/tio tat a#al "aris ar" costat). *"

"aris o a co!/a it a i P ratio ar" t"r"or" 3al#"d !or" b i3"stors

b"ca#s" t" ar" /r"/ar"d to ait !or" "ars to r"co3"r t"ir i3"st!"t. $ i P

ratio t"r"or" t"ds to idicat" tat a co!/a is so!"o R!or" s"c#r"H. *#s

$ "llE"stablis"d co!/a is li"l to a3" a i"r P ratio ta a co!/a

ic is "lE#ot"d o t" stoc "xca"I

$ lar" co!/a it a bi"r ass"t baci is li"l to a3" a i"r P ratio

ta a s!all co!/a it s!all"r ass"t bas" A b"ca#s" as

BF R. Kit as at 25 April 2006

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Transcript of BF R. Kit as at 25 April 2006