MAC2602/201

This paper consists of 8 pages and interest tables A to D on pages i-iv.

Table A : Present value of R1 after n years

Table B : Present value of R1 per annum received for n years
Table C : Future value of R1 after n years
Table D : Future value of R1 per annum received for n years

PLEASE NOTE:

1. All questions must be answered and calculations must be shown.

2. Ensure that you are handed the correct examination answer book (blue) by the invigilator.
3. Each question answered must commence on a separate page.
4. Do not write in pencil.
5. Ignore value-added tax and capital gains tax except where specifically mentioned in the question.
6. A combined final mark of 50% is required to pass this module. This final mark is calculated as
follows: (10% - obtained for compulsory assignments 01, 02 and 03) + (90% x mark obtained in
this examination), subject to a subminimum of 40% for this paper.

PROPOSED TIMETABLE

Question Topic Marks Minutes

1 Time value of money 15 18
2 Capital structure & cost of capital 20 24
3 Analysis of financial information & managing working capital 23 28
4 Capital investment & capital budgeting 22 26
5 Multiple choice questions 20 24
100 120
QUESTION 1 (15 marks) (18 minutes)

a) Mxolisi has deposited an amount of R1 500 in a bank account. This account earns simple interest
of 8% per annum.

REQUIRED:
Calculate the amount of interest that he will earn after 2 years.
Show detailed workings.
[Use four decimal places for your calculations and round your final answer to the nearest rand.]
(2)

b) Every year after Mary has paid all her additional expenses and treated herself to some luxuries
she still has R4 200 from her annual bonus available in her bank account. She wants to save this
amount and decided to deposit this amount, on an annual basis, for the next 3 years. The special
savings account she decided on earns interest at 12%, compounded annually.

REQUIRED:
Calculate the total value of Mary’s special savings account at the end of year three by using the
mathematical formula.
Show the mathematical formula and detailed workings.
[Use four decimal places for your calculations and round your final answer to the nearest rand.]
(4)

c) Helen will be investing an amount of R3 900 annually at the end of each of the following four
years. She will earn compounded interest of 14% per annum.

REQUIRED:
Calculate the present value of Helen’s investment by using your financial calculator and showing
detailed inputs with regard to periods and interest rate.
[Use four decimal places for your calculations and round your final answer to the nearest rand.]
(2)

d) Simeon wants to invest an amount now that will have a total value of R10 000 after five years.
The compounded interest rate of the investment is 12% per annum.

REQUIRED:
Calculate the amount that Simeon will have to invest today to receive R10 000 at the end of year
five by using the mathematical formula.
Show the mathematical formula and detailed workings.
[Use four decimal places for your calculations and round your final answer to the nearest rand.]
(4)

e) Today is Michaela’s birthday. She received a total of R2 000 cash as presents from her friends
and family. She wants to invest this money and decided on a fixed term bank deposit for six years
at an annual compounded interest rate of 16%.

REQUIRED:
Calculate the value of her investment at the end of year six by using the mathematical formula.
Show the mathematical formula and detailed workings.
[Use four decimal places for your calculations and round your final answer to the nearest rand.]
(3)
[15]

2
 MAC2602/201

QUESTION 2 (20 marks) (24 minutes)

a) Pete Limited has the following forms of capital funding:

Form of capital funding R mil

Leases 80
Issued share capital 500
Non-distributable reserves 214
Bonds 230
Mortgage bonds 211
Retained income (56)

REQUIRED:
Based on bookvalues, show in detail the amounts financed by equity and the amounts financed by
debt as well as the total capital funding. Then calculate the capital structure and provide the
debt:equity ratio. (8)

b) The cost of equity can be determined by the Capital Asset Pricing Model (CAPM). Supply the
formula of the CAPM and name the two elements that the expected rate of return required by
ordinary shareholders essentially comprises of. (2)

c) The following is an extract from DA-NC Limited’s statement of financial position as at 31 August
2014:
The given rate (in the table below) for the debt funding is after-tax rates.

Ordinary shares issued. 1 000 000

Market value of debentures at 11% R20 500 000

DA-NC Ltd. has a beta of 0,9, a risk-free rate of 7% and a market risk premium of 6,5%. Their
shares are currently trading at R82,30 per share.

REQUIRED:
Calculate the weighted average cost of capital (WACC) for DA-NC Limited by using the WACC
formula. The cost of equity should be calculated by using the CAPM (round to full percentage).

[Set your calculator on four decimal places for the calculations of this question and round your final
answers to two decimal places. Show the formulas used and detailed calculations.] (10)
[20]
QUESTION 3 (23 marks) (28 minutes)

PART A

The directors of Shine Ltd need more information regarding different types of financial analysis and have
asked you to help them analyse some of their financial information. You are given the following
additional information and extracts:

Additional information:

1. Shine Ltd has the following information with regards to its statement of profit or loss and other
comprehensive income for the period ended 31 July 2014:

R’000

Revenue 45 336
Gross profit 29 447
Operating costs (15 200)

2. The earnings per share was 198,3 cents (2013: 213,7 cents) and they had 5 000 000 issued shares
as at 31 July 2014. The current share price is R16,10 (2013: R14,00)

3. Shine Ltd has the following information with regards to its statement of financial position as at 31
July 2014:
R’000

Non-current assets 9 270

Current assets 6 723
Capital and reserves 3 109
Non-current liabilities 8 921
Current liabilities 3 963

4. Shine Ltd is under new management since the beginning of 2014. The new management focused
on cutting expenditure as well as paying off long-term liabilities.

REQUIRED:

a) In performing financial analysis, there are different types of techniques one can use to make the
information useful and give meaning to it. Name the different techniques that can be used in the
following two stages of performing financial analysis:

(i) Preparation of financial information for analysis (3)

(ii) Analysis of financial information (3)

b) Calculate the following ratios for Shine Ltd on 31 July 2014. (Clearly indicate the formula and
specific figures used in each case.) Round your final answers to two decimal places.

(i) Operating profit margin (2013:29,15%) (3)

(ii) Current ratio (3)
(iii) Debt ratio (3)
(iv) Earnings yield (3)

4
 MAC2602/201

PART B

The soccer managing and agent company, Jooky Hiltons, requested you to assist them in the
management of their accounts receivables. They do offer discount to their customers but are not sure if
this credit terms have a positive effect on the profitability of the company. The credit terms offered to the
customers of Jooky Hiltons are: 1,5/10 net 30.

They supplied you with their debtors’ aging schedule as at the end of May 2014.

Jooky Hiltons

Balance of the account Percentage of total balance

Number of days outstanding R %
0-10 256 200 25%
11-30 510 350 50%
31-60 132 302 13%
60 + 125 770 12%
1 024 622 100%

REQUIRED:
a) List the four areas that a company’s credit policy focusses on. (2)

b) Analyse the debtors’ ageing schedule of Jooky Hiltons and indicate the percentage of customers
that are not complying with the company’s credit terms. (2)

c) List one possible issue that Jooky Hiltons should look into by referring to their credit policy. (1)
[23]

QUESTION 4 (22 marks) (26 minutes)

Ezi-Melt Limited is considering whether to continue with their production with its existing melting-furnace
or to replace it with a new melting-furnace with a fusing agent section which is expected to speed up the
melting process.

Information regarding the existing melting furnace:

Cost price: R660 000 Current book value: R396 000
Current market value: R200 000 Useful life: 5
Current tax value: R220 000 Remaining years: 3
Realisable value end of useful life: Nil Maximum annual production capacity: 5 600 units

Information regarding the new melting furnace with fusing agent section:

Cost to purchase new melting-furnace with a fusing agent section R840 000
Useful life of new melting-furnace with a fusing agent section 3 years
Realisable value end of useful life: Nil
Maximum annual production capacity 6 700 units

The following expected economic conditions and additional information will have to be considered:
Year
1 2 3
Estimated demand for products 4 500 5 600 6 660
Selling price - per unit 170 196 225
Variable manufacturing cost - per unit 89 105 156
Fixed cost per annum - to be incurred excluding depreciation 22 000 13 000 20 000
1. The depreciation policy of the company is to depreciate assets straight line over the useful life,
while the wear and tear policy of the South African Revenue Service makes provision for assets to
be written-off over a period of three years, with no realisable value at the end of the period.

2. The company’s cost of capital is 14% per annum and the current rate of normal taxation is 28%.

3. All the estimated cash flows will arise at the end of the year to which they are applicable except the
initial outlays which occur at the beginning of the year.

4. The net present value (NPV) of the new melting-furnace with the fusing agent section was correctly
calculated by the company to be R46 809.

REQUIRED:

a) Name two factors that affect the capital budgeting decision. (2)
b) Determine the net present value of the existing melting-furnace by using the net present value
method. Advise whether the company should keep the existing melting-furnace or purchase the
new melting-furnace with a fusing agent section and motivate your recommendation.
[Work to the nearest Rand, round off all your factors to three decimal places and show all your
calculations. (20)
[22]

QUESTION 5 (20 marks) (24 minutes)

This question consists of ten multiple-choice questions. Each question must be considered
independently, except where specific reference is made to information in another question. Each
question has only one correct answer, and the marks per question (5.1 – 5.10) are indicated in brackets
after each question.

Please answer the ten questions in your examination answer book and list the question numbers below
one another, from 5.1 – 5.10, with your corresponding answer next to it, for example:
5.1 (a)
5.2 (b)

The questions are as follows:

5.1 “It should inspire change, be easy to understand and easily communicated and be long-term in
nature as it will not change.”
This is characteristics of _______?

a) core values
b) mission statement
c) strategy
d) vision statement (2)

5.2 Connected stakeholders are those groups that are connected through the contractual relationship
they have with the organisation and they are interested in the objectives of the organisation in as
far as these objectives affect their own respective goals.
Which one of the following is NOT a connected stakeholder to Massmart (Pty) Ltd?

a) Pressure groups
b) Suppliers
c) Customers
d) Banks
(2)

6
 MAC2602/201

5.3 Threats are related to external factors in the SWOT analysis. The following examples are given to
you:

(1) Increasing competition that results in excess capacity.

(2) Strikes by workers in the industry.
(3) Extensive wastage of raw materials
(4) Price wars among competitors.
(5) Insufficient research and development facilities.

Which of the above are examples of “threats”?

a) Statements (1), (2) and (3)

b) Statements (1), (2), (4) and (5)
c) Statements (1), (2) and (4)
d) Statements (2), (3), (4) and (5) (2)

5.4 Which one of the following alternatives best describes the definition of “strategic financial
management”?

a) It is making decisions about the allocation of an organisation’s resources. The allocation of

the organisation’s resources includes the organisation’s capital and people.
b) Organisational arrangements, systems for gathering together human, physical financial and
information resources at all levels of the system.
c) The management and control of money and money-related operations within the business. It
includes planning, organising and controlling the financial activities of a business. The
financial activities include the acquiring of funds as well as the use of these funds by applying
general management principles.
d) The identification of possible strategies capable of maximising an organisation’s net present
value, the allocation of scarce capital resources among the competing opportunities and the
implementation and monitoring of the chosen strategy so as to achieve stated objectives.(2)

5.5 Which one of the following alternatives is NOT descriptive of a non-profit company?

a) All the income and assets must be utilised for the determined objective although relevant
parties may be paid a reasonable remuneration.
b) The company is incorporated for the purpose of financial gain for its shareholders.
c) No income or assets may be transferred to its directors, members, officers or incorporators
with the exception of reasonable remuneration for services.
d) The benefit must be to further some “public benefit” relating to one or more cultural or social
activities, or communal or group activities. (2)

5.6 Which of the following statements do NOT correctly describe factoring?

(1) Factoring allows the organisation to withdraw money up to the original credit limit once a
certain percentage has been repaid and/or extra cash can be paid into the account and
withdrawn again later.
(2) It is created when the organisation sells a bill of exchange to the bank.
(3) It is a form of debtor’s financing which results in improving the collection period.
(4) Factoring is not regarded as finance secured by the debtors’ book.
(5) The factoring agreement drawn up is described as a continuous agreement whereby the
factor is compelled to take over all approved claims of the organisation depending on the
terms of the agreement.
 a) Statements (1), (2) and (3)
b) Statements (2), (3) and (5)
c) Statements (1), (2), (3) and (5)
d) Statements (1), (2) and (4) (2)

5.7 Which of the following statements are TRUE with regard to capital markets?

(1) A capital market is a financial market in which equity and longer-term debt securities are
traded.
(2) It is also called security markets and they trade in ordinary shares, preference shares,
bonds and loans that have terms of more than one year.
(3) The Johannesburg Stock Exchange (JSE) is an equity market and one of the divisions of
the capital market.
(4) The capital market is a provider of a secondary market for trading in previously issued
instruments that investors sell to one another.
(5) Large investors, governments and organisations can invest their surplus funds on the
capital market.

a) Statements (1), (2) and (4)

b) Statements (2), (3), (4) and (5)
c) Statements (1), (2), (3) and (5)
d) Statements (1), (2), (3), (4) and (5) (2)

5.8 Which one of the following alternatives is FALSE?

a) Equity holders control the organisation.

b) Interest is deductible for tax purposes where dividends normally are not deductible.
c) In the case of liquidation, equity is repaid before debt.
d) Equity tends to be part of the organisation for life. (2)

5.9 Which one of the following statements does not relate to strategic risk?

a) Actions of the competitors.

b) Day-to-day operations of the organisation
c) The organisation’s position and relation with the external environment in the long-term.
d) Risk from the external environment that is not under the control of the organisation. (2)

5.10 Which one of the following alternatives is NOT a method to identify risk?

a) Brainstorming
b) Organisation charts and flow charts
c) WACC
d) SWOT-analysis (2)
[20]

8
 MAC2602
OCTOBER/NOVEMBER 2014
i

TABLE A / TABEL A

PRESENT VALUE OF R1 RECEIVED/PAID AFTER N YEARS / HUIDIGE WAARDE VAN R1 ONTVANG/BETAAL NA N JAAR

Year/ 1% 2% 4% 6% 8% 10% 12% 14% 15% 16% 18% 20% 22% 24% 25% 26% 28% 30% 35%
Jaar N

1 0,990 0,980 0,962 0,943 0,926 0,909 0,893 0,877 0,870 0,862 0,847 0,833 0,820 0,806 0,800 0,794 0,781 0,769 0,741
2 0,980 0,961 0,925 0,890 0,857 0,826 0,797 0,769 0,756 0,743 0,718 0,694 0,672 0,650 0,640 0,630 0,610 0,592 0,549
3 0,971 0,942 0,889 0,840 0,794 0,751 0,712 0,675 0,658 0,641 0,609 0,579 0,551 0,524 0,512 0,500 0,477 0,455 0,406
4 0,961 0,924 0,855 0,792 0,735 0,683 0,636 0,592 0,572 0,552 0,516 0,482 0,451 0,423 0,410 0,397 0,373 0,350 0,301
5 0,951 0,906 0,822 0,747 0,681 0,621 0,567 0,519 0,497 0,476 0,437 0,402 0,370 0,341 0,328 0,315 0,291 0,269 0,223

6 0,942 0,888 0,790 0,705 0,630 0,564 0,507 0,456 0,432 0,410 0,370 0,335 0,303 0,275 0,262 0,250 0,227 0,207 0,165
7 0,933 0,871 0,760 0,665 0,583 0,513 0,452 0,400 0,376 0,354 0,314 0,279 0,249 0,222 0,210 0,198 0,178 0,159 0,122
8 0,923 0,853 0,731 0,627 0,540 0,467 0,404 0,351 0,327 0,305 0,266 0,233 0,204 0,179 0,168 0,157 0,139 0,123 0,091
9 0,914 0,837 0,703 0,592 0,500 0,424 0,361 0,308 0,284 0,263 0,225 0,194 0,167 0,144 0,134 0,125 0,108 0,094 0,067
10 0,905 0,820 0,676 0,558 0,463 0,386 0,322 0,270 0,247 0,227 0,191 0,162 0,137 0,116 0,107 0,099 0,085 0,073 0,050

11 0,896 0,804 0,650 0,527 0,429 0,350 0,287 0,237 0,215 0,195 0,162 0,135 0,112 0,094 0,086 0,079 0,066 0,056 0,037
12 0,887 0,788 0,625 0,497 0,397 0,319 0,257 0,208 0,187 0,168 0,137 0,112 0,092 0,076 0,069 0,062 0,052 0,043 0,027
13 0,879 0,773 0,601 0,469 0,368 0,290 0,229 0,182 0,163 0,145 0,116 0,093 0,075 0,061 0,055 0,050 0,040 0,033 0,020
14 0,870 0,758 0,577 0,442 0,340 0,263 0,205 0,160 0,141 0,125 0,099 0,078 0,062 0,049 0,044 0,039 0,032 0,025 0,015
15 0,861 0,743 0,555 0,417 0,315 0,239 0,183 0,140 0,123 0,108 0,084 0,065 0,051 0,040 0,035 0,031 0,025 0,020 0,011

16 0,853 0,728 0,534 0,394 0,292 0,218 0,163 0,123 0,107 0,093 0,071 0,054 0,042 0,032 0,028 0,025 0,019 0,015 0,008
17 0,844 0,714 0,513 0,371 0,270 0,198 0,146 0,108 0,093 0,080 0,060 0,045 0,034 0,026 0,023 0,020 0,015 0,012 0,006
18 0,836 0,700 0,494 0,350 0,250 0,180 0,130 0,095 0,081 0,069 0,051 0,038 0,028 0,021 0,018 0,016 0,012 0,009 0,005
19 0,828 0,686 0,475 0,331 0,232 0,164 0,116 0,083 0,070 0,060 0,043 0,031 0,023 0,017 0,014 0,012 0,009 0,007 0,003
20 0,820 0,673 0,456 0,312 0,215 0,149 0,104 0,073 0,061 0,051 0,037 0,026 0,019 0,014 0,012 0,010 0,007 0,005 0,002

21 0,811 0,660 0,439 0,294 0,199 0,135 0,093 0,064 0,053 0,044 0,031 0,022 0,015 0,011 0,009 0,008 0,006 0,004 0,002
22 0,803 0,647 0,422 0,268 0,184 0,123 0,083 0,056 0,046 0,038 0,026 0,018 0,013 0,009 0,007 0,006 0,004 0,003 0,001
23 0,795 0,634 0,406 0,262 0,170 0,112 0,074 0,049 0,040 0,033 0,022 0,015 0,010 0,007 0,006 0,005 0,003 0,002 0,001
24 0,788 0,622 0,390 0,247 0,158 0,102 0,066 0,043 0,035 0,028 0,019 0,013 0,008 0,006 0,005 0,004 0,003 0,002 0,001
25 0,780 0,610 0,375 0,233 0,146 0,092 0,059 0,038 0,030 0,024 0,016 0,010 0,007 0,005 0,004 0,003 0,002 0,001 0,001

26 0,772 0,598 0,361 0,220 0,135 0,084 0,053 0,033 0,026 0,021 0,014 0,009 0,006 0,004 0,003 0,002 0,002 0,001
27 0,764 0,586 0,347 0,207 0,125 0,076 0,047 0,029 0,023 0,018 0,011 0,007 0,005 0,003 0,002 0,002 0,001 0,001
28 0,757 0,574 0,333 0,196 0,116 0,069 0,042 0,026 0,020 0,016 0,010 0,006 0,004 0,002 0,002 0,002 0,001 0,001
29 0,749 0,563 0,321 0,185 0,107 0,063 0,037 0,022 0,017 0,014 0,008 0,005 0,003 0,002 0,002 0,001 0,001 0,001
30 0,742 0,552 0,308 0,174 0,099 0,057 0,033 0,020 0,015 0,012 0,007 0,004 0,003 0,002 0,001 0,001 0,001

40 0,672 0,453 0,208 0,097 0,046 0,022 0,011 0,005 0,004 0,003 0,001 0,001
50 0,608 0,372 0,141 0,054 0,021 0,009 0,003 0,001 0,001 0,001
 ii

TABLE B / TABEL B

PRESENT VALUE OF R1 PER ANNUM RECEIVED/PAID AT THE END OF THE YEAR FOR N YEARS /
HUIDIGE WAARDE VAN R1 PER JAAR ONTVANG/BETAAL AAN DIE EINDE VAN DIE JAAR VIR N JAAR

Year /
Jaar N 1% 2% 4% 6% 8% 10% 12% 14% 15% 16% 18% 20% 22% 24% 25% 26% 28% 30% 35%
1 0,990 0,980 0,962 0,943 0,926 0,909 0,893 0,877 0,870 0,862 0,847 0,833 0,820 0,806 0,800 0,794 0,781 0,769 0,741
2 1,970 1,942 1,886 1,833 1,783 1,736 1,690 1,647 1,626 1,605 1,566 1,528 1,492 1,457 1,440 1,424 1,392 1,361 1,289
3 2,941 2,884 2,775 2,673 2,577 2,487 2,402 2,322 2,283 2,246 2,174 2,106 2,042 1,981 1,952 1,923 1,868 1,816 1,696
4 3,902 3,808 3,630 3,465 3,312 3,170 3,037 2,914 2,855 2,798 2,690 2,589 2,494 2,404 2,362 2,320 2,241 2,166 1,997
5 4,853 4,713 4,452 4,212 3,993 3,791 3,605 3,433 3,352 3,274 3,127 2,991 2,864 2,745 2,689 2,635 2,532 2,436 2,220

6 5,795 5,601 5,242 4,917 4,623 4,355 4,111 3,889 3,784 3,685 3,498 3,326 3,167 3,020 2,951 2,885 2,759 2,643 2,385
7 6,728 6,472 6,002 5,582 5,206 4,868 4,564 4,288 4,160 4,039 3,812 3,605 3,416 3,242 3,161 3,083 2,937 2,802 2,508
8 7,652 7,325 6,733 6,210 5,747 5,335 4,968 4,639 4,487 4,344 4,078 3,837 3,619 3,421 3,329 3,241 3,076 2,925 2,598
9 8,566 8,162 7,435 6,802 6,247 5,759 5,328 4,946 4,772 4,607 4,303 4,031 3,786 3,566 3,463 3,366 3,184 3,019 2,665
10 9,471 8,983 8,111 7,360 6,710 6,145 5,650 5,216 5,019 4,833 4,494 4,192 3,923 3,682 3,571 3,465 3,269 3,092 2,715

11 10,368 9,787 8,760 7,887 7,139 6,495 5,937 5,453 5,234 5,029 4,656 4,327 4,035 3,776 3,656 3,544 3,335 3,147 2,752
12 11,255 10,575 9,385 8,384 7,536 6,814 6,194 5,660 5,421 5,197 4,793 4,439 4,127 3,851 3,725 3,606 3,387 3,190 2,779
13 12,134 11,343 9,986 9,853 7,904 7,103 6,424 5,842 5,583 5,342 4,910 4,533 4,203 3,912 3,780 3,656 3,427 3,223 2,799
14 13,004 12,106 10,563 9,295 8,244 7,367 6,628 6,002 5,724 5,468 5,008 4,611 4,265 3,962 3,824 3,695 3,459 3,249 2,814
15 13,865 12,849 11,118 9,712 8,559 7,606 6,811 6,142 5,847 5,575 5,092 4,675 4,315 4,001 3,859 3,726 3,483 3,268 2,825

16 14,718 13,578 11,652 10,106 8,851 7,824 6,974 6,265 5,954 5,669 5,162 4,730 4,357 4,033 3,887 3,751 3,503 3,283 2,834
17 15,562 14,292 12,166 10,477 9,122 8,022 7,120 6,373 6,047 5,749 5,222 4,775 4,391 4,059 3,910 3,771 3,518 3,295 2,840
18 16,398 14,992 12,659 10,828 9,372 8,201 7,250 6,467 6,128 5,818 5,273 4,812 4,419 4,080 3,928 3,786 3,529 3,304 2,844
19 17,226 15,678 13,134 11,158 9,604 8,365 7,366 6,550 6,198 5,877 5,316 4,844 4,442 4,097 3,942 3,799 3,539 3,311 2,848
20 18,046 16,351 13,590 11,470 9,818 8,514 7,469 6,623 6,259 5,929 5,353 4,870 4,460 4,110 3,954 3,808 3,546 3,316 2,850

21 18,857 17,011 14,029 11,764 10,017 8,649 7,562 6,687 6,312 5,973 5,384 4,891 4,476 4,121 3,963 3,816 3,551 3,320 2,852
22 19,660 17,658 14,451 12,042 10,201 8,772 7,645 6,743 6,359 6,011 5,410 4,909 4,488 4,130 3,970 3,822 3,556 3,323 2,853
23 20,456 18,292 14,857 12,303 10,371 8,883 7,718 6,792 6,399 6,044 5,432 4,925 4,499 4,137 3,976 3,827 3,559 3,325 2,854
24 21,243 18,914 15,247 12,550 10,529 8,985 7,784 6,835 6,434 6,073 5,451 4,937 4,507 4,143 3,981 3,831 3,562 3,327 2,855
25 22,023 19,523 15,622 12,783 10,675 9,077 7,843 6,873 6,464 6,097 5,467 4,948 4,514 4,147 3,985 3,834 3,654 3,329 2,856

26 22,795 20,121 15,983 13,003 10,810 9,161 7,896 6,906 6,491 6,118 5,480 4,956 4,520 4,151 3,988 3,837 3,566 3,330 2,856
27 23,560 20,707 16,330 13,211 10,935 9,237 7,943 6,935 6,514 6,136 5,492 4,964 4,524 4,154 3,990 3,839 3,567 3,331 2,856
28 24,316 21,281 16,663 13,406 11,051 9,307 7,984 6,961 6,534 6,152 5,502 4,970 4,528 4,157 3,992 3,840 3,568 3,331 2,857
29 25,066 21,844 16,984 13,591 11,158 9,370 8,022 6,983 6,551 6,166 5,510 4,975 4,531 4,159 3,994 3,841 3,569 3,332 2,857
30 25,808 22,396 17,292 13,765 11,258 9,427 8,055 7,003 6,566 6,177 5,517 4,979 4,534 4,160 3,995 3,842 3,569 3,332 2,857

40 32,835 27,355 19,793 15,046 11,925 9,779 8,244 7,105 6,642 6,234 5,548 4,997 4,544 4,166 3,999 3,846 3,571 3,333 2,857
50 39,196 31,424 21,482 15,762 12,234 9,915 8,304 7,133 6,661 6,246 5,554 4,999 4,545 4,167 4,000 3,846 3,571 3,333

10
 MAC2602
OCTOBER/NOVEMBER 2014
iii

TABLE C / TABEL C

FUTURE VALUE OF R1 RECEIVED NOW, AFTER N YEARS / TOEKOMSTIGE WAARDE VAN R1 NOU ONTVANG NA N JAAR

Year / 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% 16% 18% 20%

Jaar N

1 1,0100 1,0200 1,0300 1,0400 1,0500 1,0600 1,0700 1,0800 1,0900 1,1000 1,1200 1,1400 1,1500 1,1600 1,1800 1,2000
2 1,0201 1,0404 1,0609 1,0816 1,1025 1,1236 1,1449 1,1664 1,1881 1,2100 1,2544 1,2996 1,3225 1,3456 1,3924 1,4400
3 1,0303 1,0612 1,0927 1,1249 1,1576 1,1910 1,2250 1,2597 1,2950 1,3310 1,4049 1,4815 1,5209 1,5609 1,6430 1,7280
4 1,0406 1,0824 1,1255 1,1699 1,2155 1,2625 1,3108 1,3605 1,4116 1,4641 1,5735 1,6890 1,7490 1,8106 1,9388 2,0736
5 1,0510 1,1041 1,1593 1,2167 1,2763 1,3382 1,4026 1,4693 1,5386 1,6105 1,7623 1,9254 2,0114 2,1003 2,2878 2,4883

6 1,0615 1,1262 1,1941 1,2653 1,3401 1,4185 1,5007 1,5869 1,6771 1,7716 1,9738 2,1950 2,3131 2,4364 2,6996 2,9860
7 1,0721 1,1487 1,2299 1,3159 1,4071 1,5036 1,6058 1,7138 1,8280 1,9487 2,2107 2,5023 2,6600 2,8262 3,1855 3,5832
8 1,0829 1,1717 1,2668 1,3686 1,4775 1,5938 1,7182 1,8509 1,9926 2,1436 2,4760 2,8526 3,0590 3,2784 3,7589 4,2998
9 1,0937 1,1951 1,3048 1,4233 1,5513 1,6895 1,8385 1,9990 2,1719 2,3579 2,7731 3,2519 3,5179 3,8030 4,4355 5,1598
10 1,1046 1,2190 1,3439 1,4802 1,6289 1,7908 1,9672 2,1589 2,3674 2,5937 3,1058 3,7072 4,0456 4,4114 5,2338 6,1917

11 1,1157 1,2434 1,3842 1,5395 1,7103 1,8983 2,1049 2,3316 2,5804 2,8531 3,4785 4,2262 4,6524 5,1173 6,1759 7,4301
12 1,1268 1,2682 1,4258 1,6010 1,7959 2,0122 2,2522 2,5182 2,8127 3,1384 3,8960 4,8179 5,3503 5,9360 7,2876 8,9161
13 1,1381 1,2936 1,4685 1,6651 1,8856 2,1329 2,4098 2,7196 3,0658 3,4523 4,3635 5,4924 6,1528 6,8858 8,5994 10,699
14 1,1495 1,3195 1,5126 1,7317 1,9799 2,2609 2,5785 2,9372 3,3417 3,7975 4,8871 6,2613 7,0757 7,9875 10,147 12,839
15 1,1610 1,3459 1,5580 1,8009 2,0789 2,3966 2,7590 3,1722 3,6425 4,1772 5,4736 7,1379 8,1371 9,2655 11,974 15,407

16 1,1726 1,3728 1,6047 1,8730 2,1829 2,5404 2,9522 3,4259 3,9703 4,5950 6,1304 8,1372 9,3576 10,748 14,129 18,488
17 1,1843 1,4002 1,6528 1,9479 2,2920 2,6928 3,1588 3,7000 4,3276 5,0545 6,8660 9,2765 10,761 12,468 16,672 22,186
18 1,1961 1,4282 1,7024 2,0258 2,4066 2,8543 3,3799 3,9960 4,7171 5,5599 7,6900 10,575 12,375 14,463 19,673 26,623
19 1,2081 1,4568 1,7535 2,1068 2,5270 3,0256 3,6165 4,3157 5,1417 6,1159 8,6128 12,056 14,232 16,777 23,214 31,948
20 1,2202 1,4859 1,8061 2,1911 2,6533 3,2071 3,8697 4,6610 5,6044 6,7275 9,6463 13,743 16,367 19,461 27,393 38,338

21 1,2324 1,5157 1,8603 2,2788 2,7860 3,3996 4,1406 5,0338 6,1088 7,4002 10,804 15,668 18,822 22,574 32,324 46,005
22 1,2447 1,5460 1,9161 2,3699 2,9253 3,6035 4,4304 5,4365 6,6586 8,1403 12,100 17,861 21,645 26,186 38,142 55,206
23 1,2572 1,5769 1,9736 2,4647 3,0715 3,8197 4,7405 5,8715 7,2579 8,9543 13,552 20,362 24,891 30,376 45,008 66,247
24 1,2697 1,6084 2,0328 2,5633 3,2251 4,0489 5,0724 6,3412 7,9111 9,8497 15,179 23,212 28,625 35,236 53,109 79,497
25 1,2824 1,6406 2,0938 2,6658 3,3864 4,2919 5,4274 6,8485 8,6231 10,835 17,000 26,462 32,919 40,874 62,669 95,396
 iv

TABLE D / TABEL D

FUTURE VALUE OF R1 PER ANNUM RECEIVED FOR N YEARS AT THE END OF EACH YEAR /
TOEKOMSTIGE WAARDE VAN R1 PER JAAR ONTVANG VIR N JAAR AAN DIE EINDE VAN ELKE JAAR

Year / 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 12% 14% 15% 16% 18% 20%

Jaar N

1 1,0000 1,0000 1,0000 1,0000 1,0000 1,0000 1,0000 1,0000 1,0000 1,0000 1,0000 1,0000 1,0000 1,0000 1,0000 1,0000
2 2,0100 2,0200 2,0300 2,0400 2,0500 2,0600 2,0700 2,0800 2,0900 2,1000 2,1200 2,1400 2,1500 2,1600 2,1800 2,2000
3 3,0301 3,0604 3,0909 3,1216 3,1525 3,1836 3,2149 3,2464 3,2781 3,3100 3,3744 3,4396 3,4725 3,5056 3,5724 3,6400
4 4,0604 4,1216 4,1836 4,2465 4,3101 4,3746 4,4399 4,5061 4,5731 4,6410 4,7793 4,9211 4,9934 5,0665 5,2154 5,3680
5 5,1010 5,2040 5,3091 5,4163 5,5256 5,6371 5,7507 5,8666 5,9847 6,1051 6,3528 6,6101 6,7424 6,8771 7,1542 7,4416

6 6,1520 6,3081 6,4684 6,6330 6,8019 6,9753 7,1533 7,3359 7,5233 7,7156 8,1152 8,5355 8,7537 8,9775 9,4420 9,9299
7 7,2135 7,4343 7,6625 7,8983 8,1420 8,3938 8,6540 8,9228 9,2004 9,4872 10,089 10,730 11,067 11,414 12,142 12,916
8 8,2857 8,5830 8,8923 9,2142 9,5491 9,8975 10,260 10,637 11,028 11,436 12,300 13,233 13,727 14,240 15,327 16,499
9 9,3685 9,7546 10,159 10,583 11,027 11,491 11,978 12,488 13,021 13,579 14,776 16,085 16,786 17,519 19,086 20,799
10 10,462 10,950 11,464 12,006 12,578 13,181 13,816 14,487 15,193 15,937 17,549 19,337 20,304 21,321 23,521 25,959

11 11,567 12,169 12,808 13,486 14,207 14,972 15,784 16,645 17,560 18,531 20,655 23,045 24,349 25,733 28,755 32,150
12 12,683 13,412 14,192 15,026 15,917 16,870 17,888 18,977 20,141 21,384 24,133 27,271 29,002 30,850 34,931 39,581
13 13,809 14,680 15,618 16,627 17,713 18,882 20,141 21,495 22,953 24,523 28,029 32,089 34,352 36,786 42,219 48,497
14 14,947 15,974 17,086 18,292 19,599 21,015 22,550 24,215 26,019 27,975 32,393 37,581 40,505 43,672 50,818 59,196
15 16,097 17,293 18,599 20,024 21,579 23,276 25,129 27,152 29,361 31,772 37,280 43,842 47,580 51,660 60,965 72,035

16 17,258 18,639 20,157 21,825 23,657 25,673 27,888 30,324 33,003 35,950 42,753 50,980 55,717 60,925 72,939 87,442
17 18,430 20,012 21,762 23,698 25,840 28,213 30,840 33,750 36,974 40,545 48,884 59,118 65,075 71,673 87,068 105,93
18 19,615 21,412 23,414 25,645 28,132 30,906 33,999 37,450 41,301 45,599 55,750 68,394 75,836 84,141 103,74 128,12
19 20,811 22,841 25,117 27,671 30,539 33,760 37,379 41,446 46,018 51,159 63,440 78,969 88,212 98,603 123,41 154,74
20 22,019 24,297 26,870 29,778 33,006 36,786 40,995 45,762 51,160 57,275 72,052 91,025 102,44 115,38 146,63 186,69

21 23,239 25,783 28,676 31,969 35,719 39,993 44,865 50,423 56,765 64,002 81,699 104,77 118,81 134,84 174,02 225,03
22 24,472 27,299 30,537 34,248 38,505 43,392 49,006 55,457 62,873 71,403 92,503 120,44 137,63 157,41 206,34 271,03
23 25,716 28,845 32,453 36,618 41,430 46,996 53,436 60,893 69,532 79,543 104,60 138,30 159,28 183,60 244,49 326,24
24 26,973 30,422 34,426 39,083 44,502 50,816 58,177 66,765 76,790 88,497 118,16 158,66 184,17 213,98 289,49 392,48
25 28,243 32,030 36,459 41,646 47,727 54,865 63,249 73,106 84,701 98,347 133,33 181,87 212,79 249,21 342,60 471,98


Unisa 2014

12
 MEMORANDUM –
OCTOBER/NOVEMBER 2014

MAC2602

19
QUESTION 1 (15 marks) (18 minutes)

(a) Simple interest

Study guide 1, p. 83 (Revised guide 1, p. 79)

Simple interest for 2 years @ 8% per annum = (R1 500 x 8%) x 2

= (R1 500 x 0,08) x 2
= R120 x 2
= R240 (2)

(b) Future value – ordinary annuity

Study guide 1, p. 87, 123 (Revised guide 1, p. 83, 119)

n
⎡ (1 + i ) − 1 ⎤
⎢ ⎥
FV annuity = I x ⎢ i ⎥
⎢ ⎥
⎣ ⎦
⎡ (1 + 0,12) 3 − 1 ⎤
⎢ ⎥
= R4 200 x ⎢ 0,12 ⎥
⎢ ⎥
⎣ ⎦
⎡ (1,12) 3 − 1 ⎤
⎢ ⎥
= R4 200 x ⎢ 0,12 ⎥
⎢ ⎥
⎣ ⎦
(0,4049) − 1
= R4 200 x � 0,12 �

= R4 200 x 3,3744

= R14 172,00 (rounded to the nearest rand) (4)

(c) Present value – ordinary annuity (Financial calculator)

Study guide 1, p. 129 – 130 (Revised guide 1, p. 125 - 126)

3 900 +/- PMT

4n
14 i
PV = 11 363

Or PV = annuity x present value of R1 per period

And Table B at 14% for 4 years = 2,914
then = R3 900 x 2,914
= R11 364,60
= R11 365 (rounded to the nearest rand) (2)

14
 MAC2602
Exam Solution Oct/Nov 2014

(d) Present value – single payment

Study guide 1, p. 91, 127 (Revised guide 1, p. 87, 123)

 FV 
PV =  n 
 (1 + i ) 
 10 000 
PV =  5 
 (1 + 0,12) 
 10000 
PV =  5 
 (1,12) 

10 000 
PV =  
 1,7623 

PV = R5 674,40

PV = R5 674 (rounded to the nearest rand)

(4)
(e) Future value – single payment
Study guide 1, p. 86, 121 (Revised guide 1, p. 82, 117)
FV = PV ( 1+ i) n
= R2 000 x ( 1+ 0,16) 6
= R2 000 x ( 1,16) 6
= R2 000 x (2,4364)
= R4 872,79
= R4 873 (rounded to the nearest rand) (3)
[15]
QUESTION 2 (20 marks) (24 minutes)
a) Debt: Equity ratio for Pete Limited
(SG 1, p. 186 – 187) (Revised guide 1, p. 175 - 184)
Calculate the amount financed by equity:

Equity funding R mil

Issued share capital 500
Non-distributable reserves 214
Retained income (56)
Total 658

Calculate the amount financed by debt:

Debt funding R mil
Leases 80
Bonds 230
Mortgage bonds 211
Total 521

Total capital funding = R658 + R521 = R1 179 million

Capital structure:
Equity (658/1 179 x 100/1) = 55,81%
Debt (521/1 179 x 100/1) = 44,19%
D:E ratio = 44,19:55,81 (8)

b) Formula of CAPM:
Ke = Rf + β(Rm - Rf)

The two elements in the CAPM that the expected rate of return required by ordinary shareholders
essentially comprises of:
(SG 1, p. 204 – 207) (Revised guide 1, p. 200 - 203)
i. Risk-free rate

ii. Market risk premium (Rm - Rf)

*Market risk is the risk associated with the economical environment in which ALL
organisations do business and which is influenced by interest rates, exchange rates,
oil prices and various other factors that are difficult to quantify.
(2)
c) Calculation of WACC (SG 1, p. 214 – 218) (Revised guide 1, p. 210 - 214)

Cost of equity calculation by using CAPM (ke)

ke = Rf + β(Rm- Rf)

ke = 0,07 + 0,9(0,065)

ke = 0,07 + 0,0585

ke = 0,1285 (rounded to 13%)

Take note that the market risk premium was given as 6,5%
Therefore (Rm- Rf) = 0,065
While Rf is given as 0,07
It follows that (Rm- Rf) = (Rm- 0,07) = 0,065 AND Rm = 0,135 or 13,5%

Using the formula:

k e ve + k d vd
WACC =
ve + vd

(13% x 82 300 000) + (11% x 20 500 000)

WACC =
82 300 000 + 20 500 000

10 699 000 + 2 255 000

WACC =
102 800 000

12 954 000
WACC =
102 800 000

WACC = 0,1260
WACC = 12,60%**

16
 MAC2602
Exam Solution Oct/Nov 2014

Calculations:

Market value of equity (ve):

Current market price: given as R82,30 per share.
Number of shares: 1 000 000 shares as per statement of financial position.

ve = Number of shares x current market value per share.

ve = 1 000 000 x R82,30. Therefore ve = R82 300 000

Market value of debt (vd) and cost of debt (ve)

Given as R20 500 000 and 11% (already after tax)

Or Using the table: (to give an understanding of how the formula links to the table format)

Total amount % of total Cost Weighted

Type of capital at market capital of cost of
values (weight) capital capital
R % % %
E: Equity - Ordinary shares Ve 82 300 000 E/V 80,06 13 10,41
+ D: Debt - Debentures Vd 20 500 000 D/V 19,94 11 2,19

= V: Value 102 800 000 100,00 12,60

(10)

 82 300 000/102 800 000 = 80,06% and 80,06% x 13% = 10,41%

20 500 000/102 800 000 = 19,94 and 19,94 x 11% = 2,19%
Calculated by using CAPM in (c)
After-tax cost - given
[20]
QUESTION 3 (23 marks) (28 minutes)

PART A

a) Different techniques in performing financial analysis (Name the different techniques that can be
used in the following two stages of performing financial analysis)

STAGE
i. PREPARATION OF FINANCIAL INFORMATION FOR ANALYSIS, Scenario i
(SG 2, p. 11)
• Comparative financial statements
• Indexed financial statements
• Common size statements (3)
STAGE
ii. ANALYSIS OF FINANCIAL INFORMATION, Scenario ii (SG 2, p. 11 + 14)

• Failure prediction
• Trend analysis
• Ratio analysis (3)
b) Ratio analysis

i) Operating profit margin (SG 2, p. 23)

2014

Operating profit 14 2471

x 100 = x 100
Revenue 45 336
= 31,43 %
1
29 447 – 15 200 = 14 247
Gross profit – operating cost = operating profit (3)

ii) Current ratio: (SG 2, p. 30)

2014
Current assets: Current liabilities = 6 723: 3 963

= 1,70 :1
[Indicates how many times current assets cover current liabilities]
(3)

iii) Debt ratio (SG 2, p. 37)

2014

Total debt 12 8841

x100 = x 100
Total assets 15 9932
= 80,56 %
1
8 921 + 3 963 = 12 884
2
9 270 + 6 723 = 15 993
[Percentage of all debt forms covering the assets] (3)

iv) Earnings yield (SG 2, p. 43)

2014

198,3 cents
or R1,983
Earnings per share (EPS) =
1 610,0 cents
Share price x 100 or R16,10
= 12,32 %

[EPS was given and need not to be calculated first]

EPS being Earnings or net profit/ Number of shares issued (3)
Part A total 18

(a) LIST 4 areas on which a company’s CREDIT POLICY focus:

1. Creditworthiness (financial strength of customers and their ability to repay debt)
2. Credit period (length of time to pay outstanding balance)
3. Discounts (for early payment – before credit period expires)
4. Collection policy (how to collect overdue accounts payable) (2)

18
 MAC2602
Exam Solution Oct/Nov 2014

(b) ANALYSIS OF THE DEBTORS AGEING SCHEDULE (SG 2, p. 58 - 59)

Analyse the ageing schedule AND indicate the percentage of customers that are not complying with
the company’s credit terms.
The ageing schedule of Jooky Hiltons indicates that several of its customers are not complying
with its credit terms. A large proportion of the accounts receivable balance, equalling 25%
(13%+12%), is more than 30 days old. This is the case in spite of Jooky Hiltons's credit terms that
require full payment within 30 days. (2)

(c) With reference to their credit policy list ONE possible issue that Jooky Hilton should look into.

Creditworthiness of customers
(Based on an analysis of the ageing schedule, it seems that Jooky Hiltons are too lenient in granting
credit to customers. This may have increased their revenue, but could also result in higher bad
debts.)
OR

Credit period
(The credit period granted to trade debtors of Jooky Hiltons is 30 days but 25% of customers exceed
the period.)
OR

Discounts
(It seems that the small discount of 1,5% offered by Jooky Hiltons to their customers was not
sufficient to motivate them to pay earlier.)
OR

Collection policy
(Based on an analysis of the ageing schedule, it seems that they might have to use stricter debt
collecting procedures and work on a more aggressive collection policy. Jooky Hiltons have to be
careful not to damage relationships with their customers.)

OR

Credit terms
(This include the credit period as well as discounts) (1)
Part B total 5
[23]
QUESTION 4 (22 marks) (27 minutes)
(a) Factors listed below influence the capital allocation/budgeting decision:Topic 8, SG 2, p. 85 –
150 and (SG 2, p. 93)

Name ANY TWO of the 8 listed factors

• the returns of the individual projects under consideration
• availability of funds
• current and target capital structure of the organisation
• legal factors
• lending policies of financial institutions
• immediate need for the project
• future earnings
 • risks and uncertainties (2)

(b) Calculation of Net present value of EXISTING melting furnace

Year

0 1 2 3
R R R R
Current realisable value forfeited
(Opportunity cost) (200 000) - - -

Sales  - 765 000 1 097 600 1 260 000

Variable cost - (400 500) (588 000) (873 600)
Fixed cost - (22 000) (13 000) (20 000)
Annual net cash flow before tax - 342 500 496 600 366 400

Taxation 
(39 900) (139 048) (102 592)

Net cash flow (200 000) 302 600 357 552 263 808
Factor at 14% [Table A: 1/(1+i)n] 1,000 0,877 0,769 0,675

Net present value (200 000) 265 380 274 957 178 070
(200 000) – 718 407 = 518 407

Calculations:
 Sales
Yr 1 4 500 x R170 = R765 000
Yr 2 5 600 x R196 = R1 097 600
Yr 3 5 600 x R225 = R1 260 000 (Maximum capacity for existing melting-furnace
is 5 600 units)

 Variable cost
Yr 1 4 500 x R89 = R400 500
Yr 2 5 600 x R105 = R588 000
Yr 3 5 600 x R156 = R873 600 (Maximum capacity for existing melting-furnace
is 5 600 units)

 Taxation
Year

1 2 3
R R R
Realisation/scrapping allowance forfeited ④ 20 000 - -
Sales 765 000 1 097 600 1 260 000
Variable cost (400 500) (588 000) (873 600)
Fixed cost (22 000) (13 000) (20 000)
Wear and tear (R660 000 / 3) (220 000) - -
Taxable amount 142 500 496 600 366 400
Tax payable at 28% 39 900 139 048 102 592

④ Realisation/Scrapping allowance forfeited

20
 MAC2602
Exam Solution Oct/Nov 2014

R
Tax value 220 000
Less: Realisable value 200 000
Realisation allowance forfeited by modifying and not selling 20 000

Net present value existing melting furnace calculated to be R518 407.

Net present value NEW melting furnace given to be R46 809.

Advice/recommendation and motivation thereof:

The existing melting-furnace should not be replaced as it delivers a higher net present value than the
new melting furnace based on the expected economic conditions.
The project with the highest net present value should be chosen. [22]

How the NPV of the new melting furnace was calculated. NOT PART OF THE SOLUTION – NPV
GIVEN IN THE QUESTION as R46 809

Year
0 1 2 3
R R R R
Cost price (840 000) - - -
Sales  - 765 000 1 097 600 1 498 500
Variable cost  - (400 500) (588 000) (1 038 960)
Fixed cost excl. depreciation - (22 000) (13 000) (20 000)
Annual net cash flow before tax 342 500 496 600 439 540
Taxation  (17 500) (60 648) (44 671)
Net cash flow (840 000) 325 000 435 952 394 869
Factor at 14% [Table A] 1,000 0,877 0,769 0,675
Net present value (840 000) 285 025 335 247 266 537
R46 809
Calculations:
 Sales  Variable cost
4 500 x R170 = R765 000 4 500 x R89 = R400 500
5 600 x R196 = R1 097 600 5 600 x R105 = R588 000
6 660 x R225 = R1 498 500 6 660 x R156 = R1 038 960

 Taxation
Year

1 2 3
R R R
Sales 765 000 1 097 600 1 498 500
Variable cost (400 500) (588 000) (1 038 960)
Fixed cost (22 000) (13 000) (20 000)
Net cash inflow before tax 342 500 496 600 493 540
Wear and tear 28% (280 000) - -
Taxable amount 62 500 216 600 159 540
Tax payable at 28% 17 500 60 648 44 671

QUESTION 5 (20 marks) (24 minutes)

5.1 Alternative (b) is the correct answer (SG 1, p. 6) (2)

5.2 Alternative (a) is the correct answer (SG 1, p. 17) (Revised SG 1, p. 13) (2)

Pressure groups are secondary stakeholders (external stakeholders).

5.3 Alternative (c) is the correct answer (SG 1, p. 35 - 36) (Revised SG 1, p. 30 - 32) (2)

Statements (3) and (5) are examples of internal factors which are weaknesses.

5.4 Alternative (d) is the correct answer (SG 1, p. 63) (Revised SG 1, p. 59) (2)

Alternative (a) is the definition for strategic planning (SG 1, p. 32) (Revised SG 1, p. 28)
Alternative (b) is the definition for organisational structure (SG 1, p. 73) (Revised SG 1, p. 69)
Alternative (c) is the definition for traditional financial management (SG 1, p. 62) (Revised SG
1, p. 58)

5.5 Alternative (b) is the correct answer (SG 1, p. 70) (Revised SG 1, p. 66) because it is
descriptive of profit companies and not of non-profit companies. (2)

5.6 Alternative (d) is the correct answer (SG 1, p. 172 - 173) (Revised SG 1, p. 168) (2)

Statement (1) relates to revolving credit (SG 1, p.173) (Revised SG 1, p. 169)

Statement (2) relates to a banker’s acceptance (SG 1, p. 172) (Revised SG 1, p. 168)
Statement (4) factoring IS regarded as financing secured by the debtor’s book (SG 1, p. 172)
(Revised SG 1, p. 168)

5.7 Alternative (d) is the correct answer (SG 1, p. 154 - 155) (Revised SG 1, p. 151 - 152) (2)

All the statements are true with regard to capital markets.

5.8 Alternative (c) is the correct answer (SG 1, p. 162) (Revised SG 1, p. 158). In the case of
liquidation debt is repaid before equity. (2)

5.9 Alternative (b) is the correct answer (SG 2, p. 178 - 181)

Strategic risk focuses on the long-term and has more to do with the organisation’s position in
relation with the external environment on the long-term
Operational risks are more concerned with the day-to-day operations of the organisation.
(SG 2, p.181) (2)

5.10 Alternative (c) is the correct answer (SG 2, p. 190) (2)

[20]

22