FM CAT 1 SEPTEMBER- DECEMBER 2024

Q1

.Value for money is an important objective for not‐for‐profit organizations.

Which of the following actions is consistent with increasing value for money?

Q2
Which of the following is LEAST likely to fall within financial management?

Q3
Which of the following is a difference between primary and secondary capital markets?

Q4
The following information has been calculated for D Co:

Trade receivables collection period               10 weeks

Raw material inventory turnover period          6 weeks

Work in progress inventory turnover period     2 weeks

Trade payables payment period                      7 weeks

Finished goods inventory turnover period        6 weeks

What is the length of the working capital cycle?

Q5
A cash budget was drawn up as follows:

What is the closing cash balance for December budgeted to be?

Q6
 Mile Co is looking to change its working capital policy to match the rest of the industry. The following results are expected for the coming year:

Revenue and cost of sales can be assumed to be spread evenly throughout the year. The working capital ratios of Mile Co, compared with the industry, are as follows:

Assume there are 365 days in each year.

If Mile Co matches its working capital cycle with the industry, what will be the decrease in its net working capital?

Q7
A company is considering investing in a two‐year project. Machine set‐up costs will be Shs.125, 000, payable immediately. Working capital of Shs.4, 000 is required at the beginning of the contract and will be released at the end.

Given a cost of capital of 10%, what is the minimum acceptable contract price to be received at the end of the contract?

Q8
A company has 31 December as its accounting year‐end. On 1 January 2021, a new machine costing Shs.2,000,000 is purchased. The company expects to sell the machine on 31 December 2026 for Shs.350, 000.

The rate of corporation tax for the company is 30% and tax is paid at the end of the year in which it is incurred. Tax‐allowable depreciation is obtained at 25% on the reducing balance basis, and a balancing allowance is available on asset disposal. The company makes sufficient profits to obtain relief for tax‐allowable depreciation as soon as they arise.

If the company’s cost of capital is 15% per year, what is the present value of the tax savings from the tax‐allowable depreciation on 1 January 2021?

Q9
Four projects, P, Q, R, and S, are available to a company that is facing shortages of capital over the next year but expects capital to be freely available thereafter.

In what sequence should the projects be selected if the company wishes to maximize net present values?

Q10
Alicia is contemplating purchasing for Shs.280, 000 a machine that she will use to produce 50,000 units of a product per year for five years. These products will be sold for Shs.10 each and unit variable costs are expected to be Shs.6. Incremental fixed costs will be Shs.70, 000 per year for production costs and Shs.25, 000 per year for selling and administration costs. Alicia has a required return of 10% per year.

Q11
Data of relevance to the evaluation of a particular project are given below. Cost of capital in real terms      10% per year

Expected general inflation rate                                8% per year

The expected increase in the project’s annual cash inflow is 6% per year

Expected increase in the project’s annual cash outflow of 4% per year

Which of the following sets of adjustments will lead to the correct NPV being calculated?

Q12
When considering standard deviation as a statistical measure, which of the following statements is true?

Q13
There are two main types of financial markets: capital and money markets, and within each of these are primary and secondary markets.

Which TWO of the following statements are true?