FINM7409 Financial Management for Decision Makers
Creation date:2024-06-01 16:04:47
Financial Management for Decision Makers
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FINM7409 Financial Management for Decision Makers
Exam duration: 90 minutes + 10 minutes reading + 15 minutes submission
Instructions:
Once you have completed the exam, upload the completed exam answers file
in ONE PDF document to the Blackboard assignment submission link.
You need to hand write and scan-to-pdf your response.
Semester One Mid-semester Examinations, 2023 FINM7409 Financial Management for Decision Makers
QUESTION 1 [1 MARK]
The equity section of the statement of financial position includes:
A) Shareholders Capital
B) Cash at Bank
C) Asset Revaluation Reserve
D) Both A and C.
QUESTION 2 [1 MARK]
What do you think are the most likely patterns to be found in the cash flows from
operating and investing activities for a relatively new company (e.g. in the growth phase)?
A. Outflows of operating cash flows /outflows of investing flows
B. Inflows of operating cash flows /outflows of investing cash flows
C. Outflows of operating cash flows /increase in investing flows
D. Inflows of operating cash flows /inflows of investing flows
QUESTION 3 [1 MARK]
A firm has an opening balance of receivables amounting to $10,000. During the year the
firm has sales totalling $100,000. It writes off $3,000 in bad debts.
At year-end it is owed $8,000 by customers.
How much cash was received from receivables in the year?
E. $102,000
F. $105,000
G. $95,000
H. $99,000.
QUESTION 4 [1 MARK]
Which of the following is not considered a deficiency of the statement of financial
position?
Semester One Mid-semester Examinations, 2023 FINM7409 Financial Management for Decision Makers
A) The amount of discretion in recording some transactions.
B) The lack of recognition of inflation.
C) The disclosure of assets and the claims against such assets.
D) The conflict between relevant and reliable information.
QUESTION 5 [1 MARK]
If reported profits are reduced by $5,000 in year one because of the use of more
aggressive depreciation policy:
A) profits in later years will be unaffected.
B) profits in later years must be $5,000 higher.
C) profits in later years will be $5,000 lower.
D) none of the above.
QUESTION 6 [1 MARK]
Which of the following statements is false?
A. The statement of cash flows summarises cash flows by category, and covers
operating, investing and financing flows.
B. Operating flows are typically cash flows that relate to normal operations, including
cash received from customers and cash paid to suppliers.
C. Investing flows are cash flows relating to investments, and include purchase of new
non-current assets, their depreciation, and sale proceeds from any such assets sold.
D. None of the above. They are all true.
QUESTION 7 [1 MARK]
Which statement is correct?
A) Financial reports are prepared for internal users whereas management reports are
prepared for external users.
B) Financial reports are produced at more frequent intervals than management reports.
Semester One Mid-semester Examinations, 2023 FINM7409 Financial Management for Decision Makers
C) Financial reports reflect past performance whereas management reports are concerned
with the future as well as the past.
D) Financial reports provide more forecast data than management reports.
QUESTION 8 [1 MARK]
The quality of accounting information that requires items that are basically the same to be
treated in the same manner is:
A) relevance.
B) timeliness.
C) understandability.
D) comparability.
QUESTION 9 [1 MARK]
Which three factors should be considered when making a recognition decision?
A. Uncertainty, possibility and measurement uncertainty
B. Certainty, probability and measurement uncertainty
C. Measurement certainty, probability and uncertainty
D. Probability, uncertainty and measurement uncertainty
QUESTION 10 [1 MARK]
If net profit is $100,000, interest is $30,000 and tax is $20,000, earnings before interest
and tax (EBIT) is:
E. $150,000.
F. $50,000.
G. $110,000.
H. $90,000.
Semester One Mid-semester Examinations, 2023 FINM7409 Financial Management for Decision Makers
PROBLEM 1 [5 MARKS TOTAL]
Part (a) [3 MARKS] For each of the transactions below, analyse how the asset, liability
and equity accounts increase, decrease or remain unchanged.
Assets Liabilities Equity
1 The business purchased
inventory for $10,000 on
credit
$10,000
increase
$10,000
increase
2 The owner contributed $5,000
to the business
3 The business has sold
inventory (cost of $12,000)
for $10,000 cash
4 A customer, who owed
$8,000, made a payment of
$2,000
Semester One Mid-semester Examinations, 2023 FINM7409 Financial Management for Decision Makers
Part (b) [2 MARKS] Comment on JB Hi-Fi’s liquidity and financing, based on the
financial statement below.
Semester One Mid-semester Examinations, 2023 FINM7409 Financial Management for Decision Makers
PROBLEM 2 [9 MARKS TOTAL]
The following information was prepared for Bell’s Enterprises as at 30 June 2022.
Assets/ Expenses Liabilities/ Owner's
Equity / Income
$ $
Cash 20,000
Prepaid insurance 8,000
Accounts payable 30,000
Administrative expenses 70,000
Mortgage loan payable 1 Sep 2023 400,000
Employee expenses 110,000
Land and buildings 840,000
Capital at 1 July 2021 400,000
Accounts receivable 104,000
Income 434,000
Equipment 160,000
Accum. deprec. Equipment (at 1 July 2021)________ 48,000
$1,312,000 $1,312,000
Additional information available at 30 June 2022:
1. Interest expense during the year is $9,000 and is not yet paid for.
2. Depreciation of equipment is at the rate of 10% p.a. using the straight-line method.
(Note that accum. deprec means accumulated depreciation and salvage value is expected
to be zero).
3. Among $8,000 of the prepaid insurance, $5,000 has been used-up during the year
REQUIRED:
Incorporating all the above information, prepare:
a) an Income Statement for the year ended 30 June 2022. [4 MARKS]
b) a Statement of Financial Position as at 30 June 2022. [5 MARKS]
Semester One Mid-semester Examinations, 2023 FINM7409 Financial Management for Decision Makers
PROBLEM 3 [6 MARKS]
Link Ltd’s statement of comprehensive income for the years ended 31 December 2021
and 2022, and the statement of financial position as at 31 December 2021 and 2022, are as
follows:
LINK Ltd
Statements of comprehensive income for years ended 2021 and 2022
2021 2022
$m $m
Sales 207 153
Cost of sales (101) (76)
Gross profit 106 77
Other expenses (48) (48)
Other operating income 4 –
62 29
Interest revenue and similar income 2 –
64 29
Interest expense and similar charges (4) (4)
Profit before tax 60 25
Tax on profit or loss on ordinary activities (16) (6)
Profit on ordinary activities after taxation 44 19
Retained profit brought forward from last year 30 56
74 75
Dividend on ordinary shares (18) (18)
Retained profit carried forward 56 57
Semester One Mid-semester Examinations, 2023 FINM7409 Financial Management for Decision Makers
LINK Ltd
Statements of financial position as at 31 December 2021 and 2022
2021 2022
$m $m
Current assets
Inventory 24 25
Accounts receivable 26 25
Cash at bank and in hand 27 1
77 51
Non-current assets
Land and buildings 110 130
Plant and machinery 62 56
172 186
Total assets 249 237
Current liabilities
Accounts payable 23 20
Income tax payable 16 6
Dividend payable 14 14
53 40
Non-current liabilities
Debenture loans (10%) 40 40
Shareholders’ equity
Paid-up share capital 100 100
Retained profits 56 57
156 157
Total liabilities and shareholders’ equity 249 237
Non-current assets are stated at net written down values. In ‘other expenses’, depreciation
was included as follows:
2021 2022
$m $m
Land and buildings 6 10
Plant and machinery 10 12
There were no non-current asset disposals in either year. In both years an interim dividend
was paid within the financial year, and a final dividend was paid just after the end of the
year concerned. Purchase of inventories for the year was $77m.
Semester One Mid-semester Examinations, 2023 FINM7409 Financial Management for Decision Makers
REQUIRED:
Prepare a statement of cash flows for Link Ltd for 2022 [6 MARKS]
The following information will assist you.
Cash flows from operating activities
Receipts from customers ?
Payments to suppliers and employees (106)
Interest paid ?
Income taxes (2017 liability) (?)
Net cash provided by operating activities ?
Cash flows from investing activities
Payments for non-current assets ?
Proceeds from sale of non-current assets 0
Net cash used in investing activities ?
Cash flows from financing activities
Dividends paid (?)
Net cash used in financing activities (?)
Net change in cash for the year (26)
Cash at the beginning of the financial year 27
Cash at the end of the financial year 1
Semester One Mid-semester Examinations, 2023 FINM7409 Financial Management for Decision Makers
END OF EXAMINATION