Credit Risk Assessment 1 - May 2016
Credit Risk Assessment 1 - May 2016
Credit Risk Assessment 1 - May 2016
INSTRUCTIONS TO CANDIDATES
4 You will be allowed 10 minutes to go through the paper before the start of the
examination, you may write on this paper but not in the answer book.
7 All persons writing examinations without payment will risk expulsion from the
Institute.
8 If you are caught cheating, you will be automatically disqualified in all subjects
seated this semester.
QUESTION 1
ASSETS
Non - Current Assets Revenue 17,500.00
Property, Plant and Equipment 5,170.00 Cost of Sales (14,600.00)
Goodwill 120.00 Gross Profit 2,900.00
Investment in Associates 60.00
5,350.00 Distribution Costs (1,870.00)
Current Assets Administrative Costs (490.00)
Inventories 2,650.00 Finance Costs - Interest Payable (148.00)
Trade Receivables 2,400.00 Other Income 8.00
Cash and Cash Equivalents 140.00 Profit Before Tax 400.00
5,190.00 Income Tax Expense (160.00)
Total Assets 10,540.00 Profit For the Year 240.00
QUESTION 2
b) Outline and discuss the contents of the three key financial statements.
(8 marks)
(Total 15 marks)
QUESTION 3
a) What are the two main aspects that a trading company like Shoprite stores
consider in working capital management? (5 marks)
b) List five sources of working capital and discuss how they impact working capital
Management. (10 marks)
(Total 15 marks)
QUESTION 4
- Creditors 1,789
- Purchases 13,890
- Debtors 5,345
- Sales 17,654
- Cost of Sales 9,123
- Closing Stock 793
(Total 15 marks)
QUESTION 5
a) With a use of a well labelled diagram Distinguish between fixed and variable
costs; (10 marks)
b) Briefly explain five weaknesses and limitations of breakeven analysis. (10 marks)
(Total 20 marks)
QUESTION 6
a) Discuss the rationale for considering business and financial risks in assessing the
appropriateness and fitness of an application for a credit facility. The discussion
should include impact on profitability, capacity to repay, survivability of an
application, highlighting which kind of cost has more impact on either business
risk or financial risk. (10
marks)
b) Discuss three critical factors that are necessary for the success of a business.
(10 marks)
(Total 20 marks)
Required
Calculate and discuss the answer in each of the above.
Hint: Clearly showing all formulae and workings.
QUESTION 8
The De La Rey Model of financial risk measures the likelihood of a business failing
due to financial risk. According to the model:
Required