Answer ALL questions below. 

QUESTION 1 (25 MARKS) a) Discuss FIVE (5) reasons on how financial intermediaries can improve the efficiency of financial markets. (10 marks) b) Explain the differences between maximising profits and maximising shareholders’ wealth. Justify which one should be the goal of financial management. (6 marks) c) Discuss any THREE (3) costs and THREE (3) benefits of operating business as a corporation. (9 marks)

QUESTION 2 (25 MARKS) You are the accountant of Fashionista Berhad, which is a clothing company. The directors of your company require you to analyze and interpret the most recent financial statements and compare its performance with those of previous year. You are presented with the following financial statements for Fashionista Berhad. Statements of Comprehensive Income for the year ended 31 March 2020 and 2021: 31 March 2020 31 March 2021 RM’000 RM’000 Sales revenue 2,000 2,900 Cost of sales (see note below) (1,200) (1,800) Gross profit 800 1,100 Distribution costs (160) (250) Administrative expenses (200) (200) Profit from operations 440 650 Finance cost (50) (50) Profit before tax 390 600 Income tax expense (44) (46) Net profit for the period 346 554 Note: 10% and 20% of purchases and sales were for cash respectively. Cost of sales figures are made up as follows: Year ended 31 March 2020 31 March 2021 RM’000 RM’000 Opening inventory 180 200 Purchases 1,220 1,960 1,400 2,160 Less Closing inventory (200) (360) Cost of sales 1,200 1,800 Statements of Financial Position 31 March 2020 31 March 2021 RM’000 RM’000 RM’000 RM’000 Non-current assets Property, plant and equipment 3,100 3.674 Less accumulated depreciation (1,214) (1,422) 1,886 2,252 Current assets Inventory 200 360 Trade receivables 400 750 Cash at bank 100 120 700 1,230 2,586 3,482 Capital and reserves Issued ordinary share capital 1,000 1,000 Share premium account 200 200 Retained earnings 368 922 1,568 2,122 Non-current liabilities 10% loan notes 500 500 Current liabilities Trade payable 210 380 Proposed dividend 260 430 Income tax 48 50 518 860 2,586 3,482 a)For each of the two years, calculate THREE (3) profitability ratios, TWO (2) liquidity ratios and THREE (3) activity ratios to assist you in your analysis and interpretation of Fashionista Berhad’s financial statements. (16 marks) b) Comment on the ratios you have calculated for both years, and suggest possible reasons for any changes. (9 marks)

 QUESTION 3 (25 MARKS) a) In order to send your first child to Law School when the time comes, you want to accumulate RM45,000 at the end of 17 years. Assuming that your savings account will pay 6.5% compounded annually, calculate how much would you have to deposit if: i. you want to deposit an equal amount at the end of each year. ii. you want to deposit one large lump sum today. (8 marks) b) Leigh Delight Candy Berhad is choosing between two bonds in which to invest their cash. One is being offered from Hershey's and will mature in 15 years and pay RM40 each quarter. The other alternative is a Mars' bond that will mature in 18 years and pay RM50 each quarter. Compute the present value of each bond if the discount rate is 12% compounded quarterly, and each bond pays RM1,000 at maturity. (8 marks) c) Badang starts a retirement fund at age 21 and plans on depositing equal annual amounts on each birthday, starting at age 21, and ending at age 60. He wants to have RM2 million at age 60. Jasin starts his fund on his 30th birthday. He wants to deposit equal annual amounts on each birthday starting on his 30th birthday and ending on his 60th birthday. Jasin wants to have RM2 million at age 60. If the investment funds earn 10% per year, calculate the amounts the Badang and Jasin respectively will have to save each year (rounded to the nearest dollar) to meet their goals. Comment on the difference. (9 marks)

 QUESTION 4 (25 MARKS) a)You are considering a sales job that pays you on a commission basis or a salaried position that pays you RM50,000 per year. Historical data suggests the following probability distribution for your commission income. Decide which job has the higher expected income. Commission Insurance Agent Commission of Unit Trust Agent Probability of Occurrence RM15,000 RM80,000 0.15 RM35,000 RM38,000 0.20 RM48,000 RM45,000 0.35 RM67,000 RM15,000 0.22 RM80,000 RM77,000 0.18 (7 marks) b) The following is historical data for Security A and B. i. You are required to calculate the expected return and standard deviation for the securities A and B. Year Return for Sec A Return for Sec B 1 0.25 0.16 2 0.25 0.15 3 0.35 0.20 4 0.15 0.12 5 0.10 0.09 (14 marks) ii. Justify whether security A is the riskier than security B.

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Question 1 Question 2 Question 3 The financial market is ... View the full answer