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8 The management of XYZ Co has annual credit sales of $20 million and accounts receivable of $4 million. Working

capital is financed by an overdraft at 12% interest per year. Assume 365 days in a year.

What is the annual finance cost saving if the management reduces the collection period to 60 days?

A $85,479

B $394,521

C $78,904

D $68,384

9 Which of the following statements concerning financial management are correct?

(1) It is concerned with investment decisions, financing decisions and dividend decisions

(2) It is concerned with financial planning and financial control

(3) It considers the management of risk

A 1 and 2 only

B 1 and 3 only

C 2 and 3 only

D 1, 2 and 3

10 SKV Co has paid the following dividends per share in recent years:

Year 20X4 20X3 20X2 20X1

Dividend ($ per share) 0360 0338 0328 0311

The dividend for 20X4 has just been paid and SKV Co has a cost of equity of 12%.

Using the geometric average historical dividend growth rate and the dividend growth model, what is the market

price of SKV Co shares on an ex dividend basis?

A $467

B $514

C $540

D $697

11 'There is a risk that the value of our foreign currency-denominated assets and liabilities will change when we prepare

our accounts'

To which risk does the above statement refer?

A Translation risk

B Economic risk

C Transaction risk

D Interest rate risk

12 The following information has been calculated for A Co:

Trade receivables collection period: 52 days

Raw material inventory turnover period: 42 days

Work in progress inventory turnover period: 30 days

Trade payables payment period: 66 days

Finished goods inventory turnover period: 45 days

What is the length of the working capital cycle?

A 103 days

B 131 days

C 235 days

D 31 days

13 Which of the following is/are usually seen as benefits of financial intermediation?

(1) Interest rate fixing

(2) Risk pooling

(3) Maturity transformation

A 1 only

B 1 and 3 only

C 2 and 3 only

D 1, 2 and 3

14 Which of the following statements concerning working capital management are correct?

(1) The twin objectives of working capital management are profitability and liquidity

(2) A conservative approach to working capital investment will increase profitability

(3) Working capital management is a key factor in a company's long-term success

A 1 and 2 only

B 1 and 3 only

C 2 and 3 only

D 1, 2 and 3

15 Governments have a number of economic targets as part of their monetary policy.

Which of the following targets relate predominantly to monetary policy?

(1) Increasing tax revenue

(2) Controlling the growth in the size of the money supply

(3) Reducing public expenditure

(4) Keeping interest rates low

A 1 only

B 1 and 3

C 2 and 4 only

D 2, 3 and 4