RISK FINANCING

MULTIPLE CHOICE

PLEASE READ THE QUESTIONS CAREFULLY, RESEARCH AND ANSWER VERY ACCURATELY

1) ABC (Pty)Ltd is an SME furniture retailing business. On the 1^st of January 2022, the premises were subject to a serious fire which destroyed the building, all contents and stock. Despite an effort to find alternative temporary premises, nothing suitable could be located before expiry of the maximum indemnity period (MIP). The insured are tenants in the building and only insure Contents, Stock and BI under their policy. There is a cessation of rent clause within the lease with the landlord. The policy is subject to average. BI insurance is provided as follows:

Gross Profit sum insured R200,000

Maximum Indemnity Period 12 months

Uninsured Working Expenses as stated in the policy are:

Purchases, net of stock movement

Delivery charges

Bad debts

The company continued to pay staff during the interruption period and all other costs remained the same.

Turnover for the years before the fire was as follows:

2019 R959,591

2020 R1,165,775

2021 R1,088,819

Financial details for the year ending 31 December 2021:

Sales	R1,088,819
Finance commission
Income from concession
Turnover		R1,088,819
Opening stock	R21,367
Production wages	R71,494
Purchases	R608,323
Closing stock	-R22,646
Cost of sales		R678,538
Gross profit		R410,281
Wages and salaries	R126,368
Rent	R44,068
Rates	R73,678
Delivery charges	R36,422
Utilities	R8,507
Cleaning	R372
Waste disposal	R779
Repairs and maintenance	R2,912
Communication	R2,481
Advertising	R37,198
Bad debts	R2,500
Credit card charges	R548
Depreciation	R1,015
Total overheads		R336,848
Net profit		R73,433

Question

Calculate the loss of gross profit amount for 2021

a.

413 596,39

b.

R442 853,00

c.

R71 862,05

d.

-R71862,05

2) ..... gives the enterprise the right to issue paid-in debt, equity, or hybrid capital, which can be regarded as the underlying asset of the option.

a.

Exercise style

b.

Underlying asset

c.

Tenor

d.

Strike price

3) Umda University is a privately owned education institution operating in four provinces of South Africa. The council of the university held four meetings during the 2023 academic year ending July 2023 where the following were documents were discussed:

(a) Risk Register (5 top risks)

No	Risk	Control	Residual Risk	Responsible Executive Manager
1	High rate of failure in all undergraduate degrees, certificates and diplomas	Recruit 500 etutors at R5000 remuneration per month each tutor.	An overall average of 10% failure rate is anticipated	Chief Financial Officer (Chattered Accountant)
2022: 45% average 2023: 40% average
2	Increasing outstanding fees per year.	Secure the services of a debt collector at a cost of 5% per each 100 percent collected account.	An average of 50% outstanding fees per year is anticipated	Register of students (PHD Bus Management)
2022: 55% of fees 2023: 60% of fees
3	Irregular spending by management per annual budget	No irregular spending is permitted.	Zero tolerance.	Risk, Governance and Assurance Services Officer (PHD Risk Management)
2022: R3 million 2023: R3,5 million
4	Staff costs negative variance per annual budget	Freeze vacant posts and not recruit.	Maintain staff costs negative variance of less than R500000 per annum	Human resource Director (PHD Bus Management)
2022: R1,5 million 2023: R2 million
5	Decreasing funding from sponsors per annual budget	Increase student fees by 1% to all registered students in the next academic period	20% of the annual budget could be funded by sponsors.	Vice Chancellor (PHD Bus Management)
2022: 30% 2023: 25%

Notes:

All risk management reports were timely communicated to both the management and council.

(b) Audit Report (matters needing urgent attention)

a. Debt cost costs increased from 3% to 5% of university income.

b. Non-adherence to accounting policies.

c. All computer assets of the university have exceeded the SARS prescribed depreciation rates and period.

d. Insurance policies of the university have lapsed due to non-payment of premium.

e. Performance information

The university has only achieved 2 out of 6 strategic objectives.

The university teaching and research has been downgraded by a recognised institution from a rank 11 to 26.

Council has not ensured the implementations of recommendations made by both the Internal Audit and Auditors during the last three years.

f. Audit opinion, the university obtained a disqualified opinion from auditors.

(c) Financial Information

Account	2021	2022	2023
Deficit	R32 million	R40 million	R45 million
Bank overdraft	R300 000	R4500 000	R5200 000
Financial reserves	R12 million	R6 million	R2 million

(d) Council Minutes (approved)

Composition

Council has five non-executive members who receives remuneration. Risk related fees for non-executive members are R25 000 per meeting. The chair of the Council, who is a non-executive member, receives R50 000 per meeting. While the deputy chair, also a non-executive member, receives R45000 per meeting. All other members of council do not receive remuneration. The cost of each meeting, excluding the remuneration of members, is R45000. It is expected that this cost will increase by 5% in the next academic period.

Decisions

Zero increase on meeting fees of Council members in the next academic period.

Increase the number of Council meetings from 4 to 6 per academic year.

Management to apply for government funding even though the Finance Minister announced the blanket 20% budget cut in all social spending.

Management not allowed to make any loans.

Replenish the university financial reserves by contributing 10% of surplus each year for the next ten years.

Question Which of the following controls of the university may worsen the cashflow position of the university?

a.

recruitment of etutors

b.

No irregular spending

c.

Freezing of vacant posts

d.

Debt collection

4) SA Logistix is a transport company that operates across South Africa. The company has a fleet of specialised vehicles to transport a wide range of products such as fresh foodstuffs, chemicals, and hazardous products.

The company is preparing for the annual insurance review. The Board of SA Logistix has instructed the Chief Financial Officer (CFO) and the Chief Risk Officer (CRO) to determine the appropriate risk financing strategies for the fleet. To determine the risk financing alternatives, the CRO recommended that the maximum probable yearly aggregate loss (MPY) must be calculated for the fleet.

The historical financial data of the fleet is incomplete and certain critical components need to be calculated. Claims inflation forms a significant component of the total claims cost per accident and for that reason it is important to include claims inflation in the data. For the purpose of this exercise, the CRO defined claims inflation as the administration cost and effect of exchange rate fluctuation. The board of Logistix stated in the last annual report that the company adopted a conservative risk appetite. Exchange rates have a significant effect on claims inflation as 40% of claims cost is in foreign currency.

Refer to the table for the annual inflation rate and appropriate exchange rate. The historical information available for the fleet is as follows:

YEAR	ANNUAL INFLATION RATE	ZAR/USD	% OF CLAIMS COST IN FX	NUMBER OF VEHICLES	BUDGETED COST PER VEHICLE	NUMBER OF ACCIDENTS	AVERAGE DAMAGE PER ACCIDENT	CLAIMS ADMIN
2013	4,56%	11,2	40%	120	R 1 800 000	50	R 100 000	R 9 000
2014	4,89%	12,5	40%	120	R 1 900 000	60	R120 000
2015	5%	13,2	40%	120	R 2 000 000	60	R135 000
2016	5,32%	15,9	40%	150	R 2 100 000	70	R150 000
2017	5,42%	15,8	40%	150	R 2 200 000	70	R170 000
2018	5,75%	16,7	40%	150	R 2 300 000	90	R200 000
2019	5,83%	17,5	40%	150	R 2 700 000	90	R230 000
2020	7,13%	19,8	40%	150	R 2 750 000	80	R255 000
2021	7,43%	20,6	40%	150	R 2 800 000	100	R270 000
2022	7,80%	22,5	40%	150	R 2 850 000	90	R300 000

Question

Determine the claims administration marginal cost per claim for the year 2021 by incorporating the information provided in the table above.

a.

R878

b.

R1 106

c.

R980

d.

R633

5) Umda University is a privately owned education institution operating in four provinces of South Africa. The council of the university held four meetings during the 2023 academic year ending July 2023, where the following documents were discussed:

(a) Risk register (5 top risks)

No	Risk	Control	Residual risk	Responsible executive manager
1	High rate of failure in all undergraduate degrees, certificates and diplomas	Recruit 500 e-tutors at R5000 remuneration per month per tutor.	An overall average of 10% failure rate is anticipated	Chief Financial Officer (chartered accountant)
2022: 45% average 2023: 40% average
2	Increasing outstanding fees per year	Secure the services of a debt collector at a cost of 5% per each 100% collected account.	An average of 50% outstanding fees per year is anticipated.	Registrar of students (PhD Business Management)
2022: 55% of fees 2023: 60% of fees
3	Irregular spending by management per annual budget	No irregular spending is permitted.	Zero tolerance	Risk, governance and assurance services officer (PhD Risk Management)
2022: R3 million 2023: R3,5 million
4	Staff costs negative variance per annual budget	Freeze vacant posts and do not recruit.	Maintain staff negative cost variance of less than R500000 per annum	Human resource director (PhD Business Management)
2022: R1,5 million 2023: R2 million
5	Decreasing funding from sponsors per annual budget	Increase student fees by 1% for all registered students in the next academic period.	20% of the annual budget could be funded by sponsors.	Vice-Chancellor (PhD Business Management)
2022: 30% 2023: 25%

Notes:

All risk management reports were timely communicated to both the management and council.

(b) Audit report (matters needing urgent attention)

a. Debt costs increased from 3% to 5% of university income.

b. Non-adherence to accounting policies.

c. All computer assets of the university have exceeded the SARS-prescribed depreciation rates and period.

d. Insurance policies of the university have lapsed due to non-payment of premium.

(c) Financial information

Account	2021	2022	2023
Deficit	R32 million	R40 million	R45 million
Bank overdraft	R300 000	R4500 000	R5200 000
Financial reserves	R12 million	R6 million	R2 million

e. Performance information

The university has only achieved 2 out of 6 strategic objectives.

A recognised institution has downgraded the university teaching and research from a ranking of 11 to 26.

Council has not ensured the implementations of recommendations made by both the Internal Audit and Auditors during the last three years.

f. Audit opinion: the university obtained a disqualified opinion from auditors.

Council minutes (approved)

Composition

Council has five non-executive members who receive remuneration. Risk-related fees for non-executive members are R25 000 per meeting. The chair of the Council, who is a non-executive member, receives R50 000 per meeting, while the deputy chair, also a non-executive member, receives R45000 per meeting. All other members of Council do not receive remuneration. The cost of each meeting, excluding the remuneration of members, is R45000. It is expected that this cost will increase by 5% in the next academic period.

Decisions

Zero increase on meeting fees of Council members in the next academic period.

Increase the number of Council meetings from 4 to 6 per academic year.

Management to apply for government funding even though the Minister of Finance announced a blanket 20% budget cut in all social spending.

Management is not allowed to make any loans.

Replenish the university financial reserves by contributing 10% of surplus each year for the next ten years.

Question Self-insurance is ... option given the financial environment of the university

a.

available

b.

feasible

c.

unfeasible

d.

recommended

6) Libre Logistics Ltd. insures against accidents of its motor fleet. The fleet consists of highly specialised, imported refrigerator trucks. Contributing factors to the high value of incidents are the poor conditions of the municipal and provincial roads and the quality of drivers. The following are the records of Libre Logistics Ltd:

Table 1: Loss experience of the motor fleet over the last five years
Year	No. of vehicles	Average loss per event	No of accidents	Total cost for the year
1	20	R1,500,000	10	R15,000,000
2	20	R2,200,000	12	R26,400,000
3	25	R1,750,000	15	R26,250,000
4	30	R2,000,000	20	R40,000,000
5	50	R3,500,000	25	R87,500,000

Table 2: Quotations under consideration for the insurance of the motor fleet
Quote number	Quoted annual premium	Annual limit for damage to motor fleet	Deductible
1	R15,000,000.00	R60,000,000	R0
2	R10,000,000.00	R30,000,000	R25,000
3	R8,500,000.00	R25,000,000	R50,000
4	R6,000,000.00	R20,000,000	R70,000
5	R5,000,000.00	R10,000,000	R100,000

Question Calculate the TEC value for quote number 2

a.

R6,039,586.21

b.

R15,000,000.00

c.

R10,014,137.93

d.

R8,528,275.86

7) Umda University is a privately owned education institution operating in four provinces of South Africa. The council of the university held four meetings during the 2023 academic year ending July 2023, where the following documents were discussed:

(1) Risk register (5 top risks)

No	Risk	Control	Residual risk	Responsible executive manager
1	High rate of failure in all undergraduate degrees, certificates and diplomas	Recruit 500 e-tutors at R5000 remuneration per month per tutor.	An overall average of 10% failure rate is anticipated	Chief Financial Officer (chartered accountant)
2022: 45% average 2023: 40% average
2	Increasing outstanding fees per year	Secure the services of a debt collector at a cost of 5% per each 100% collected account.	An average of 50% outstanding fees per year is anticipated.	Registrar of students (PhD Business Management)
2022: 55% of fees 2023: 60% of fees
3	Irregular spending by management per annual budget	No irregular spending is permitted.	Zero tolerance	Risk, governance and assurance services officer (PhD Risk Management)
2022: R3 million 2023: R3,5 million
4	Staff costs negative variance per annual budget	Freeze vacant posts and do not recruit.	Maintain staff negative cost variance of less than R500000 per annum	Human resource director (PhD Business Management)
2022: R1,5 million 2023: R2 million
5	Decreasing funding from sponsors per annual budget	Increase student fees by 1% for all registered students in the next academic period.	20% of the annual budget could be funded by sponsors.	Vice-Chancellor (PhD Business Management)
2022: 30% 2023: 25%

Notes:

All risk management reports were timely communicated to both the management and council.

(2) Audit report (matters needing urgent attention)

a. Debt costs increased from 3% to 5% of university income.

b. Non-adherence to accounting policies.

c. All computer assets of the university have exceeded the SARS-prescribed depreciation rates and period.

d. Insurance policies of the university have lapsed due to non-payment of premium.

(3) Financial information

Account	2021	2022	2023
Deficit	R32 million	R40 million	R45 million
Bank overdraft	R300 000	R4500 000	R5200 000
Financial reserves	R12 million	R6 million	R2 million

e. Performance information

The university has only achieved 2 out of 6 strategic objectives.

A recognised institution has downgraded the university teaching and research from a ranking of 11 to 26.

Council has not ensured the implementations of recommendations made by both the Internal Audit and Auditors during the last three years.

f. Audit opinion: the university obtained a disqualified opinion from auditors.

Council minutes (approved)

Composition

Council has five non-executive members who receive remuneration. Risk-related fees for non-executive members are R25 000 per meeting. The chair of the Council, who is a non-executive member, receives R50 000 per meeting, while the deputy chair, also a non-executive member, receives R45000 per meeting. All other members of Council do not receive remuneration. The cost of each meeting, excluding the remuneration of members, is R45000. It is expected that this cost will increase by 5% in the next academic period.

Decisions

Zero increase on meeting fees of Council members in the next academic period.

Increase the number of Council meetings from 4 to 6 per academic year.

Management to apply for government funding even though the Minister of Finance announced a blanket 20% budget cut in all social spending.

Management is not allowed to make any loans.

Replenish the university financial reserves by contributing 10% of surplus each year for the next ten years.

Question

Identify the compliance risk in the options below.

a.

Poor achievement of strategic objectives

b.

Disqualified audit opinion

c.

Lapsed insurance policy

d.

Non adherence to SARS prescribed depreciation rates

8) Libre Logistics Ltd. insures against accidents of its motor fleet. The fleet consists of highly specialised, imported refrigerator trucks. Contributing factors to the high value of incidents are the poor conditions of the municipal and provincial roads and the quality of drivers. The following are the records of Libre Logistics Ltd:

Table 1: Loss experience of the motor fleet over the last five years
Year	No. of vehicles	Average loss per event	No of accidents	Total cost for the year
1	20	R1,500,000	10	R15,000,000
2	20	R2,200,000	12	R26,400,000
3	25	R1,750,000	15	R26,250,000
4	30	R2,000,000	20	R40,000,000
5	50	R3,500,000	25	R87,500,000

Table 2: Quotations under consideration for the insurance of the motor fleet
Quote number	Quoted annual premium	Annual limit for damage to motor fleet	Deductible
1	R15,000,000.00	R60,000,000	R0
2	R10,000,000.00	R30,000,000	R25,000
3	R8,500,000.00	R25,000,000	R50,000
4	R6,000,000.00	R20,000,000	R70,000
5	R5,000,000.00	R10,000,000	R100,000

Question

Determine which quote is the most appropriate by using the given the loss experience of the company.

a.

Quote number 3 appears to be the best alternative. The company will however need to improve the skills of the drivers and put pressure on local and provincial government to improve road conditions.

b.

Quote number 4 appears to be the best alternative. The company will however need to improve the skills of the drivers and put pressure on local and provincial government to improve road conditions.

c.

Quote number 1appears to be the best alternative. The company will however need to improve the skills of the drivers and put pressure on local and provincial government to improve road conditions.

d.

Quote number 2 appears to be the best alternative. The company will however need to improve the skills of the drivers and put pressure on local and provincial government to improve road conditions.

9) ABC (Pty)Ltd is an SME furniture retailing business. On the 1^st of January 2022, the premises were subject to a serious fire which destroyed the building, all contents and stock. Despite an effort to find alternative temporary premises, nothing suitable could be located before expiry of the maximum indemnity period (MIP). The insured are tenants in the building and only insure Contents, Stock and BI under their policy. There is a cessation of rent clause within the lease with the landlord. The policy is subject to average. BI insurance is provided as follows:

Gross Profit sum insured R200,000

Maximum Indemnity Period 12 months

Uninsured Working Expenses as stated in the policy are:

Purchases, net of stock movement

Delivery charges

Bad debts

The company continued to pay staff during the interruption period and all other costs remained the same.

Turnover for the years before the fire was as follows:

2019 R959,591

2020 R1,165,775

2021 R1,088,819

Financial details for the year ending 31 December 2021:

Sales	R1,088,819
Finance commission
Income from concession
Turnover		R1,088,819
Opening stock	R21,367
Production wages	R71,494
Purchases	R608,323
Closing stock	-R22,646
Cost of sales		R678,538
Gross profit		R410,281
Wages and salaries	R126,368
Rent	R44,068
Rates	R73,678
Delivery charges	R36,422
Utilities	R8,507
Cleaning	R372
Waste disposal	R779
Repairs and maintenance	R2,912
Communication	R2,481
Advertising	R37,198
Bad debts	R2,500
Credit card charges	R548
Depreciation	R1,015
Total overheads		R336,848
Net profit		R73,433

Question

Calculate the rate of gross profit for 2021.

a.

46%

b.

40%

c.

41%

d.

38%

10) Umda University is a privately owned education institution operating in four provinces of South Africa. The council of the university held four meetings during the 2023 academic year ending July 2023, where the following documents were discussed:

(1) Risk register (5 top risks)

No	Risk	Control	Residual risk	Responsible executive manager
1	High rate of failure in all undergraduate degrees, certificates and diplomas	Recruit 500 e-tutors at R5000 remuneration per month per tutor.	An overall average of 10% failure rate is anticipated	Chief Financial Officer (chartered accountant)
2022: 45% average 2023: 40% average
2	Increasing outstanding fees per year	Secure the services of a debt collector at a cost of 5% per each 100% collected account.	An average of 50% outstanding fees per year is anticipated.	Registrar of students (PhD Business Management)
2022: 55% of fees 2023: 60% of fees
3	Irregular spending by management per annual budget	No irregular spending is permitted.	Zero tolerance	Risk, governance and assurance services officer (PhD Risk Management)
2022: R3 million 2023: R3,5 million
4	Staff costs negative variance per annual budget	Freeze vacant posts and do not recruit.	Maintain staff negative cost variance of less than R500000 per annum	Human resource director (PhD Business Management)
2022: R1,5 million 2023: R2 million
5	Decreasing funding from sponsors per annual budget	Increase student fees by 1% for all registered students in the next academic period.	20% of the annual budget could be funded by sponsors.	Vice-Chancellor (PhD Business Management)
2022: 30% 2023: 25%

Notes:

All risk management reports were timely communicated to both the management and council.

(2) Audit report (matters needing urgent attention)

a. Debt costs increased from 3% to 5% of university income.

b. Non-adherence to accounting policies.

c. All computer assets of the university have exceeded the SARS-prescribed depreciation rates and period.

d. Insurance policies of the university have lapsed due to non-payment of premium.

(3) Financial information

Account	2021	2022	2023
Deficit	R32 million	R40 million	R45 million
Bank overdraft	R300 000	R4500 000	R5200 000
Financial reserves	R12 million	R6 million	R2 million

e. Performance information

The university has only achieved 2 out of 6 strategic objectives.

A recognised institution has downgraded the university teaching and research from a ranking of 11 to 26.

Council has not ensured the implementations of recommendations made by both the Internal Audit and Auditors during the last three years.

f. Audit opinion: the university obtained a disqualified opinion from auditors.

Council minutes (approved)

Composition

Council has five non-executive members who receive remuneration. Risk-related fees for non-executive members are R25 000 per meeting. The chair of the Council, who is a non-executive member, receives R50 000 per meeting, while the deputy chair, also a non-executive member, receives R45000 per meeting. All other members of Council do not receive remuneration. The cost of each meeting, excluding the remuneration of members, is R45000. It is expected that this cost will increase by 5% in the next academic period.

Decisions

Zero increase on meeting fees of Council members in the next academic period.

Increase the number of Council meetings from 4 to 6 per academic year.

Management to apply for government funding even though the Minister of Finance announced a blanket 20% budget cut in all social spending.

Management is not allowed to make any loans.

Replenish the university financial reserves by contributing 10% of surplus each year for the next ten years.

Question

Which of the following should appear in the updated risk register of the university?

i. Lapsed insurance policy.

ii. Disqualified audit opinion.

iii. Poor achievement of strategic objectives.

iv. Nonadherence to SARS prescribed depreciation rates.

a.

i,ii, iii and iv

b.

i and ii

c.

i and iv

d.

i and iii

11) Securitisation refers to ...

a.

the financial markets bundle and unbundle, package and repackage, retain and

transfer of economic and financial risks with great flexibility and imagination.

b.

the transformation of insurance risks typically retained by insurers or reinsurers into risks that are generally handled by the financial markets.

c.

the complex financial instruments that derive their value from some other underlying asset or index.

d.

the transfer a risk unwanted by one party to another party more inclined to take that risk.

12) Umda University is a privately owned education institution operating in four provinces of South Africa. The council of the university held four meetings during the 2023 academic year ending July 2023, where the following documents were discussed:

(1) Risk register (5 top risks)

No	Risk	Control	Residual risk	Responsible executive manager
1	High rate of failure in all undergraduate degrees, certificates and diplomas	Recruit 500 e-tutors at R5000 remuneration per month per tutor.	An overall average of 10% failure rate is anticipated	Chief Financial Officer (chartered accountant)
2022: 45% average 2023: 40% average
2	Increasing outstanding fees per year	Secure the services of a debt collector at a cost of 5% per each 100% collected account.	An average of 50% outstanding fees per year is anticipated.	Registrar of students (PhD Business Management)
2022: 55% of fees 2023: 60% of fees
3	Irregular spending by management per annual budget	No irregular spending is permitted.	Zero tolerance	Risk, governance and assurance services officer (PhD Risk Management)
2022: R3 million 2023: R3,5 million
4	Staff costs negative variance per annual budget	Freeze vacant posts and do not recruit.	Maintain staff negative cost variance of less than R500000 per annum	Human resource director (PhD Business Management)
2022: R1,5 million 2023: R2 million
5	Decreasing funding from sponsors per annual budget	Increase student fees by 1% for all registered students in the next academic period.	20% of the annual budget could be funded by sponsors.	Vice-Chancellor (PhD Business Management)
2022: 30% 2023: 25%

Notes:

All risk management reports were timely communicated to both the management and council.

(2) Audit report (matters needing urgent attention)

a. Debt costs increased from 3% to 5% of university income.

b. Non-adherence to accounting policies.

c. All computer assets of the university have exceeded the SARS-prescribed depreciation rates and period.

d. Insurance policies of the university have lapsed due to non-payment of premium.

(3) Financial information

Account	2021	2022	2023
Deficit	R32 million	R40 million	R45 million
Bank overdraft	R300 000	R4500 000	R5200 000
Financial reserves	R12 million	R6 million	R2 million

e. Performance information

The university has only achieved 2 out of 6 strategic objectives.

A recognised institution has downgraded the university teaching and research from a ranking of 11 to 26.

Council has not ensured the implementations of recommendations made by both the Internal Audit and Auditors during the last three years.

f. Audit opinion: the university obtained a disqualified opinion from auditors.

Council minutes (approved)

Composition

Council has five non-executive members who receive remuneration. Risk-related fees for non-executive members are R25 000 per meeting. The chair of the Council, who is a non-executive member, receives R50 000 per meeting, while the deputy chair, also a non-executive member, receives R45000 per meeting. All other members of Council do not receive remuneration. The cost of each meeting, excluding the remuneration of members, is R45000. It is expected that this cost will increase by 5% in the next academic period.

Decisions

Zero increase on meeting fees of Council members in the next academic period.

Increase the number of Council meetings from 4 to 6 per academic year.

Management to apply for government funding even though the Minister of Finance announced a blanket 20% budget cut in all social spending.

Management is not allowed to make any loans.

Replenish the university financial reserves by contributing 10% of surplus each year for the next ten years.

Question

Which of the following controls are preventative?

a.

No irregular spending

b.

Freezing of vacant posts

c.

recruitment of etutors

d.

Debt collection

13) ABC (Pty)Ltd is an SME furniture retailing business. On the 1^st of January 2022, the premises were subject to a serious fire which destroyed the building, all contents and stock. Despite an effort to find alternative temporary premises, nothing suitable could be located before expiry of the maximum indemnity period (MIP). The insured are tenants in the building and only insure Contents, Stock and BI under their policy. There is a cessation of rent clause within the lease with the landlord. The policy is subject to average. BI insurance is provided as follows:

Gross Profit sum insured R200,000

Maximum Indemnity Period 12 months

Uninsured Working Expenses as stated in the policy are:

Purchases, net of stock movement

Delivery charges

Bad debts

The company continued to pay staff during the interruption period and all other costs remained the same.

Turnover for the years before the fire was as follows:

2019 R959,591

2020 R1,165,775

2021 R1,088,819

Financial details for the year ending 31 December 2021:

Sales	R1,088,819
Finance commission
Income from concession
Turnover		R1,088,819
Opening stock	R21,367
Production wages	R71,494
Purchases	R608,323
Closing stock	-R22,646
Cost of sales		R678,538
Gross profit		R410,281
Wages and salaries	R126,368
Rent	R44,068
Rates	R73,678
Delivery charges	R36,422
Utilities	R8,507
Cleaning	R372
Waste disposal	R779
Repairs and maintenance	R2,912
Communication	R2,481
Advertising	R37,198
Bad debts	R2,500
Credit card charges	R548
Depreciation	R1,015
Total overheads		R336,848
Net profit		R73,433

Question

Calculate the net loss after average for 2021.

a.

R71862

b.

R68 230

c.

R81,984

d.

R169551

*PLEASE TAKE YOUR TIME AND READ THE QUESTIONS CAREFULLY, RESEARCH AND ANSWER VERY ACCURATELY*