SECTION $13$

Answer any TIIREE $(3)$ Questions in this section.

QUESTION TWO

$($a$)$ Write brief notes and give an example applicable to world financial markets on each of the following risk terms;

$($i$)$ Transaction risk $(2$ marks$)$

$($ii$)$ Interest rate risk $(2$ marks$)$

$($iii$)$ Translation risk $(2$ marks$)$

$($iv$)$ Economic risk $(2$ marks$)$

$($b$)$ Your company has just recruited a managing director and as a finance manager you have been directed by the company's board of directors that you should orient her on financial matters.

Required

$($i$)$ Briefly explain to the new managing director the financial management function of a company. $(3$ marks$)$

$($ii$)$ Write notes on the main objective of the company to the shareholders $(2$ marks$)$

$($iii$)$ Distinguish between financial management, financial accounting and management accounting and state their relationship $(7$ marks$)$

QUESTION THREE $(20$ MARKS $)$

$($a$)$ Yava Plc$.$ is quoted on the Lusaka Stock Exchange $($LuSE$).$ The following information relates to the company as at $31$ December $2019$:

$\backslash$begin$\{$tabular$\}\{|$l$|$l$|\}$

$\backslash$hline Number of Ordinary Shares & $20$ Million $\backslash \backslash$

$\backslash$hline Book values of $\backslash (12\backslash \%\backslash )$ Preference shares$($K$15$ shares$)$ & K$30$ Million $\backslash \backslash$

$\backslash$hline Book value of $\backslash (20\backslash \%\backslash )$ bank loan & K$5$ Million $\backslash \backslash$

$\backslash$hline Market price of ordinary shares & K$7\mathrm{.}50$ per share $\backslash \backslash$

$\backslash$hline Equity beta of Yava Plc & $1\mathrm{.}3\backslash \backslash$

$\backslash$hline Risk$-$frec rate of return & $\backslash (14\backslash \%\backslash )\backslash \backslash$

$\backslash$hline Equity risk premium & $\backslash (10\backslash \%\backslash )\backslash \backslash$

$\backslash$hline Rate of Taxation & $\backslash (30\backslash \%\backslash )\backslash \backslash$

$\backslash$hline

$\backslash$end$\{$tabular$\}$

$4$