[PDF] Financial Management 9 Sept 2016 Do NOT

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3UNDAMENTALS 5EVEL a 9KILLS 6ODULE

Time allowed: 3 hours 15 minutes

This question paper is divided into three sections: Section A - ALL 15 questions are compulsory and MUST be attempted Section B - ALL 15 questions are compulsory and MUST be attempted Section C - BOTH questions are compulsory and MUST be attempted Formulae Sheet, Present Value and Annuity Tables are on pages 13-15. Do NOT open this question paper until instructed by the supervisor. Do NOT record any of your answers on the question paper. This question paper must not be removed from the examination hall.

8APER 3.

3INANCIAL 6ANAFEMENT

3RIDAW . 9EPTEMBER )"(-

The Association of

Chartered Certified

Accountants

Section A - ALL 15 questions are compulsory and MUST be attempted7MEATEVTEUIEHSKDQSPWKDEDPOQAHEUaPPFUIE3AODKDAUE1OTaES2PPLMEUUPSECPSDcPVSAOTaESTUPEACINVMUKQMECIPKCERVETUKPO"4POPUaSKUEPVUUIEAOTaESTUPUIE638TPOUIEMKOEDQAHETPFUIEAOTaESBPPLMEU"5ACIRVETUKPOKTaPSUI,NASLT"BThe owners of a private company wish to dispose of their entire investment in the company. The company has an

issued share capital of $1m of $0·50 nominal value ordinary shares. The owners have made the following valuations

of the company"s assets and liabilities.

Non-current assets (book value)$30m

Current assets$18m

Non-current liabilities$12m

Current liabilities$10m

The net realisable value of the non-current assets exceeds their book value by $4m. The current assets include $2m

of accounts receivable which are thought to be irrecoverable. y1-= 2< =1. 62726>6 9;2,. 9.; <1-;. @12,1 =1. 8@7.;< <18>5- -,,.9= /8; =1. ,869-7BU a$14 b$25 c$28 d$13 Cy12 ,1 8/ =1. /8558@270 /27-7,2-5 27<=;>6.7=< @255 not +. =;--.- 87 - 687.B 6-;4.=U aCommercial paper bConvertible loan notes cTreasury bills dCertificates of deposit

FAndrew Co is a large listed company financed by both equity and debt.i7 @12,1 8/ =1. /8558@270 -;.-< 8/ /27-7,2-5 6-7-0.6.7= @255 =1. 269-,= 8/ @8;4270 ,-92=-5 6-7-0.6.7= +.<6-55.<=UaLiquidity management

bInterest rate management cManagement of relationship with the bank dDividend policy Hy12 ,1 8/ =1. /8558@270 -;. -.<,;29=287< 8/ +-<2< ;2<4U (1)It is the difference between the spot exchange rate and currency futures exchange rate

(2)It is the possibility that the movements in the currency futures price and spot price will be different

(3)It is the difference between fixed and floating interest rates (4)It is one of the reasons for an imperfect currency futures hedge a1 only b1 and 3 c2 and 4 only d2, 3 and 4

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10Which of the following would you expect to be the responsibility of financial management?

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