Sydney Boys High School

YEAR 12 BUSINESS STUDIES ASSESSMENT TASK 2012.

FINANCE HSC Weight. 25%
Student Number _______________________________________________________
General Instructions

Reading time 5 minutes

Working time 2 hrs.
Write using black or blue pen
Board approved calculators may be used
Write you student number at the top of each section

Part A: Multiple Choice (20 Marks) Answer on the answer sheet provided.
Part B: Short Answers (20 Marks) Answer in the spaces provided.
Part C: Report (20 Marks) Answer in the booklet provided.

Question
Part A
Part B
Q.21
Q.22
Q.23
Part C

TOTAL

Mark

/10
/5
/5

/20
/20

/20

/60

Sydney Boys High School (est. 1883)

ANSWER SHEET - Place an X on the most correct answer.

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A
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A

B
B
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B
B
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B
B
B
B
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B
B
B

TOTAL MARK

C
C
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C

D
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D

Part A: Multiple Choice (20 Marks)

(Choose the most correct answer)
1

Which of the following is a source of short term debt finance?

A
B
C
D

Debenture.
Mortgage.
Overdraft.
Ordinary shares.

Which government institution would investigate a claim that a company has falsified its
accounting records?

A
B
C
D

Australian Stock Exchange.

Department of Fair Trading (NSW).
Australian Securities and Investment Commission.
Australian Competition and Consumer Commission..

Cakes Are Us Pty Ltd has recently opened. In the first three months of trading
the business recorded the following cash flow performance.

Opening Balance
Total Inflows
Total Outflows

JUNE
0
$11,500
$10,600

JULY
..
$5,000
$6,200

AUGUST
.
$5,600
$6,900

What is the opening balance in August?

A - $ 1200
B - $ 300.
C $ 900.
D $ 6,200.
4

To increase liquidity Tree Tops Pty. Ltd has decided to sell its accounts receivables to
GEC Finance Ltd. This is an example of;

A
B
C
D

Leasing.
Factoring.
Gearing.
Merging.

How can a business improve its working capital management?

A
B
C
D

By increasing cost centres.

By reducing variable cost.
By leasing rather than buying assets.
By extending credit terms to 60 days.

Mantovani Pty. Ltd.

(For Year Ending 30/6/10)
$ 000s
Current Assets
$300
Current Liabilities
Non-Current Assets
$600
Non-Current Liabilities

$150.
$300.

What is the value of Owners Equity for Mantovani Pty Ltd?

A
B
C
D

$150,000
$450,000.
$300,000.
$1,350,000.

7. What does a cash flow report indicate?

A
B
C
D

The level of gearing.

The level of profitability.
The level of stability.
The level of liquidity.

8. What is the benefit to shareholders of debt financing over equity financing?

A
B
C
D

It minimises risk.
Return on shareholders equity is likely to be higher.
Repayments can be postponed in economic recessions.
Loans are guaranteed by the Australian Securities Exchange.

9. Bald Eagle Pet Shop Pty. Ltd allows terms of 30 days on Accounts Receivables.
If the Accounts Receivable Turnover ratio is 6 then this means that
A
B
C
D

Stock is turned over every 61 days.

Accounts Receivable is turned over every 180 days.
Stock is turned over 6 times a year.
The company may experience cash flow problems.

10 Working capital management achieves the objectives of the business by;

A
B
C
D

Determining the best mix of current assets and current liabilities.

Ensuring long term liabilities do not exceed short term assets.
Ensuring short term liabilities do not exceed long term assets.
Ensuring that total assets equal total liabilities.

11 Which of the following indicates the effectiveness of a firms credit policy?

A
B
C
D

Expense ratio
Current ratio.
Net profit ratio.
Accounts Receivable Turnover Ratio.

12 Which of the following is an external, long term source of debt finance.?

A
B
C
D

Overdraft.
Commercial Bill.
Debenture.
Factoring.

13 A financial strategy to encourage regular inflows of cash to a business

would be?
A
B
C
D

Discounts for early payments of accounts.

Relaxation of strict credit policy.
More efficient inventory control system.
Increase the price of goods.

14 All of the following are external sources of funds except;

A
B
C
D

Retained earnings.
Private equity.
Mortgage.
Ordinary shares.

15 Which of the following types of budgets relate to capital expenditure and research and
development?
A
B
C
D

Project Budget.
Operating Budget.
Financial Budget
Cash Flow Budget.

16 When a business can no longer pay its debts as they fall due it is
said to be
A
B
C
D

Bankrupt.
Insolvent.
Unprofitable.
Experiencing cash flow problems.

Use the following information to answer Qs 17 and 18.

Bamiyan Tours Pty Ltd reported the following financial information.
$ 000s
Gross Profit
Expenses
Current Assets
Non-Current Assets
Current Liabilities
Non-Current Liabilities

60
10
400
100
200
100

17. The rate of return on owners equity is

A
B
C
D

10%
12%
25%
Insufficient information provided.

18. Working Capital is

A
B
C
D

$200.
$300.
$400.
$500.

19

A mortgage is;

A
B
C
D

A current asset in the Balance Sheet.

A non-current liability in the Balance Sheet.
A financial expense in the Revenue Statement.
An intangible item in the Balance Sheet.

20

The value of one currency in another currency on a particular day is an example of;

A
B
C
D

A currency swap.
A spot exchange rate.
A derivative.
A forward exchange.

Part B. (Short Answers. 20 Mks)

Q.21. (10 mks)
a) With reference to the Gym Karma Pty Ltd financial information;
Calculate (show working) the following ratios for 2011.
i)

Gross Profit Ratio (1 mk)

ii)

Net Profit Ratio. (1 mk)

iii)

Expense Ratio. (1 mk)

iv)

Accounts Receivable Turnover Ratio. (1 mk)

(b) Define working capital management. ( 2 mks)

(c)

Calculate the working capital for Gym Karma Pty Ltd in 2011. (1 mk)

d) Outline three limitations of financial reports. (3 mks)

Q.22. Outline the five objectives of financial management. (5 mks)

i)
7

ii)
iii)
iv)
v)
Q.23 a) Describe two methods of international payment. (2 mks)
i)

ii)

b) Explain how hedging can reduce the level of uncertainty involved with international financial
transactions (3 mks)

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Part C: Report (20 Marks)

In your answer you will be assessed on how well you:
Demonstrate knowledge and understanding relevant to the question.
Apply the hypothetical business situation.
Communicate using relevant business terminology and concepts.
Present a sustained, logical and cohesive response in the form of a business report.
Gym Karma Pty Ltd
Gym Karma Pty Ltd is a clothing manufacturer / retailer
that has created a niche market in designing high
fashion clothing and accessories for the fitness/health
sector. Their designs have become so popular that their
clothing is being worn not only for training purposes
and in the gym but also just for leisure wear! The
success of the business has not gone unnoticed and an
international sportswear company, Kontiki International
Ltd is interested in taking over the business. You have
been hired as a financial consultant to prepare a Report
for Kontiki Ltd.

(Refer to Financial information provided for Gym Karma Pty Ltd)

In your Report you will:
Calculate and evaluate financial ratios to assess changes over time in the following areas;
i)
Liquidity.
ii)
Solvency.
iii)
Return on Owners Equity.
For each of the above propose and justify effective strategies that might be used by Kontiki Ltd to
improve the financial state of the business in the future.

11

TABLE 1. Summary of Key Financial Data for Gym Karma Pty Ltd.
From the Balance Sheet
ITEM
2010
2011
$
$
Current Assets
200,000
200,000
Accounts Receivable
60,000
72,000
Non-Current Assets
860,000
956,000
Total Assets
1,060,000
1,156,000
Current Liabilities
208,000
160,000
Non-current
392,000
480,000
Liabilities
Total Liabilities
600,000
640,000
Owners Equity
460,000
516,000
From Revenue Statement
ITEM
2010
$
Sales (credit)
200,000
COGS
120,000
Gross Profit
80,000
Expenses
20,000
Net Profit
60,000
Industry Averages
Ratios
Liquidity
Solvency
Efficiency
Expenses
Profitability
(GP)
Profitability
(NP)

$
2.5 : 1
0.50 : 1
38 days
26%
34%
10%

12

2011
$
240,000
140,000
100,000
44,000
56,000

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