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RSK4804 Assignment 1 (ANSWERS) 2024 - DISTINCTION GUARANTEED

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Well-structured RSK4804 Assignment 1 (ANSWERS) 2024 - DISTINCTION GUARANTEED. (DETAILED ANSWERS - DISTINCTION GUARANTEED!)... Question 1 (15) You are a new credit manager for Mbabane National Bank. An application for a temporary loan facility to bridge Ngwane Transport and Logistics’ working capital lands on your desk. Consult the information below to assist you in making an informed decision: Account Opening Balance Closing Balance a. Inventory b. Accounts receivable c. Accounts payable R23m R30m R22m R20m R26m R24m d. Net sales during the year were R90m while cost of goods sold amounted to 60% of the sales. Interpret the cash conversion cycle if the industry average is 85 days. (i) Calculate Ngwane Transport and Logistics’ operating cycle and working capital (cash conversion) cycle. (ii) Communicate your decision to the Relationship Manager and make recommendations. Question 2 [20] 1. Explain why credit is considered a powerful driver of the economy. (5) 2. You’re required to identify a lending organisation of your choice (bank or retailer) and outline the credit process and in your own words, provide details of each phase. (15) Question 3 (10) The CFO and management of Marula Logistics approached your financial institution for a credit facility. The following are ratios for Marula Logistics for the 2016 financial year. • Working capital to total asset ratio = 13% • Retained earnings to total asset ratio = 27% • Profit before interest and tax to total assets = 18% • Market value of equity to book value of debt = 115% • Sales to total assets = 126% Based on the Altman’s Z-score, calculate the risk of bankruptcy for Marula Logistics. Briefly comment on the credit decision you will make based on the calculated Z-score. Question 4 Are external ratings reliable? Describe the precautions to take while relying on external ratings.

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RSK4804
Assignment 1 2024
Unique Number:
Due Date: 26 May 2024

QUESTION 1

(i) Calculations:

Operating cycle = DSI + DSO

Where DSI (Days Sales of Inventory)

= (Average Inventory / Cost of Goods Sold) * 365 days




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