FIN3702 EXAM ANSWERS JUNE 2020

MEMO – FIN3702 JUNE 2019




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, MCQ QUESTIONS 1 to 30


ANSWER EXPLANATION


1 2 Sales forecast → production plans → estimation of costs (labour,
fixed costs) → pro forma statements → cash budget


2 4 Depreciation is a noncash item


3 2 Trade and other payables and accruals.


4 1 An increase in CA increase NWC, thereby reducing the risk of
technical insolvency.


5 1 If a firm uses an aggressive financing strategy, it increases return
and increases risk.


6 2 Produce low-cost short cycle goods.

OC = AAI + ACP
7 3
AAI = OC - ACP
= 120 -40
= 80

8 1 CCC = OC - APP
Strategies for managing the cash conversion cycle
▪ Turn inventory over in shorter time without running out of
stock.
▪ Collect trade receivables quicker without losing sales from
high pressure collection techniques.
▪ Manage mail, processing and clearing time to reduce them
when collecting from customers and to increase them when
paying suppliers.
▪ Pay trade and other payables as slowly as possible with
damaging the firm’s credit rating.



9 3 realized an annual savings of R120,000.




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