RSK4804 Assignment 2 2024 (546572)

RSK4804 Assignment 2 2024 (Unique Nr. 546572) - DUE 28 June 2024 ;100 % TRUSTED workings, explanations and solutions. For assistance call or W.h.a.t.s.a.p.p us on ...(.+.2.5.4.7.7.9.5.4.0.1.3.2)........... Question 1 (5) (a) What do you understand by the probability of default? (b) Maseru Development Bank has R850 million credit with Matsieng Hydroelectric Power, with a maturity of eighteen months. The expected loss for Maseru Development Bank is R22 million, and the recovery rate is assumed to be 23%. Calculate the probability of loan default by Matsieng Hydroelectric Power. Question 2 (10) You are a customer relationship manager at Zakho Commercial Bank and as part of the periodic rotation of customers (credit portfolio), you are now in charge of Silverton Iron and Steel Corporation. While studying this customer you observe the following: - • Dip in operating performance. The turnover and net profit grew 12% and 8% respectively, but excluding gain on revaluation of properties, there is a net loss due to higher interest outgoings and a drop in operating profit margin. • Cash flow remained stretched as the company embarked upon a huge inventory purchase (using bank credit lines) believing steel prices had hit the bottom. However, the steel prices are yet to recover while the order book is not very healthy as the demand for steel fabricated products remains lukewarm. • The balance sheet looks acceptable; however, the gearing level is increasing and relatively high at 210% (or 2.10x). • The auditors have been associated with the company for a long time (11 years) and had also acted as financial advisors, which might entail a conflict of interest. The key concerns identified are constantly recurring liquidity issues, irregular and inconsistent financial information, below-par financial management, lack of consolidated audited financial statements, absence of financial projections, and poor corporate governance with the owner/chairman making all the decisions without any real challenges from the management. This customer is already on the watch list and being reviewed on a semi-annual basis. You’re required to do the following: - lOMoARcPSD| 2022 RSK4804 Assignments 2 a) Explain the possible risk mitigants you would seek from the customer. b) Explain the kind of credit monitoring system you would implement to closely track developments. Question 3 (10) Use the following data to calculate the requested ratios for Tristar Transport and Logistic Services. Briefly analyse each answer. Assets R’000 Liabilities and equity R’000 Cash 320 Accounts payable 580 Accounts receivable 910 Accrues expenses 190 Inventory* 690 Notes payable – bank 480 Current assets 1 920 Current maturing long-term debt 95 Fixed assets 1 325 Current liabilities 1 345 Long-term debt 690 Equity 1 210 Total assets 3 245 Total liabilities and equity 3 245 *Prior-period inventory was 180 Income statement R’000 Net sales 9 725 Cost of goods sold 6 200 Operating expenses 2 550 Interest expense 105 Other income 5 Other expenses 50 Taxes 118 Net income 707 1) Days accounts receivable. 2) Inventory turnover. 3) Debt/equity. 4) Total asset turnover (asset utilisation). 5) Finance cost-to-sales ratio. Total [25]