All Questions

Question 1

What is myopic management?

Answer 1

Means possibly choosing quick returns over slower but ultimately the higher one.

Question 2

What are the three E’s?

Answer 2

Economy - doing things at a low price
Efficiency - maximise output as efficiently as possible
Effectiveness - achieve objectives

Question 3

What is ARR also know as?

Answer 3

Return on Capital Employed

Average profits / average investment

Question 4

Ratio for ROCE

Answer 4

Operating profit (PBIT) / Capital Employed

Question 5

How do you calculate average investment for ARR?

Answer 5

Average investment - Cost + residual value / 2

And

Average profits / average investment

Question 6

Name the money market securities

Answer 6

• Treasury bills
• Certificates in deposit
• Commercial Papers
• Bankers Acceptance

Question 7

Capital employed

Answer 7

NCA + CA - Non Current Liabilities

Or

Share Capital + Reserves + long term loans

Question 8

Gross Margin

Answer 8

Gross profit / sales

Question 9

Net margin

Answer 9

Net profit / sales

Question 10

RI

Answer 10

Profit after tax - (Operating assets x cost of capital)

Question 11

Asset turnover

Answer 11

Sales / capital employed

Question 12

Payable days

Answer 12

Payables balance / credit purchases x 365

Question 13

Receivable days

Answer 13

Receivable balance / credit sales x 365

Question 14

Inventory

Answer 14

Inventory / cost of sales x 365

Question 15

Current ratio

Answer 15

Current assets / current liabilities

Question 16

Quick ratio

Answer 16

Current assets - inventory / current liabilities

Question 17

Financial gearing

Answer 17

Debt / equity

Question 18

Operational gearing

Answer 18

Contribution / PBIT

Question 19

Dividend cover

Answer 19

PAT / total dividend

Question 20

Dividend yield

Answer 20

Dividends per share / share price

Question 21

Interest cover

Answer 21

PBIT / interest

Question 22

Interest yield

Answer 22

(Coupon rate / market price) x 100%

Question 23

PE ratio

Answer 23

Share price / EPS

Question 24

Define current ratio

Answer 24

Tells you whether the company had to sell all its readily available assets would it be able to pay off its immediate debt

Question 25

TERP RATIO

Answer 25

MV of shares in use + proceeds from new shares / number of shares in issue after

Question 26

Value of right

Answer 26

TERP - issue price

Question 27

Value of right per existing share

Answer 27

TERP - issue price / no of shares needed to obtain right

Question 28

How to calculate Equivalent Annual Cost?

Answer 28

PV of costs / annuity factor

Question 29

What is systematic risk?

Answer 29

Market wide risk such as state of company

Question 30

What is non systematic risk?

Answer 30

Risk that is unique to a certain asset or company.

Question 31

Sensitivity Analysis

Answer 31

NPV of project / PV of item

Question 32

ROE

Answer 32

PAT + preference dividends / ordinary share cap + reserves

Question 33

EPS

Answer 33

PAT and int and preference shares / number of ordinary shares

Question 34

Total shareholder return

Answer 34

Dividend for year + increase in share price / share price at start of year

Question 35

How do you calculate total value of the company?

Answer 35

Total earnings x 1 / earnings yield