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Financial Statement Analysis Question Paper
Financial Statement Analysis
Course:Bachelor Of Commerce
Institution: Kenyatta University question papers
Exam Year:2009
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
INSITUTE OF OPEN LEARNING (IOL)
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
BAC 407: FINANCIAL STATEMENT ANALYSIS
DATE:
Thursday 8th January 2009
TIME:
2.00pm-4.00pm
------------------------------------------------------------------------------------------------------------
INSTRUCTIONS:
1.
Answer ALL questions
2.
Show your work in good form
3.
Time allowed is Two hours
Q1.
ABC Company has predicted credit sales for the first 6 months of year Y2 as
follows
Month Jan Feb March April May June
Sales (sh)250,000 200,000 300,000 350,000 300,000 400,00
10% of credit sales are uncollectible while 50% are collected in the month of sale,
and 30% the following month after.
Required: What are the expected total cash receipts for this period?
[20marks)
Q2.
An excerpt from the balance sheet of K Company is given below. Equipment that
had cost sh 10,000 several years ago was sold for sh 2,000 during year 2. There
was no gain or loss in the sale.
December 31
Year 2
Year 1
Equipment
sh 50,000
sh 30,000
Less accumulated depreciation
30,000
20,000
Unexpired cost
sh 20,000
10,000
Required:
a)
Compute the resources applied to purchase equipment in year 2
b)
What was the amount provided by sale of equipment?
c)
Compute the depreciation expense for year 2
[20mark]
Q3.
Following are a list of ratio and a list of factors about which you are attempting to
make conclusions. Indicate which rations you would compute to help you reach a
conclusion. Use only one ratio per factor.
? Current ratio
? Net income to sales
? Times interest earned
? Net income to total assets
? Number of days sales uncollected
? Net income to owners equity
? Acid-test ratio
? Inventory turnover
? Ratio of owners equity to debt
? Asset turnover
a)
You are interested in the efficiency of asset use in the business
b)
You are concerned with the firm’s ability to meet its current
obligations in the very near future.
c)
You are trying to estimate the risk of insolvency over the long run
d)
You suspect that expenses have been increasing at a rate that is
faster than the overall business activity in the firm
e)
You suspect that credit terms offered by your firm have resulted in
your losing of customers to your competitors.
2
f)
You are questioning the need to be more competitive by expanding
the line of merchandize stocked, at the same time recognizing that
the items not now handled are rather slow moving.
g)
You are contemplating issuing bonds to finance expansion.
[20marks)
Q4.
The following items appear among the assets and liabilities of
Diga-Jigua Company.
31/12/Year1
31/12/Year 2
Cash
sh 300,000
shs 400,000
Receivables (net)
700,000
800,000
Accounts payable
500,000
500,000
Long-term notes payable
2, 2000,000
2,000,000
The general price index was 150 at the beginning of the year and 180 at the end
Required: What is the gain or loss on monetary items?
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