Entrepreneurial Finance Question Paper

Entrepreneurial Finance

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2008

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2008/2009
INSTITUTIONAL BASED PROGRAMME

EXAMINATION FOR THE DEGREE OF MASTER OF BUSINESS
ADMINISTRATION
BAC 604
ENTREPRENEURIAL FINANCE

DATE: Monday 29th December 2008 TIME: 2.00 P.M. – 5.00 P.M.

INSTRUCTIONS

1.
Answer ALL Questions
QUESTION 1
An entrepreneur has approach you for advise on production, inventory and profit
management. The data provided to help you is given in the form of a budgeted profit and
loss accounts for the year ending 30th June 2008 as follows;

Sale

400,000
Less: Variable costs
320,000
Fixed costs

40,000
360,000
Net profit

40,000

Calculate the for the enterprise and commend on its implication

(10 marks)

b)
State what would be the likely effect on the profits of the firm in conditions of:

i)
Increasing demand for the product.

(5 marks)

ii)
Falling demand for the product.

(5 marks)

1

QUESTION 2

a)
“The two time-windows referred to as Quiet periods in IPO are associated with
very little activity”

Explain the activities during these periods.

(7 marks)
b)
“The due diligence stage of the venture capital cycle is the longest and the most
imported stage”. Discuss what happens during this stag.

(7 marks)

QUESTION 3
An entrepreneur has made plans for the next year. He has estimated that the company
will employ total assets of Kshs. 8000,000; 50 per cent of the assets being financed by
borrowed capital at an interest cost of 8 per cent per year. The direct cost for the years
are estimated at Kshs. 480,000 and all other operating expenses are estimated at kshs.
80,000. the goods will be sold to customers at 150 per cent of the direct costs. Tax rate
is assumed to be 50 per cent.

Required
Calculate
i)
Net profit margin

(4 marks)
ii)
Return on assets

(4 marks)
iii)
Assets turnover

(4 marks)
iv)
return on owners’ equity.

(4 marks)

QUESTION 4
In entrepreneurial financing, there should be a clear distinction made between cash
profits. Explain why cash flows are more important in investment decisions.

(10 marks)
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