Entrepreneurial Finance Question Paper

Entrepreneurial Finance

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2010

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2009/2010
INSTITUTE OF OPEN LEARNING
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE
BAC 412: ENTERPRENEURIAL FINANCE
DATE: THURSDAY, 22ND JULY 2010 TIME: 11.00 A.M. - 1.00 P.M.

INSTRUCTIONS:
1.
Attempt all questions.
2.
Time allowed 2 hours.
3.
Marks allocated to each question are shown at the end of each question.
4.
Be precise and state any assumptions made.

Question One
In recent years, there has been a trend towards “cross-border” listing of securities of
quoted firms. These has reduced the over-reliance by firms on domestic capital markets.

Required:
(a)
Explain the meaning of “cross-border” listing. (4 marks)
(b)
Identify and explain six reasons why firms in your country may seek “cross-border” listing. (6 marks)
(c)
Identify four barriers to “cross-border” listing. (6 marks)

Question Two
(a)
What is venture capital? (3 marks)
(b)
State and explain six reasons why the market for venture capital is not yet developed in your country. (12 marks)
(c)
Briefly explain what is meant by “Business Angels” as a source of finance to the company. (5 marks)

Question Three
(a)
Briefly explain how the “Dow Theory” views the movement of the market prices of shares traded on a stock exchange. (4 marks)
(b)
Distinguish between the following terms:
(i)
cum-all and ex-all (2 marks)
(ii)
Capital markets and money markets. (2 marks)
(iii)
Operating leases and capital leases (2 marks)
(c)
The earnings yield of Excel Limited is 20% and the current market price per ordinary share is Sh100. Each share has par value of Sh50. The dividend for the current year is 10% of the par value.

Required:
(i)
The earnings per share (1 mark)
(ii)
The dividend cover (2 marks)
(iii)
The price earnings ratio (2 marks)

Question Four
(a)
List and explain four factors that should be taken into account by a businessman when making the choice between financing by short-terms and long term sources. (4 marks)
(b)
Discuss the special problems encountered by small scale enterprises in raising investment capital. (4 marks)
(c)
Write brief notes on the following:
(i)
Initial public offering (2 marks)
(ii)
Central Depositors System (CDS) (2 marks)
(iii)
Stock market efficiency (2 marks)
(iv)
Immobilisation (1 mark)

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