• 1a.

  As a financial analyst, you have been hired to evaluate a portfolio containing shares X and Y.

  Probability X		Return X	Probability Y			Return Y
  0.20		10%	0.20			0%
  0.60		15%	0.30			10%
  0.20		20%	0.30			20%
  			0.20			30%

  Calculate the expected returns and standard deviation of X and Y --15marks

  Question 1b

  You have just been appointed as the financial controller of Sanchez & Gomez Limited, a privately owned entity operating in the fashion wholesale business. You have been asked to attend the forthcoming monthly management meeting and report on aspects of the entity’s financial position. You are aware that during the previous financial year the management team has been concerned about the liquidity of the company, and its working capital management.

  The following information is available from the management accounts for the year ended 30 December 2015

  		6 months to 30 June2014 “000”		6 months to 30 Dec 2014 “000”
  Inventories at period end			1050	550
  Receivables at period end Cost of sales for the period			1100         1500	950         1300
  Cash and cash equivalents at period end			------	150
  Trade payables at period end			1400	800
  Short term borrowings at period end			250	--------
  Revenue for the period			2250	2000

  Prepare a brief report that analyses the working capital and liquidity position of Sanchez & Gomez limited. Include the below calculations for the relevant ratios, in your report and comment (20)

  HINT: Inventory turnover, Creditor’s payment period, Debtors’ collection period, Acid test ratio, Current ratio, Working capital, Cash conversion cycle