Question 8 of 35

Sarah owns a perfume shop in Hazyview. If Sarah decides to invest R100 000 into an account for future expansions of her perfume shop, what is the future value of the amount if she invests it for three years at an interest rate of 5% per annum?

Use the following tables, containing the discounting factors, as needed for this question:

• A.

  R115 760

• B.

  R112 576

• C.

  R105 000

• D.

  R130 000

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Question 9 of 35

1 Points

Khanyisile owns a fabric store and offers a curtain-making service to her customers. The industrial machine used to sew the curtains has broken down and Khanyisile needs to decide if it is worth it to replace the machine right now.

A new machine is worth R50 000, but she does not really have the capital now to replace the machine. Her brother owns such a machine and has indicated that he will give it to her now with payment only due in three years. He is willing to let her take the machine for R75 000 at an interest rate of 15% per year.

She has approached you to assist her and you advise her that she will need to look at the present value of the machine before deciding. Given the high decrease of the discounting factors along with the high interest rates offered on the machine and the long time period she will require to pay off the machines, the following is correct:

• A.

  The lower the interest rate is, the smaller the present value of a given future amount will be.

• B.

  The higher the interest rate is, the bigger the present value of a given future amount will be.

• C.

  The lower the interest rate is, the bigger the present value of a given future amount will be.

• D.

  The higher the interest rate is, the smaller the present value of a given future amount will be.

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Question 10 of 35

1 Points

The factor ( 1 + i ) ⁿ in the formula is known as the future-value factor (FVF) or _____________ factor of a single amount.

• A.

  variable-interest

• B.

  original-investment

• C.

  capital-interest

• D.

  compound-interest

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Question 11 of 35

1 Points

Which financial ratio is used by providers of loan capital to determine the degree to which a business can meet its debt obligations fully and punctually in the normal course of events?

• A. The gearing ratio
• B. The debt ratio
• C. The solvency ratio
• D. The current ratio

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Question 12 of 35

1 Points

Paul is the owner of a sport store that specialises in extreme sports such as paragliding and wakeboarding. To entice customers to spend more he has recently launched store credit, subject to approval. Which one of the following is a cost of granting credit that Paul must be aware of?

• A. The loss of customer goodwill
• B. Loss of flexibility
• C. Insurance cost
• D. Loss of interest

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Question 13 of 35

1 Points

If IBM would like to improve its gross profit margin, which one of the following strategies would be the most appropriate? IBM would have to _______________ .

• A. improve its marketing efforts in order to increase sales while reducing the cost of products sold
• B. increase sales by relaxing the credit standards while improving productivity by means of performance-management systems
• C. decrease its marketing efforts in order to decrease sales while increasing the cost of products sold
• D. reduce equity by buying back shares and cancelling the shares

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Question 14 of 35

1 Points

IBM reports that, for the years 2009 and 2008, the gross profit margins are 45.72% and 44.06% respectively. Both the net profit and the gross profit margins indicated stronger financial positions for IBM from 2008 until 2010. When calculating the gross profit margin, IBM should aim to achieve the ____________ gross profit margin.

• A. lowest
• B. greatest
• C. least fluctuating
• D. most fluctuating

Discounting factors to calculate present values Periods (n) 5% 10% 15% 1 0,9524 0,9091 0,8696 2 0,9070 0,8264 0,7561 3 0,8638 0,7513 0,6575 4 0,8227 0,6830 0,5718 5 0,7835 0,6209 0,4972 6 0,7462 0,5645 0,4323 Discounting factors to calculate future values Periods (n) 5% 10% 15% 1 1,0500 1,1000 1,1500 2 1,1025 1,2100 1,3225 3 1,1576 1,3310 1,5209 4 1,2155 1,4641 1,7490 5 1,2763 1,6105 2,0114 6 1,3401 1,7716 2,3131