Section A

31. Which of this organization could be describe as having a legal entity, separate

from its owners and managers?

A. K. Ofori Ventures

B. KHN Accountants and Associates

C. Okudzeto and Partners

D. Accra City Limited

32. What variable apart from a firm retained earnings from the profit and loss account makes up the shareholders equity?

A. Equity shares

B. Net working capital

C. Profits

D. Return on equity

33. Which of this may not be a component in an annual report?

A. Directors report

vii.

Debt to equity ratio 2 marks each [Total marks 14]

1 mark

5 marks 4 marks 6 marks

B. Auditorsreport

C. Financialstatements D. Employers report

34. Stocks with highly likely risk level, generally have lower return as the theory predicts.

A. TRUE B. FALSE

35. All BUT one of the following is NOT a model used to compute cost of equity

A. Dividend Growth Model

B. Capital Asset Pricing Model

C. Dividend Valuation Model

D. Cost of Growth Model

36. How would you describe a market efficiency level which influenced investors public and private information sources?

A. Semi-strong efficiency B. Strong-formefficiency C. High-Formefficacy D. Weak-form efficiency

37. A firm may raise additional equity to support its growth after initial public offering through which of the market?

A. Secondary market

B. Primary market

C. Derivativemarket

D. Tertiary market

38. Finance is vital for which of the following business activity (activities)?

A. Marketing Research

B. ProductPricing

C. Design of marketing and distribution channels

D. All of the given options

39. Which of the following terms refers to the use of debt financing?

A. Operating Leverage

B. FinancialLeverage

C. Manufacturing Leverage D. None of the given options

40. In which type of market, new securities are traded?

A. Primary market

B. Secondary market

C. Tertiary market

D. None of the given options

41. Time value of money is an important finance concept because:

A. It takes risk into account

B. It takes time into account

C. It takes compound interest into account

D. All of the given options

42. Which of the following ratios are particularly interesting to short-term creditors?

A. Liquidity Ratios

B. Long-term Solvency Ratios

C. Profitability Ratios

D. Market Value Ratios

43. Which one of the following is NOT a liquidity ratio?

A. Current Ratio

B. Quick Ratio

C. Cash Coverage Ratio

D. Cash Ratio

44. Which of the following is measured by profit margin?

A. Operating efficiency B. Assetuseefficiency C. Financialpolicy

D. Dividend policy

45. A company having a current ratio of 1 will have __________ net working capital.

A. Positive

B. Negative

C. zero

D. None of the given options

46. Which of the following is a special case of annuity, where the stream of cash flows continues forever?

A. Ordinary Annuity

B. SpecialAnnuity

C. Annuity Due

D. Perpetuity

47. You need GHS10,000 to buy a new television. If you have GHS6,000 to invest at 5 percent compounded annually, how long will you have to wait to buy the television?

A. 8.42 years

B. 10.51 years

C. 15.75 years

D. 18.78 years

48. How long will it take an amount to quadruple if invested in a mutual fund that pays 15.5% per annum?

A. 9.62 years

B. 8.5 years

C. 12.82 years

D. 4.65 years

49. In relation to the financial management of a company, which of the following provides the best definition of a firms primary financial objective?

A. To achieve longterm growth in earnings

B. To maximise the level of annual dividends

C. To maximise the wealth of its ordinary shareholder

D. To maximise the level of annual profits

50. Which of the following is not one of the three main types of decision facing the financial manager in a company?

A. Income decision

B. Investmentdecision

C. Dividend decision

D. Financing decision

51. The agency problem is a driving force behind the growing importance attached to sound corporate governance. In this context, who are the agents?

A. Customers B. Shareholders C. Managers

D. Auditors

52. Which of the following statements are correct?

I. Maximising market share is an example of a financial objective

II. Shareholder wealth maximisation is the primary financial objective for a company listed on a stock exchange

III. Financial objectives should be quantitative so that their achievement can be measured

A. IandIIonly B. IandIIIonly

C. IIandIIIonly D. I, II and III

53. ABC Ltd. has a Current Ratio of 1.5: 1 and liabilities of 500,000. What are the Current Assets?

A. GHS500,000, B. GHS1,000,000, C. GHS750,000, D. GHS25,00,000

54. Which of the following refers to a conflict of interest between principal and agent?

A. Management Conflict

B. InterestConflict

C. Agency Problem

D. None of the given options

55. Which of the following is a series of constant cash flows that occur at the end of each period for some fixed number of periods?

A. Ordinary annuity

B. Annuity due

C. Perpetuity

D. None of the given options

56. Which of the following is the process of planning and managing a firms long- term investments?

A. Capital Structuring

B. CapitalRationing

C. CapitalBudgeting

D. Working Capital Management

57. Mr. Y and Mr. Z are planning to share their capital to run a business. They are going to employ which of the following type of business?

A. Sole-proprietorship

B. Partnership

C. Corporation

D. None of the given options

58. What would be the present value of GHS10,000 to be received after 6 years at a discount rate of 8 percent?

A. GHS6,302 B. GHS9,981 C. GHS14,800 D. GHS15,869

59. Suppose the total cost of a college education will be GHS5,000 in 12 years for a child. The Parents have GHS500 to invest today. What rate of interest must they earn on investment to cover the cost of the childs education?

A. 21% B. 12% C. 18% D. 30%

60. Unigold Corporation stock is selling for GHS1.50 per share. The dividend paid is GHS0.35 per share and it is expected to grow 14% more or less indefinitely. What return does this stock offer?

A. 26.6% B. 27.3% C. 37.3% D. 40.6%

SECTION B

Attempt only TWO (2) Questions from this Section

QUESTION 1

Consider that Adjovi Hevi placed GHS 12,525 in Mutual Fund for the next 15 years. She is to earn a quarterly interest rate of 11.25% per year.

a. Compute her Future value using

i. Simple interest rate

ii. Compound interest rate

iii. Explain the difference in your results

3 marks 3 marks 1 mark

b. Consider Komlaga Joeboy who is planning for his retirement in 18 years time. He decides to contribute GHS125,155 at the end of each year for the next 18 years. The current interest rate is 7.15% per annum.

i. Calculate the present value of an annuity for him. 3 marks

ii. Suppose only interest rate suddenly increase to 9.15% per annum, what will be

the present value of the annuity? 3 marks

iii. Explain the implication of your results to Komlaga. 2 marks

[Total marks 15]

QUESTION 2

Global Consult is considering two capital expenditure Projects: Agriculture and Baking. Both proposals are for similar products and both are expected to operate for four years. The company anticipates a cost of capital of 22%. Only one proposal can be accepted.

The net after tax cash flows of the projects are as follows;

Agriculture (GH) Baking (GH)

Initial Investment Year 1

Year 2

Year 3

(50,000) (45000) 25,500 12,500 24,500 15,500 17,000 21,000 19,000 42,000

Year 4

You are required to calculate:

a. Net Present Value (NPV) for each project.

b. Internal Rate of Return (IRR) of each project. Use 28% as the alternative rate for the

IRR.

c. The Payback period for each project.

QUESTION 3

(a) Differentiate between the following types of market;

i. Primary and Secondary Markets

ii. Capital and Money Markets

iii. systematic risk and unsystematic risk

5 marks

5 marks [Total marks 15]

4 marks

4 marks

4 marks

(b) State any three (3) limitations of the Capital Asset Pricing Model (CAPM) use in the

valuation of cost of equity?

3 marks [Total marks 15]