Solve all the questions below.,,,
12.? Prepare horizontal and vertical analyses. L02, 3 The statement of financial position For Bondi Ltd is presented below. ASSETS Current assets 5 38 I300 $ an 000 Property. plant and equipment {net} 81 I300 90 000 Intangi bles 31 000 40 000 Tom am $200 one $21.0 one LIABILITIES AND EQUm' Current liabilities 5 52 [IO-0 $ 43 000- Noncurrent liabilities 135 000 150 000 Equity 13 000 12 000 Total "abilities and equity Required a. Prepare a horizontal analysis of the statement of nancial position data for Bondi Ltd using 2019 as a base. Show the amount of in crease or decrease as well b. Prepare a vertical analysis for Bondi Ltd for 2019 and 2020. Question 14 a) Allen would like to open a business to produce a software that he thinks would be well-received by the market. However. the investment needed to start a busi- ness is very high and Allen could barely cover it on his own. The software is very likely to be successful and generate prots. but it takes 2 years before prots are generated. Explain why the existence of a nancial intermediary. like a bank, makes Allen's investment more likely. [4 marks] b) Banks are nancial intermediaries engaged in maturity transformation. Explain 0) d) what it means for banks to engage in maturity transformation and what are the risks associated with it for banks and depositors. How do banks make prots? [8 marks] Now assume that Allen needs to borrow 300 to produce his software, which will generate 500 in two years. There are N savers in the economy, each en- dowed with 2 and each facing a 25% chance that there will be an emergency and they will need their 2 back. What is the minimum value of N such that a nancial intermediary can solve the problem of getting money from savers to borrowers? [6 marks] After the 2009 nancial crisis. countries in the Basel Committee on Banking Supervision have agreed to raise the mandatory reserves for banks. Explain what happens to the money muitiplier and the bank deposit multiplier if the re- serve ratio is increased and what governments need to do if they wish to main- tain the previous level of broad money M. [8 marks] What's the difference between a liquidity crisis and a solvency crisis? When Lehman Brothers went under. its debts (liabilities) were much greater than its assets. Did Lehman Brothers experience a solvency or a liquidity issue? [4 marks] SECTION C: Macroeconomics Candidates should answer ONE of the two following long questions. It is essential that you explain your answers. Question 13 In this question we will reect on the Australian res from last year. A wide part of Australia has experienced severe res in the last year. which made the economy much less productive and had severe impacts on business activities. 3) Explain why you could expect negative shifts in the aggregate demand curve following the res. What would you expect are the drivers of this shift? Reect on each of the components of the aggregate demand and comment on whether they are likely to change due to the res. [6 marks] 1)) Explain why you could expect negative shifts in the aggregate supply curve following the res. What would you expect are the drivers of this shift? Reect on each of the components of the aggregate supply and comment on whether they are likely to change due to the res. [6 marks] 0) Show the shifts discussed in parts a) and b) graphically. You may assume an upward sioping AS curve for simplicity. Can you predict what happens to real GDP and the price level? [8 marks] d) The res in Australia can also be considered a decrease in the country's stock of capital. You may use the Solow model to show what happens when capital decreases and what the model predicts for the new growth rate. Are these con- sequences Iikely to happen in practice? [10 marks] 1. Ratio analysis A company reports accounting data in its financial statements. This data is used for financial analyses that provide Insights into a company's strengths, weaknesses, performance In specific areas, and trends in performance. These analyses are often used to compare a company's performance to that of its competitors or to its past or expected future performance. Such insight helps managers and analysts improve their decision making. Consider the following scenario: You work for a brokerage firm. Your boss asked you to analyze Blue Parrot Manufacturing's performance for the past three years and to write a report that includes a benchmarking of the company's performance. Which of the following components would be best for you to include in your financial statement analysis? A comparison of the firm's performance with other firms in the same industry based on their financial ratios Financial statements based solely on Information given to analysts and brokerage firms Most decision makers and analysts use five groups of ratios to examine the different aspects of a company's performance. Indicate whether each of the following statements regarding financial ratios is true or false. Statement True False A company exhibiting a high liquidity ratio is likely to have enough resources to pay off its short-term obligations. Asset management or activity ratios provide insights into management's efficiency in using a firm's working capital and long-term assets. Debt or financial leverage ratios help analysts determine whether a company has sufficient cash to repay its short-term debt obligations. One possible explanation for an increase in a firm's profitability ratios over a certain time span is that the company's Income has Increased. Market value or market based ratios help analysts figure out what investors and the markets think about the firm's growth prospects or current and future operational performance
