Reference no: EM13720001
Question 1: Answer the following short questions regarding financial management
1.1: The primary financial objective of any business is to:
1.2: Name 5 secondary objectives of financial management.
1.3: Explain 5 steps that can be taken to ensure that a business maintains a positive cash flow.
1.4: Name 4 reasons why budgets are drawn up.
Question 2: Basic financial concepts:
Match the following terms (a-j) to the most accurate description (2.1 - 2.10)
a) Solvency
b) Fixed assets c) Liquidity
d) Working capital
e) Assets
f) Profitability
g) Fixed overhead expenses h) Capital
i) Variable expenses
j) Current assets
2.1: Stock of raw materials, stock of finished goods, work in progress, prepaid expenses and deposits, cash on hand and at bank and outstanding debtors.
2.2: Items that are purchased to facilitate the running of the business (they are not pur- chased for resale)
2.3: The ability of a business to pay off its debt at any given time, even if all its activities should stop.
2.4: The relationship between the net income earned over a certain period, and the capital used in that period to generate income.
2.5: The money available to the business for the purchase of goods and services with a view to generating an income for the business.
2.6: The economic resources that an enterprise owns
2.7: Expenses that must be paid whether the business is trading or not.
2.8: The company's ability to keep making all its required payments regularly and on time.
2.9: Money used to acquire current assets such as stock or financing debtors.
2.10: Expenditure directly related to the manufacturing or sales processes of a company Question 3:
Question 3: Carefully read each of the following statements and state whether they are true (T) or false (F):
No Statement
3.1: The amount of an expense account is decreased by entries on the debit side.
3.2: The amount of an income account is increased by entries on the debit side.
3.3: An enforceable claim against others, such as account receivable is classified as an asset.
3.4: The acid test measures the ability of an organisation to meet its current liabilities without the most non-liquid item of current assets.
3.5: Solvency ratios investigate the effectiveness of employment of assets to realise sales
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Question 4: Classify (√) the following accounts as asset, liability, income or expense accounts:
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ACCOUNT
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ASSET
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LIABILITY
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INCOME
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EXPENSE
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Sales
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Loan from bank
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Telephone
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Rental paid
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Discounts given
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Stationary in store
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Postage
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Equipment
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Question 5: Choose the concept (a-f) that match the statements (5.1-5.6):
a. Fixed asset register b. Journals
c. Income statements
d. Cash flow statements e. Ledgers
f. Balance sheets
5.1: Diaries of the day-to-day transactions of the business.
5.2: Summarise and categorise the information entered into journals.
5.3: Reflect the profit/loss made by company for a specific period.
5.4: Examples of ledgers.
5.5: Project the flow of money in a business for specified future period.
5.6: Snapshots of businesses at close of business on a specified day.
Question 6: Compile a pre-adjustment trail balance for Catherine's Cake Emporium.
The following balances appear in her general ledger on 31 July:
Bank (favourable) R 3 000
Capital R 20 000
Salaries R 8 000
Vehicles R 35 000
Creditors R 32 000
Debtors R 3 000
Sales R 7 000