PROJECT

Bachelor of Business Administration Honours

PROGRAMME Postgraduate Diploma in Business Management

Postgraduate Diploma in Family Business Management

MODULE Accounting and Financial Management

YEAR One (1)

INTAKE July 2024

TOTAL MARKS 100 marks

Answer ALL questions. [100 MARKS]
QUESTION 1 (20 Marks)
REQUIRED
Study the Statement of Comprehensive Income of Asterix Limited for the three-year period provided below
and then answer the following questions:
1.1 Explain the change that possibly took place in the financing activities over the three-year
period. (2 marks)
1.2 Calculate the other operating expenses for 2022. (2 marks)
1.3 Calculate the expected cost of sales for 2025 if the budgeted sales are R5 000 000 and
the gross margin percent for 2024 is maintained. (4 marks)
1.4 Comment on the cost of sales over the three-year period. (4 marks)
1.5 Comment on the trends that you observe regarding personnel expense and rent
expense. (4 marks)
1.6 Provide an interpretation of the operating profit over the three-year period. (4 marks)

INFORMATION
The Statement of Comprehensive Income of Asterix Limited for three years are provided below:
ASTERIX LIMITED
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER:
2024 2023 2022
R R R
Sales 4 000 000 3 100 000 2 400 000
Cost of sales (1 960 000) (1 457 000) (1 080 000)
Gross profit 2 040 000 1 643 000 1 320 000
Operating expenses (1 630 200) (1 259 200) ?
Personnel 683 000 518 700 382 200
Marketing 147 700 120 900 93 600
Administration 362 700 273 000 214 500
Rent 126 750 109 200 78 000
Other operating expenses 310 050 237 400 ?
Operating profit 409 800 383 800 368 500
Interest expense (96 000) (108 000) (120 000)
Profit before tax 313 800 275 800 248 500
Company tax (84 726) (74 466) (69 580)
Profit after tax 229 074 201 334 178 920
QUESTION 2 (20 Marks)
REQUIRED
Use the information provided below to answer the following questions (with ratios expressed to two decimal
places). Use only the formulas provided in the formula sheet that appear after Question 5.
2.1 Will the company be able to settle its short-term obligations with its short-term assets?
Motivate your answer with the use of a ratio. (3 marks)
2.2 The directors are considering financing the expansion of the company by taking out a
long-term loan. With the use of TWO (2) relevant ratios advise whether this would be
appropriate for the company. (6 marks)
2.3 Comment on the dividend payout rate of the company. (2 marks)
2.4 Calculate the cost (as a percentage) to Kiara Limited of not accepting discounts from
creditors in settlement of accounts. (3 marks)
2.5 As a shareholder would you be satisfied with the profitability of the company? Motivate
your answer with the relevant ratio. (3 marks)
2.6 Is the company’s debt payment period appropriate? Justify your answer by using an
appropriate ratio. (3 marks)

INFORMATION
The condensed information given below was obtained from the books of Kiara Limited:
KIARA LIMITED
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2024
R
Sales 4 200 000
Cost of sales (2 652 000)
Gross profit 1 548 000
Operating expenses (798 000)
Operating profit 750 000
Interest income 60 000
Interest expense (135 000)
Profit before tax 675 000
Company tax (182 250)
Profit after tax 492 750
KIARA LIMITED
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER:
2024 2023
R R
ASSETS
Property, plant and equipment (cost) 2 490 000 1 620 000
Accumulated depreciation (630 000) (480 000)
Long-term investments 660 000 450 000
Inventory 1 050 000 1 290 000
Accounts receivable 1 230 000 900 000
Company tax paid in advance 30 000 0
Bank 750 000 660 000
5 580 000 4 440 000

EQUITY AND LIABILITIES

Ordinary share capital 2 700 000 2 000 000
Retained income 1 500 000 1 158 000
Long-term loan from Kip Bank (15%) 900 000 1 000 000
Accounts payable 480 000 228 000
Company tax payable 0 54 000
5 580 000 4 440 000

ADDITIONAL INFORMATION
■ All purchases and sales are on credit.
■ Interim dividends paid during the year amounted to R150 750.
■ Credit terms of 3/10 net 60 days are granted by creditors.
 QUESTION 3 (20 Marks)
Note: The expanded contribution margin model MUST be used to answer all the questions.
3.1
REQUIRED
Use the information provided below to answer the following questions:
3.1.1 Calculate the total revenues at break-even (without using the contribution margin ratio)
if the sales manager’s proposal is rejected. (4 marks)
If the sales manager’s proposal is accepted, calculate the following:
3.1.2 The additional expenditure that the company can afford on advertising (4 marks)
3.1.3 The break-even quantity (4 marks)
3.1.4 The selling price per unit that will enable the company to break-even. (4 marks)
INFORMATION
Yippy Limited manufactures a product that sells for R180 each. The company presently produces and sells
90 000 units per year. The unit variable manufacturing costs and selling costs are R90 and R18 respectively.
Fixed costs are R4 536 000 for manufacturing overheads and R1 944 000 for selling and administrative
activities.

The sales manager has proposed that the selling price be increased to R216 per unit. To maintain the present
sales volume, advertising must be increased. The company’s profit objective is an operating margin of 10%.

3.2
REQUIRED
Suppose Boardmans Limited wants to earn an operating profit of R1 800 000 from the battery
sales. How much can it afford to spend on the total variable costs if the production and sales
are 20 000 units? (4 marks)
INFORMATION
Following substantial research, Boardmans Limited is confident that it can make and sell a new battery with
a prolonged life for mobile phones. The management anticipates the market demand for the new battery to
be 20 000 units per year if the battery is priced at R300 per unit. The fixed costs of producing between 19 000
and 25 000 units is estimated to be R900 000.
QUESTION 4 (20 Marks)

REQUIRED
Use the information provided below to answer the following questions:
4.1 Calculate the weighted average cost of capital (expressed to two decimal places). Your
answer must include the calculations of the cost of equity, preference shares and the
loan. (16 marks)
4.2 Calculate the cost of equity using the Capital Asset Pricing Model (expressed to two
decimal places). (4 marks)

INFORMATION
Cadmore Limited intends raising finance for a proposed new project. The financial manager has provided the
following information to determine the present cost of capital to the company:
The capital structure consists of the following:
■ 3 million ordinary shares issued at R1.50 each but currently trading at R2 each.
■ 1 200 000 12%, R2 preference shares with a market value of R2.50 per share.
■ R1 000 000 18% Bank loan, due in March 2027.

Additional information
■ The company’s beta coefficient is 1.3.
■ The risk-free rate is 8%.
■ The return on the market is 18%.
■ The Gordon Growth Model is used to determine the cost of equity.
■ A dividend growth of 10% per annum on ordinary shares was maintained over the past five years. The
latest dividend paid was 60 cents per share.
■ Assume that the company tax rate is 27%.
QUESTION 5 (20 Marks)

REQUIRED
Study the information given below and answer the following questions. Where discount factors are required
use only the four decimals present value tables that appear after the formula sheet or in the module guide.
Ignore taxes.
5.1 Calculate the Accounting Rate of Return on average investment of the second alternative
(expressed to two decimal places). (5 marks)
5.2 Determine which of the two investment opportunities the company should choose by
calculating the Net Present Value of each alternative. Your answer must include the
calculation of the present values and NPV. (9 marks)
5.3 Calculate the Internal Rate of Return of the first alternative (expressed to two decimal
places). Your answer must include two net present value calculations (using consecutive
rates/percentages) and interpolation. (6 marks)

INFORMATION
The management of Bentall Incorporated is considering two investment opportunities:
The first alternative involves the purchase of a new machine for R900 000 which will enable the company to
modernise its production facility. The machine is expected to have a useful life of five years and a salvage
value of R40 000. Net cash flows of R230 000 per year are anticipated.

The second alternative involves purchasing a truck. Purchasing another truck will enable the company to
expand its delivery area and increase revenue. The truck costs R900 000. Its useful life is estimated to be
five years and a salvage value of R100 000 is anticipated. The truck is expected to generate revenues of
R600 000 per year. The driver’s salary and other cash operating expenses are forecast at R350 000 per year.

Bentall Incorporated desires a rate of return of 14%. The straight-line method of depreciation is used.

TOTAL: 100 MARKS

 FORMULA SHEET

Gross profit X 100 Profit after tax X 100

Sales 1 No. of ordinary shares issued 1

Operating profit X 100 Dividends for the year X 100

Sales 1 No. of ordinary shares issued 1

Profit after tax X 100 Retained earnings for the year X 100
Sales 1 Profit due to ordinary shareholders 1

Cost of sales Earnings per share – Dividend per share X 100

Average inventory Earnings per share 1

Accounts receivable X 365 Market price per share

Credit sales 1 Earnings per share

Accounts payable X 365 Current assets

Credit purchases 1 Current liabilities

Sales Current assets – Inventory

Net assets Current liabilities

Operating profit X 100 Total debt X 100

Total assets 1 Total assets 1

Operating profit X 100 Non-current debt X 100

Capital employed 1 Equity 1

Profit after tax X 100 Operating profit

Equity 1 Interest expense
 APPENDIX 1: Present value of R1

Number
of 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 25%
Periods
1 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8696 0.8621 0.8547 0.8475 0.8403 0.8333 0.8000
2 0.9803 0.9612 0.9426 0.9246 0.9070 0.8900 0.8734 0.8573 0.8417 0.8264 0.8116 0.7972 0.7831 0.7695 0.7561 0.7432 0.7305 0.7182 0.7062 0.6944 0.6400
3 0.9706 0.9423 0.9151 0.8890 0.8638 0.8396 0.8163 0.7938 0.7722 0.7513 0.7312 0.7118 0.6931 0.6750 0.6575 0.6407 0.6244 0.6086 0.5934 0.5787 0.5120
4 0.9610 0.9238 0.8885 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 0.6587 0.6355 0.6133 0.5921 0.5718 0.5523 0.5337 0.5158 0.4987 0.4823 0.4096
5 0.9515 0.9057 0.8626 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209 0.5935 0.5674 0.5428 0.5194 0.4972 0.4761 0.4561 0.4371 0.4190 0.4019 0.3277

6 0.9420 0.8880 0.8375 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5346 0.5066 0.4803 0.4556 0.4323 0.4104 0.3898 0.3704 0.3521 0.3349 0.2621
7 0.9327 0.8706 0.8131 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132 0.4817 0.4523 0.4251 0.3996 0.3759 0.3538 0.3332 0.3139 0.2959 0.2791 0.2097
8 0.9235 0.8535 0.7894 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.4339 0.4039 0.3762 0.3506 0.3269 0.3050 0.2848 0.2660 0.2487 0.2326 0.1678
9 0.9143 0.8368 0.7664 0.7026 0.6446 0.5919 0.5439 0.5002 0.4604 0.4241 0.3909 0.3606 0.3329 0.3075 0.2843 0.2630 0.2434 0.2255 0.2090 0.1938 0.1342
10 0.9053 0.8203 0.7441 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.3522 0.3220 0.2946 0.2697 0.2472 0.2267 0.2080 0.1911 0.1756 0.1615 0.1074

11 0.8963 0.8043 0.7224 0.6496 0.5847 0.5268 0.4751 0.4289 0.3875 0.3505 0.3173 0.2875 0.2607 0.2366 0.2149 0.1954 0.1778 0.1619 0.1476 0.1346 0.0859
12 0.8874 0.7885 0.7014 0.6246 0.5568 0.4970 0.4440 0.3971 0.3555 0.3186 0.2858 0.2567 0.2307 0.2076 0.1869 0.1685 0.1520 0.1372 0.1240 0.1122 0.0687
13 0.8787 0.7730 0.6810 0.6006 0.5303 0.4688 0.4150 0.3677 0.3262 0.2897 0.2575 0.2292 0.2042 0.1821 0.1625 0.1452 0.1299 0.1163 0.1042 0.0935 0.0550
14 0.8700 0.7579 0.6611 0.5775 0.5051 0.4423 0.3878 0.3405 0.2992 0.2633 0.2320 0.2046 0.1807 0.1597 0.1413 0.1252 0.1110 0.0985 0.0876 0.0779 0.0440
15 0.8613 0.7430 0.6419 0.5553 0.4810 0.4173 0.3624 0.3152 0.2745 0.2394 0.2090 0.1827 0.1599 0.1401 0.1229 0.1079 0.0949 0.0835 0.0736 0.0649 0.0352

16 0.8528 0.7284 0.6232 0.5339 0.4581 0.3936 0.3387 0.2919 0.2519 0.2176 0.1883 0.1631 0.1415 0.1229 0.1069 0.0930 0.0811 0.0708 0.0618 0.0541 0.0281
17 0.8444 0.7142 0.6050 0.5134 0.4363 0.3714 0.3166 0.2703 0.2311 0.1978 0.1696 0.1456 0.1252 0.1078 0.0929 0.0802 0.0693 0.0600 0.0520 0.0451 0.0225
18 0.8360 0.7002 0.5874 0.4936 0.4155 0.3503 0.2959 0.2502 0.2120 0.1799 0.1528 0.1300 0.1108 0.0946 0.0808 0.0691 0.0592 0.0508 0.0437 0.0376 0.0180
19 0.8277 0.6864 0.5703 0.4746 0.3957 0.3305 0.2765 0.2317 0.1945 0.1635 0.1377 0.1161 0.0981 0.0829 0.0703 0.0596 0.0506 0.0431 0.0367 0.0313 0.0144
20 0.8195 0.6730 0.5537 0.4564 0.3769 0.3118 0.2584 0.2145 0.1784 0.1486 0.1240 0.1037 0.0868 0.0728 0.0611 0.0514 0.0433 0.0365 0.0308 0.0261 0.0115

25 0.7798 0.6095 0.4776 0.3751 0.2953 0.2330 0.1842 0.1460 0.1160 0.0923 0.0736 0.0588 0.0471 0.0378 0.0304 0.0245 0.0197 0.0160 0.0129 0.0105 0.0038
30 0.7419 0.5521 0.4120 0.3083 0.2314 0.1741 0.1314 0.0994 0.0754 0.0573 0.0437 0.0334 0.0256 0.0196 0.0151 0.0116 0.0090 0.0070 0.0054 0.0042 0.0012
40 0.6717 0.4529 0.3066 0.2083 0.1420 0.0972 0.0668 0.0460 0.0318 0.0221 0.0154 0.0107 0.0075 0.0053 0.0037 0.0026 0.0019 0.0013 0.0010 0.0007 0.0001
50 0.6080 0.3715 0.2281 0.1407 0.0872 0.0543 0.0339 0.0213 0.0134 0.0085 0.0054 0.0035 0.0022 0.0014 0.0009 0.0006 0.0004 0.0003 0.0002 0.0001 *
60 0.5504 0.3048 0.1697 0.0951 0.0535 0.0303 0.0173 0.0099 0.0057 0.0033 0.0019 0.0011 0.0007 0.0004 0.0002 0.0001 0.0001 * * * *
 APPENDIX 2: Present value of a regular annuity of R1 per period for n periods

Number
of 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
Periods
1 0.9901 0.9804 0.9709 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8696 0.8621 0.8547 0.8475 0.8403 0.8333
2 1.9704 1.9416 1.9135 1.8861 1.8594 1.8334 1.8080 1.7833 1.7591 1.7355 1.7125 1.6901 1.6681 1.6467 1.6257 1.6052 1.5852 1.5656 1.5465 1.5278
3 2.9410 2.8839 2.8286 2.7751 2.7232 2.6730 2.6243 2.5771 2.5313 2.4869 2.4437 2.4018 2.3612 2.3216 2.2832 2.2459 2.2096 2.1743 2.1399 2.1065
4 3.9020 3.8077 3.7171 3.6299 3.5460 3.4651 3.3872 3.3121 3.2397 3.1699 3.1024 3.0373 2.9745 2.9137 2.8550 2.7982 2.7432 2.6901 2.6386 2.5887
5 4.8534 4.7135 4.5797 4.4518 4.3295 4.2124 4.1002 3.9927 3.8897 3.7908 3.6959 3.6048 3.5172 3.4331 3.3522 3.2743 3.1993 3.1272 3.0576 2.9906

6 5.7955 5.6014 5.4172 5.2421 5.0757 4.9173 4.7665 4.6229 4.4859 4.3553 4.2305 4.1114 3.9975 3.8887 3.7845 3.6847 3.5892 3.4976 3.4098 3.3255
7 6.7282 6.4720 6.2303 6.0021 5.7864 5.5824 5.3893 5.2064 5.0330 4.8684 4.7122 4.5638 4.4226 4.2883 4.1604 4.0386 3.9224 3.8115 3.7057 3.6046
8 7.6517 7.3255 7.0197 6.7327 6.4632 6.2098 5.9713 5.7466 5.5348 5.3349 5.1461 4.9676 4.7988 4.6389 4.4873 4.3436 4.2072 4.0776 3.9544 3.8372
9 8.5660 8.1622 7.7861 7.4353 7.1078 6.8017 6.5152 6.2469 5.9952 5.7590 5.5370 5.3282 5.1317 4.9464 4.7716 4.6065 4.4506 4.3038 4.1633 4.0310
10 9.4713 8.9826 8.5302 8.1109 7.7217 7.3601 7.0236 6.7101 6.4177 6.1446 5.8892 5.6502 5.4262 5.2161 5.0188 4.8332 4.6586 4.4941 4.3389 4.1925

11 10.3676 9.7868 9.2526 8.7605 8.3064 7.8869 7.4987 7.1390 6.8052 6.4951 6.2065 5.9377 5.6869 5.4527 5.2337 5.0286 4.8364 4.6560 4.4865 4.3271
12 11.2551 10.5753 9.9540 9.3851 8.8633 8.3838 7.9427 7.5361 7.1607 6.8137 6.4924 6.1944 5.9176 5.6603 5.4206 5.1971 4.9884 4.7932 4.6105 4.4392
13 12.1337 11.3484 10.6350 9.9856 9.3936 8.8527 8.3577 7.9038 7.4869 7.1034 6.7499 6.4235 6.1218 5.8424 5.5831 5.3423 5.1183 4.9095 4.7147 4.5327
14 13.0037 12.1062 11.2961 10.5631 9.8986 9.2950 8.7455 8.2442 7.7862 7.3667 6.9819 6.6282 6.3025 6.0021 5.7245 5.4675 5.2293 5.0081 4.8023 4.6106
15 13.8651 12.8493 11.9379 11.1184 10.3797 9.7122 9.1079 8.5595 8.0607 7.6061 7.1909 6.8109 6.4624 6.1422 5.8474 5.5755 5.3242 5.0916 4.8759 4.6755

16 14.7179 13.5777 12.5611 11.6523 10.8378 10.1059 9.4466 8.8514 8.3126 7.8237 7.3792 6.9740 6.6039 6.2651 5.9542 5.6685 5.4053 5.1624 4.9377 4.7296
17 15.5623 14.2919 13.1661 12.1657 11.2741 10.4773 9.7632 9.1216 8.5436 8.0216 7.5488 7.1196 6.7291 6.3729 6.0472 5.7487 5.4746 5.2223 4.9897 4.7746
18 16.3983 14.9920 13.7535 12.6593 11.6896 10.8276 10.0591 9.3719 8.7556 8.2014 7.7016 7.2497 6.8399 6.4674 6.1280 5.8178 5.5339 5.2732 5.0333 4.8122
19 17.2260 15.6785 14.3238 13.1339 12.0853 11.1581 10.3356 9.6036 8.9501 8.3649 7.8393 7.3658 6.9380 6.5504 6.1982 5.8775 5.5845 5.3162 5.0700 4.8435
20 18.0456 16.3514 14.8775 13.5903 12.4622 11.4699 10.5940 9.8181 9.1285 8.5136 7.9633 7.4694 7.0248 6.6231 6.2593 5.9288 5.6278 5.3527 5.1009 4.8696

25 22.0232 19.5235 17.4131 15.6221 14.0939 12.7834 11.6536 10.6748 9.8226 9.0770 8.4217 7.8431 7.3300 6.8729 6.4641 6.0971 5.7662 5.4669 5.1951 4.9476
30 25.8077 22.3965 19.6004 17.2920 15.3725 13.7648 12.4090 11.2578 10.2737 9.4269 8.6938 8.0552 7.4957 7.0027 6.5660 6.1772 5.8294 5.5168 5.2347 4.9789
40 32.8347 27.3555 23.1148 19.7928 17.1591 15.0463 13.3317 11.9246 10.7574 9.7791 8.9511 8.2438 7.6344 7.1050 6.6418 6.2335 5.8713 5.5482 5.2582 4.9966
50 39.1961 31.4236 25.7298 21.4822 18.2559 15.7619 13.8007 12.2335 10.9617 9.9148 9.0417 8.3045 7.6752 7.1327 6.6605 6.2463 5.8801 5.5541 5.2623 4.9995
60 44.9550 34.7609 27.6756 22.6235 18.9293 16.1614 14.0392 12.3766 11.0480 9.9672 9.0736 8.3240 7.6873 7.1401 6.6651 6.2402 5.8819 5.5553 5.2630 4.9999