FINANCIAL MANAGEMENT AND DECISION MAKING

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BSc(HONS) BUSINESS MANAGEMENT
SEMESTER 1, EXAMINATION 2022/2023
FINANCIAL MANAGEMENT AND DECISION
MAKING
MODULE NO: BMP5006
Exam Paper Release Date & Time: Saturday 06 May 2023 at 10:00am
Submission Cut-off Date & Time: Sunday 07 May 2023 at 10:00am
—————————————————————————————————————
INSTRUCTIONS TO CANDIDATES: There are Five questions on this
paper.
Answer all questions.
You must submit your MS Words
electronic answer booklet via
Turnitin.
(Discount tables are attached at the back of this question paper)
Page 2 of 8
BSc (Hons) Business
Semester 1 Examination 2022-2023 Financial Management and Decision
Making Module No. BMP5006
Question 1
Davidsons Incorporated is using Payback Period and Net Present Value
(NPV) methods for investment decision making for small projects. The
cut-off period will remain at 3 years.
The net after tax cash flows of the projects are as follows:
Required:
a) Calculate the NPV of each project at 10% discount rate. Given
the above four projects’ cash flows and using a 10% discount rate,
which projects that would have been accepted under Payback
Period will now be rejected under Net Present Value?
(14 marks)
b) Explain the uses, limitations, and merits of the Payback Period
compared to Net Present Value in investment appraisal.
(6 marks)

Cash Flows Project 1 Project 2 Project 3 Project 4
Initial Cost £10,000 £15,000 £8,000 £18,000
Year 1 £4,000 £7,000 £3,000 £10,000
Year 2 £4,000 £5,500 £3,500 £11,000
Year 3 £4,000 £4,000 £4,000 £0

 

(Total 20 Marks)

Page 3 of 8
BSc (Hons) Business
Semester 1 Examination 2022-2023 Financial Management and Decision
Making Module No. BMP5006
Question 2
As per the latest annual report, the following information is made available from the
financial statements of ABC Inc. for the year 2019.

Particulars Amount (in millions)
Sales £260,174
COGS £161,782
EBIT £63,930
EBITDA £76,477
Interest Expense £3,576
Net Income £55,256
Total Debt £108,047
Total Assets £338,516
Net Fixed Assets £37,378
Total Equity £90,488
Current Assets £162,819
Current Liabilities £105,718
Cash & Cash Equivalents £48,844
Accounts Receivables £22,926
Inventories £4,106
Accounts Payable £46,236

Page 4 of 8
BSc (Hons) Business
Semester 1 Examination 2022-2023 Financial Management and Decision
Making Module No. BMP5006
Required:
(a) You are required to calculate the following ratios:
Current Ratio
Quick Ratio
Cash Ratio
Debt to Equity Ratio
Debt Ratio
Receivables Turnover Ratio
Inventory Turnover Ratio
Gross Margin
Operating Profit Margin
Net Margin
(10 marks)
b) After calculating all 10 ratios, explain how the above results can aid ABC Inc’s
decision making process.
(10 marks)
(Total Marks 20)
Page 5 of 8
BSc (Hons) Business
Semester 1 Examination 2022-2023 Financial Management and Decision
Making Module No. BMP5006
Question 3
Owen plc manufactures one product, and the entire product is sold as soon as it is
produced. The company operates a standard costing system and analysis of
variances is made every month. The standard cost card for a product is as follows.

£ per Unit
Materials (4 Kg at £4.50 per Kg) 18
Labour (5 Hours at £5 per hr) 25
Variable overheads (5 hrs at £2 per hr) 10
Fixed overheads (5 hrs at £3 per hr) 15
£68
Budgeted selling price is £75 per unit
Budgeted production 8.700 units
Budgeted sales 8,000 units
There is no opening inventory
The actual results are as follows:
Sales: 8,400 units for £613,200
Production: 8,900 units
Actual costs:
Materials (35,464 kg): £163,455
Labour: £ 224,515
Variable overheads: £ 87,348
Fixed overheads: £ 134,074

Required:
a) Prepare a flexed budget and calculate the total variances (Total 8 marks)
b) Using the data, analyse each of the cost variances: Materials; Labour;
Variable Overheads and; Fixed Overheads (Total 8 marks)

c) Using data, calculate the Sales price variance and the Sales volume variance
(Total 4 marks)

Page 6 of 8
BSc (Hons) Business
Semester 1 Examination 2022-2023 Financial Management and Decision
Making Module No. BMP5006
Question 4
Hamza Limited produces and sells two products.
Product A sells for £14 per unit and has a total variable cost of £9.90, while Product B
sells for £19 per unit and has a total variable cost of £13.20.
For every 4 units of Product A sold, three of product B are sold. Hamza Limited fixed
costs are £141,850. Budgeted sales revenue is £448,500.
Required:
a) Calculate the Break-Even points in Units.
b) Calculate the Margin of Safety in Units.
b) Evaluate the relevance of Break-Even Analysis in
decision making process.
(5 Marks)
(5 Marks)
(10 Marks)
(Total Marks 20)
Question 5
a) Evaluate at least 4 various types of budgets used in a large organisation.
(10 Marks)
b) Discuss advantages and disadvantages of an annual budget?
(10 Marks)
(Total Marks 20)
END OF QUESTION PAPER
Page 7 of 8
BSc (Hons) Business
Semester 1 Examination 2022-2023 Financial Management and Decision
Making Module No. BMP5006
Present Value Table
Present value of 1 i.e. (1 + r)-n
Where r = discount rate and n = number of periods until payment
Discount rate (r)

Period
s
(n)		 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 0.99
0		 0.98
0		 0.97
1		 0.96
2		 0.95
2		 0.94
3		 0.93
5		 0.92
6		 0.91
7		 0.90
9
2 0.98
0		 0.96
1		 0.94
3		 0.92
5		 0.90
7		 0.89
0		 0.87
3		 0.85
7		 0.84
2		 0.82
6
3 0.97
1		 0.94
2		 0.91
5		 0.88
9		 0.86
4		 0.84
0		 0.81
6		 0.79
4		 0.77
2		 0.75
1
4 0.96
1		 0.92
4		 0.88
8		 0.85
5		 0.82
3		 0.79
2		 0.76
3		 0.73
5		 0.70
8		 0.68
3
5 0.95
1		 0.90
6		 0.86
3		 0.82
2		 0.78
4		 0.74
7		 0.71
3		 0.68
1		 0.65
0		 0.62
1
6 0.94
2		 0.88
8		 0.83
7		 0.79
0		 0.74
6		 0.70
5		 0.66
6		 0.63
0		 0.59
6		 0.56
4
7 0.93
3		 0.87
1		 0.81
3		 0.76
0		 0.71
1		 0.66
5		 0.62
3		 0.58
3		 0.54
7		 0.51
3
8 0.92
3		 0.85
3		 0.78
9		 0.73
1		 0.67
7		 0.62
7		 0.58
2		 0.54
0		 0.50
2		 0.46
7
9 0.91
4		 0.83
7		 0.76
6		 0.70
3		 0.64
5		 0.59
2		 0.54
4		 0.50
0		 0.46
0		 0.42
4
10 0.90
5		 0.82
0		 0.74
4		 0.67
6		 0.61
4		 0.55
8		 0.50
8		 0.46
3		 0.42
2		 0.38
6
11 0.89
6		 0.80
4		 0.72
2		 0.65
0		 0.58
5		 0.52
7		 0.47
5		 0.42
9		 0.38
8		 0.35
0
12 0.88
7		 0.78
8		 0.70
1		 0.62
5		 0.55
7		 0.49
7		 0.44
4		 0.39
7		 0.35
6		 0.31
9
13 0.87
9		 0.77
3		 0.68
1		 0.60
1		 0.53
0		 0.46
9		 0.41
5		 0.36
8		 0.32
6		 0.29
0
14 0.87
0		 0.75
8		 0.66
1		 0.57
7		 0.50
5		 0.44
2		 0.38
8		 0.34
0		 0.29
9		 0.26
3
15 0.86
1		 0.74
3		 0.64
2		 0.55
5		 0.48
1		 0.41
7		 0.36
2		 0.31
5		 0.27
5		 0.23
9

Page 8 of 8
BSc (Hons) Business
Semester 1 Examination 2022-2023 Financial Management and Decision
Making Module No. BMP5006

(n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
1 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833
2 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694
3 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579
4 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482
5 0.594 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402
6 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335
7 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279
8 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233
9 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194
10 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162
11 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135
12 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112
13 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093
14 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078
15 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065