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NATIONAL OPEN UNIVERSITY OF NIGERIA
UNIVERSITY VILLAGE, PLOT 91, CASDASTRAL ZONE, NNAMDI AZIKIWE EXPRESS WAY, JABI, ABUJA.
FACULTY OF MANAGEMENT SCIENCES
APRIL/MAY 2019 EXAMINATION
COURSE CODE: BFN805
CREDIT UNIT: 2
COURSE TITLE: CORPORATE FINANCE
TIME ALLOWED: 2HRS
INSTRUCTIONS:
1. Attempt Question One (1) and any other two (2) questions
2. Question 1 carries 30 marks, while the other questions carry 20 marks each
3. Present all points in coherent and orderly manner
1a. Explain briefly the four (4) sections of an income statement (4 marks)
b. Below are the activities of Ibeme Ltd for the period ended 31st December 2018:
|
ACTIVITY |
|
|
Revenues (Turnover) |
11,000,000 |
|
Cost of Goods sold |
6,500,000 |
|
Depreciation |
300,000 |
|
Selling Expenses |
500,000 |
|
Administrative Expenses |
390,000 |
- Calculate Earnings Before Interest and Taxes (EBIT).
Additional information
|
Interest Expenses |
250,000 |
|
Taxes |
110,000 |
- Prepare a Net Income Statement before Extraordinary Items for the year ended 31st December, 2017.
Additional information
|
ACTIVITY |
|
|
Gains From Discontinued Operations |
500,000 |
|
Extraordinary gains |
370,000 |
|
Net Income Statement After Extraordinary Items |
|
- Prepare a Net Income Statement after Extraordinary Items for the period under consideration.
- If
N300,000 Preferred Dividend has been provided for, then prepare a Statement of Profit to Ordinary Shareholders. (26 marks)
2. Haruna Bassey is running a business which manufactures iron rods which are then sold to builders and building materials dealers. The abridged accounts for 2017 and 2018 are given below:
Haruna Bassey
Income Statement for the year ending 30 September 2017 and 2018
|
|
2017 |
2018 |
||
|
|
|
|
|
|
|
Sales |
|
3,840 |
|
4,360 |
|
Cost of sales |
|
|||
|
Direct material cost |
1,560 |
|
1,840 |
|
|
Direct wages |
1,020 |
|
780 |
|
|
Factory overheads |
220 |
2,800 |
440 |
3,060 |
|
Gross profit |
|
1,040 |
|
1,300 |
|
Expenses |
|
|||
|
Administrative cost |
240 |
|
290 |
|
|
Distribution cost |
160 |
400 |
230 |
520 |
|
Net profit |
|
640 |
|
780 |
|
Inventory of finished goods on 1st October 2016 was |
||||
Haruna Bassey Balance Sheet as at 30 September 2017 and 2018
|
|
2017 |
2018 |
||
|
|
|
|
|
|
|
Non-Current Assets |
|
|||
|
Freehold premises |
800 |
|
800 |
|
|
Plant and machinery |
400 |
|
790 |
|
|
Fixtures and fittings |
240 |
1,440 |
200 |
1,790 |
|
Current Assets |
|
|||
|
Inventory |
400 |
|
500 |
|
|
Trade receivables |
260 |
|
332 |
|
|
Bank balance |
60 |
|
---- |
|
|
Cash in hand |
20 |
|
8 |
|
|
|
740 |
|
840 |
|
|
Current Liabilities |
|
|
|
|
|
Trade payables |
(300) |
|
(320) |
|
|
Bank overdraft |
---- |
440 |
(70) |
450 |
|
|
|
1,880 |
|
2,240 |
|
Equity |
|
|||
|
Capital |
1,800 |
|
1,880 |
|
|
Net profit for the year |
640 |
|
680 |
|
|
Less drawings |
(560) |
1,880 |
(320) |
2,240 |
Required:
Use the following ratios to compare the financial performance from 2017 and 2018 of Haruna Bassey firm.
(i) Quick ratio
(ii) Current ratio
(iii) Inventory turnover (times) or inventory turnover ratio
(iv) Return on capital employed
(v) Gross profit ratio (20 marks)
3a. Discuss any five (5) determinants of the capital structure of a business enterprise. (10 marks)
b. Discuss any five (5) ways in which an organizations can achieve growth. (10 marks)
4a. Explain any four (4) ways a firm can acquire another firm. (8 marks)
b. Discuss three (3) advantages the separation of ownership from management gives the corporation over partnership and sole proprietorship. (6 marks)
c. Discuss briefly the three (3) major key risks associated with cost of capital. (6 marks)
5a. Explain five (5) reasons for issuing Convertible Securities. (10 marks)
b. Discuss the nature of financial market and functions of two (2) segments of the market. (10 marks)
