‘eres, 7-49. PM ‘ACCA TOFINALEXAMS2124 ACCA110FINALEXAMS2124 —__ tetatpoints 2» The respondent's email ([email protected]) was recorded on submission of this form. One of the sources of long-term financing is the issuance of Common *1/1 stocks. The advantages (to the issuer) of Issuing Common stocks are as follows, except a the sale of common stocks increases Credit worthiness of the firm by providing more equity. b. common stock cash dividends are not tax deductible as expense v c.common stock is frequently more attractive to investors than . debt because it grows in value with the success of the firm, Oo O0O@ 0 d. common stock dividends are not fixed _ they are paid from _ Profits when available. KM To acquire additional capital, while attempting to maximize earnings per *1/1 share, a company should normally a, select debt over equity initially v b. select equity over debt initially, ¢. issue both bonds and stocks in equal proportion. OOO © d. discontinue paying dividends and use current cash flows to raise capital funds. ntips:fdocs.google-convormside/1FAlpAl SdcBF évaa3KHTqsPOTayNEKP)POSryK/3uCvAiUSADBV-FSIQviewscore?ve=08c=08W= 18-08. 1/24‘eres, 7-49. PM ACCATOFINALEXAMS2124 Y Company A grants credit terms of 30 days to Company B. The operating *1/1 cycle of Company B is 20 days. in this case, Company A © ais, in effect, financing more than Company's inventory needs. v © bis, in effect, financing less than Company B's inventory needs. G © &Wilhave a lower level of accounts recelvable than those companies granting shorter credit terms. © disan be sure that Company B wil be able to conver its inventories into cash before payment is due. X Ifa firm's degree of operating leverage is higher than the industry average, *0/1 such firm © a.is more profitable. CO baisless risky © c.has profits that are more sensitive to changes iN Sales Volume. x © 4-has higher sales. Correct answer © a.is more profitable. ntips:ifdocs.google-convormside/FAlpAl SdcBF évea3KHTqsPOTayNEKP)POSryK/3uCvAiUSADBV'-FSIQiewscore?ve=08e=08W= 18-08... 2/24‘eres, 7-49. PM ACCATOFINALEXAMS2124 The following data are taken from the records of Apple Corporation for *2/2 the year ended December 31, 2008: Net credit sales P576,000 Average materials inventory 8,000 Average finished goods inventory 12,000 Average accounts receivable 80,000 Average accounts payable 5,000 Net credit purchases 120,000 Raw materials used 96,000 Gross profit rate 25% What is the average number of days in the company's operating Cash conversion cycle? (Use a 360-day year) O a.50 days O .105 days @ b.75days v O 4.45 days ntips:fdocs.google-convormside/FAlpAl SdcBF évaa3KHTqsPOTayNEKP)POSryKy3uCvAiUSADBV'-FSIQIiewscore?ve=08c=08W= 18-08. 3/24‘eres, 7-49. PM ACCATOFINALEXAMS2124 Which of the following statements is incorrect? * Ww © 2 Anincrease inthe corporate income tax rate might encourage a fim to increase the amount af debt, in its Capital structure. © b.Anincrease in economic uncertainty encourages equity financing. © ¢ In general, debt financing is more expensive than equity financing. v © 4: When caleuiating the cost of capita the cost assigned to retained earnings should be lower than the cost of external common equity Emil Traders, Inc. sells cell phone cases which it buys from a local “22 manufacturer. Emil Traders sells 24,000 cases evenly throughout the year. The cost of carrying one unit in inventory for one year is P11.52 and the order cost per order is P38.40. If Emil Traders would buy in economic order quantities, the total order costs is O a.276,480.. © .P 23,040. @ B8.P 2304 v O 4.P138,240 ntips:fdocs.google-convormside/FAlpAl SdcBF évea3KHTqsPOTayNEKP)POSryK/3uCvAiUSADBV-FSIQIiewscore?ve=08c=08W= 18-8. 4/24‘eres, 7-49. PM ACCATOFINALEXAMS2124 X__ Ayie Corporation is considering a project for the coming year that will *0/2 require an investment cost of P100M. the ‘company plans to finance the project by a combination of debt and equity, as follows. » Issue P20M of 10-year bonds at a price of 102, with an interest rate of 10%, and flotation cost of 3% of par. » Use P80M of funds generated from earnings retained in the business. The expected market rate of return is 14%. The current rate of Treasury Bills is 8%. The beta coefficient for Ayie Corporation i 1.2. The corporate income tax rate is 30%. What is the effective rate of interest of the bonds? O ar0% ©@ .10.20% x © b.9.89% O 4.10.10% Correct answer @ 4.10.10% Belle Company's average monthly cash receipts is P1,500,000. 2/2 Its average collection period is ten (10) days. A collection agency has Offered to be the company's collector and shorten collection period to four (4) days for a monthly fee of P1,500, The company can invest its excess funds in money market placement at a rate of 8%. If the collection agency's offer is accepted, Belle Company's net annual benefit (loss) is @ a.P6,000. v © b.P270,000. O .(P6,000). O 4d, P500. ntips:fdocs.google-convormside/FAlpAl SdcBF évaa3KHTqsPOTayNEKP)POSryK/3NCvAiUSADBV-FSIQviewscore?ve=08c=08W= 18-08. 5/21‘eres, 7-49. PM ACCATOFINALEXAMS2124 Ben Corporation uses the Baumol Cash Management Model to determine *2/2 its optimal cash balance. For the coming year, the expected cash disbursements total P432,000. The interest rate on marketable securities is 5% per annum. The fixed. cost of selling marketable securities is P8 per transaction. Using the Baumol Cash Management Model, the company's optimal cash balance is . aP11,757.55. v c. P142,000.00. b. P 5,878.78. O00 ® d.P 1,175.76. KM The EOQ model is a deterministic model that calculates the ideal order *1/1 quantity (or production lot) given specified periodic demand, tne cost per order or production run, and the periodic carrying cost per unit. The EOQ model © 2 Minimizes the sum of inventory carrying costs and either ordering or v production setup costs. © b. minimizes the sum of ordering costs and production setup costs. © c, minimizes the sum of carrying costs and handling costs. CO 4. minimizes the level of average inventory in units. ’ ntips:ifdocs.google-convormside/FAlpAl SdcBF évaa3KHTqsPOTayNEKP)POSryK/3NCvAiUSADBV-FSIQviewscore?ve=08c=08W=18fF=OBvi. 6/21‘eres, 7-49. PM ACCATOFINALEXAMS2124 The basic EOQ model equals the square root of the (1) product of twice *2/2 the demand times the cost per order, (2) divided by the periodic carrying cost per unit. If the annual demand increases by 44%, the E0Q will increase (decrease) by O a663%. O c.9.38%, @ b.20%. v O ai X_ The Economic Order Quantity (E0Q) model can be used to establish “on inventory policy. In the case of a manufacturer, the E0Q is called the Economic Lot Size (ELS) or Economic Production Quantity (EPQ). Which of the following statements about the ELS is incorrect? @ % The objective ofthe ELS models to minimize the sum of inventory carrying xX costs and the costs of production runs or setup costs. © b. Inthe ELS model, the production rate is deemed to be instantaneous. - CO S:inthe ELS model the demand is assumed to occur at a Constant rate over some period of time, OS: TheELS model is used to maximize contribution margin or minimize costs given resource constraints. * Correct answer @ 1 The ELS model is used to maximize contribution margin or minimize costs given resource constraints. * ntips:ifdocs.google-convormside/FAlpAl SdcBF évaa3KHTqsPOTayNEKP)POSryK/3uCvAiUSADBV'-FSIQiewscore?ve=08c=08W=18fF=0Bvi... 7/24‘eres, 7-49. PM ACCATOFINALEXAMS2124 Which of the following 1s not an element in the EQ formula? * WW © a yearly demand ©@ c safety stock. v © b. Variable Cost per order CO 4 periodic carrying cost per UNIT Ben Corporation uses the Baumol Cash Management Model to determine *2/2 its optimal cash balance. For the coming year, the expected cash disbursements total P432,000. The interest rate on marketable securities, is 5% per annum. The fixed. cost of selling marketable securities is P8 per transaction. Using the Baumol Cash Management Model, the average cash. balance is © aP11,757.55, © ¢.P142,000.00. @ »b.P5878,78. v © 4? 1,175.76. Y Which Of the following statements is true? * Ww CO Short-term debt is usually more expensive than long-term debt. © P-biauid assets do not ordinary earn higher retums relative to longterm assets, 0 holding the former will maximize the . return on total assets. © “%Aconservative working capital policy is characterized by higher current ratio and acic-test ratio. Ot Determining the appropriate level of working capital fora firm requires changing the firm's capital structure and dividend policy ntips:ifdocs.google.convormside/FAlpAl SdcBF évaa3KHTqsPOTayNEKP)POSryK/3NCvAiUSADBV-FSIQiewscore?ve=08c=08W=18fF=Bvi.. 8/24