Calculate the accounting rate of return for each investment

Assignment Help Business Management

Reference no: EM132990049

BMA1A01 Business Management

SECTION A:
Instructions: Show all calculations and interpret your answers where necessary by providing the solutions from the income statement and balance sheet provided

1. Current Ratio

2. Quick Ratio

3. Gross Profit Margin

4. Net Profit Margin

5 Dividend per Share and Dividend Yield

6. Inventory Turnover

7. Average Debtors Collection Period (Days)

8. Average Payment Period (Days)

9. Debt Ratio

10. Debt Equity Ratio

11. Interest Cover Ratio

12. Explain the terms "Fixed Costs", "Variable Costs" and "Total Cost"'

13. Explain the term "Financial Management"

SECTION B

INSTRUCTIONS: SHOW ALL CALCULATIONS AND INTERPRET WHERE NECESSARY

QUESTION 1
Read the scenario below and answer questions 1.1 to 1.7 below
Refer to Tables A1 to A4 at the back of chapter 13
Themba is the owners of a juice manufacturing business, he recently attended a short growth strategies training course and one of his modules was financial management. He realised that in order for his business to grow, he must be able to manage his finances correctly. In order for Themba to pass his training, he has to be able to calculate simple business formulas and interpret his solution to ensure efficient and effective management of his business finances.

Themba has the following variable (or direct) costs:
Electricity: R 2 per unit
Ingredients: R 5 per unit
Labour: R 1.90 per unit
Fuel: R 1.10 per unit
Indirect costs include:
Rent: R 10.000 per month
Security: R 5.000 per month
Maintenance: R 3.000 per month

1.1 Calculate Fixed Costs (4)
1.2 Calculate Variable Costs (5)
1.3 Calculate Total Costs if he manufactures 1000 units (3)
1.4 Calculate the break-even in for the following in units and interpret your answer (5)
1.5 Themba wants to invest his money and he wants to earn compound interest on his investment. He wants to invest R100 in a medium-term investment account. Calculate what his investment will be in five years-time if the interest rate is at 5%. (5)

1.6 How much would Themba's investment be worth in ten years? (2)
1.7 Calculate the Future Value of an investment of R100 over a five year period with an interest rate of 10%. (2)

QUESTION 2
Read the scenario below and answer questions 2.1 and 2.2 below

Sanele takes out a student loan for his first year of business management. The loan agreement states that the repayment period is equal to 1.5 years for every year of financial assistance granted that the loan is subject to an interest rate of 10% per annum compounded monthly

2.1 If Sanele pays a monthly instalment of R 1 446.91, calculate the loan amount and substitute the known values and determine P (8)
2.2 Determine how much interest Sanele will have paid on his student loan at the end of 18 months. (5)

QUESTION 3
Read the scenario below and answer question 3.1 to 3.3 below

At the end of four years, Romeo deposits R500 into an investment account. If the interest rate on the account is 10% per annum compounded yearly, determine the value of his investment at the end of 4 years.

3.1 Determine the given information and compound interest formula (3)
3.2 Draw a table indicating the interest payments and accumulated amounts for each of the interest payments and accumulated amounts for each of the four years (5)

QUESTION 4
Read the scenario below and answer question 4.1 and 4.2

Use the table below to calculate your answers to calculate investment A and investment B

	Year 0	Year 1	Year 2	Year 3
Investment A	400 000
		320 000	300 000	250 000
				120 000
Investment B	350 000
		275 000	300 000	275 000
				100 000

Calculate the accounting rate of return for each investment and explain which option is best suited for Themba's needs.

Attachment:- Business Management.rar

Reference no: EM132990049

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