Topic: Basics of Business Finance and Financial Markets

Search 500 + past questions and counting.

BMF – Nov 2020 – L1 – SB – Q6 – Basics of Business Finance and Financial Markets

Explanation of loan covenants, reasons and benefits for share repurchase, and features of a finance lease arrangement.

Question

(a) For many loan agreements, the borrower is required to provide undertakings or guarantees of some kind.
Distinguish between covenants and guarantees. (5 Marks)

(b) State THREE reasons why a company will repurchase its shares and THREE benefits that will accrue to the company for doing so. (6 Marks)

(c) Companies can acquire assets with finance lease instead of buying assets with equity or debt capital.
State SIX main features of a finance lease arrangement. (9 Marks)

(Total 20 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate finance, Finance lease, Guarantees, Loan Covenants, Share repurchase
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q16 – Basics of Business Finance and Financial Markets

Calculate the present value of N12,000 received in one year at a 5% time preference rate.

Question

Assuming a 5% time preference rate, what is the present value of N12,000 received one year from now?
A. N11,428.80
B. N11,539.90
C. N12,428.80
D. N12,539.90
E. N13,528.80

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Calculations, Present Value, Time Preference Rate
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q15 – Basics of Business Finance and Financial Markets

Identify why banks are considered important financial intermediaries.

Question

Banks are important financial intermediaries because they:
A. Create new debt
B. Are the only source of debt finance
C. Are the only source of long-term finance
D. Operate between investors and borrowers
E. Take deposits from all their customers

Answer

Find Related Questions by Tags, levels, etc.

Tags: Banking, Financial Intermediaries, Investment
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets

Identify the term for strategies maximizing profits through innovative financial methods.

Question

Strategies adopted by companies to maximize profits using innovative methods to compute the fair value of financial instruments is best described as:
A. Financial accounting
B. Financial engineering
C. Strategic financial management
D. Strategic management accounting
E. Strategic financial accounting

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Engineering, Financial instruments, Profit Maximization
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q10 – Basics of Business Finance and Financial Markets

Calculate the amount to set aside annually to accumulate a sum for a car replacement in 5 years.

Question

How much should Mr. Eaglet set aside at the end of each year to replace his motor car in 5 years’ time if the cost of a new car remains at ₦5 million and the rate of interest stays at 7% per annum?
A. N669,349.23
B. N779,349.23
C. N869,349.23
D. N979,349.23
E. N989,349.23

Answer

Find Related Questions by Tags, levels, etc.

Tags: Annuities, Financial planning, Future Value, Savings
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q9 – Basics of Business Finance and Financial Markets

Calculate the present value needed to reach a lump sum in 5 years with compound interest.

Question

Lokoson must pay a lump sum of N960,000 in 5 years. What amount deposited today at 5.8% compounded annually will make up the sum of money?
A. N724,200.36
B. N724,300.37
C. N725,200.36
D. N725,300.37
E. N725,300.37

Answer

Find Related Questions by Tags, levels, etc.

Tags: Compound Interest, Lump Sum, Present Value, Time value of money
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q8 – Basics of Business Finance and Financial Markets

Calculate the compound interest earned on a deposit over 11 years at 6.50%, compounded quarterly.

Question

What is the amount of interest earned by a deposit of N414,000 for 11 years at 6.50% compounded quarterly?
A. N427,455
B. N427,467
C. N437,455
D. N437,467
E. N447,467

Answer

Find Related Questions by Tags, levels, etc.

Tags: Compound Interest, Financial Mathematics, Investment
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – Nov 2020 – L1 – SA – Q7 – Basics of Business Finance and Financial Markets

Calculate the simple interest rate for a 3-month loan.

Question

Ronny wants to borrow N160,000 from his friend. He is willing to pay back N174,400 in 3 months. What simple interest rate will be applicable?
A. 34%
B. 35.5%
C. 36%
D. 36.5%
E. 37%

Answer

Find Related Questions by Tags, levels, etc.

Tags: Interest Rate, Loan Repayment, Simple Interest
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2020

BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets

Multiple choice question on the functions of a stock exchange.

Question

Which of the following is NOT a function of a stock exchange?

A. Provide a system in which shares can be traded in a regulated manner
B. Enforce rules of business conduct on market participants
C. Ensure availability of shares and bonds to be traded by investors
D. Ensure that there is an efficient system for providing new financial information about companies to investors in the market
E. Provide a system for recording information about the prices at which shares are bought and sold and making them available to participants

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Markets, Securities Trading, Stock Exchange
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2016

BMF – MAY 2016 – L1 – SA – Q12 – Basics of Business Finance and Financial Markets

Multiple choice question on the functions of a stock exchange.

Question

Which of the following is NOT a function of a stock exchange?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Markets, Securities Trading, Stock Exchange
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2016

BMF – May 2015 – L1 – SA – Q4 – Basics of Business Finance and Financial Markets

This question focuses on identifying the correct item that is included in a cash flow calculation.

Question

Which of the following is a cashflow calculation item?

A. Depreciation of fixed assets
B. Loss on disposal of fixed assets
C. Profit on disposal of investments
D. Surplus on revaluation of fixed assets
E. Proceeds from disposal of fixed assets

Answer

Find Related Questions by Tags, levels, etc.

Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2015

BF – Nov 2015 – L1 – SB – Q2 – Basics of Business Finance and Financial Markets

Analyzing capital structure to compute estimated share values and recommend optimal structure.

Question

A firm has recently collected the following data in respect of its capital structure, expected earnings per share, and required rate of return.

Debt Ratio %	Expected Earnings Per Share (N)	Required Rate of Return (%)
0	3.10	14
10	3.80	16
20	4.60	17
30	5.25	19
40	5.70	20
50	5.00	22
60	4.50	24

You are required to:
a. Compute the estimated share values. (10 Marks)
b. Determine the optimal capital structure based on the maximization of expected earnings per share and the maximization of share values. (5 Marks)
c. Which capital structure criterion would you recommend and why? (5 Marks)

(Total: 20 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital structure, Earnings Per Share, Share Value
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2015

BF – Nov 2015 – L1 – SA – Q11 – Basics of Business Finance and Financial Markets

Identifying the philosopher who propounded the virtue ethics theory.

Question

The virtue ethics theory was propounded by:
A. Immanuel Kant
B. Aristotle
C. Socrates
D. Plato
E. Hegel

Answer

Find Related Questions by Tags, levels, etc.

Tags: Ethics, Philosophy, Virtue
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: NOV 2015

BMF – May 2018 – L1 – SB – Q5b – Basics of Business Finance and Financial Markets

Discusses features of operational techniques in decision-making processes.

Question

State briefly the features of the following operational techniques:
i. Mathematical logic
ii. Game theory
iii. Mathematical optimisation

Answer

Find Related Questions by Tags, levels, etc.

Tags: Game Theory, Mathematical Logic, Operational Techniques, Optimization
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2018

BMF – May 2018 – L1 – SB – Q5a – Basics of Business Finance and Financial Markets

Discusses weaknesses of commonly-used corporate financial objectives.

Question

Corporate financial objectives may be expressed as maximizing shareholders’ wealth, as well as profit or growth in earnings. State and explain briefly the weaknesses of THREE commonly-used corporate financial objectives.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Corporate Financial Objectives, Profit Maximization, Shareholder Wealth
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2018

BMF – May 2018 – L1 – SB – Q2c – Basics of Business Finance and Financial Markets

Explain briefly THREE of these remedies

Question

Agency conflicts are the differences in the interests of a company’s owners and managers. However, several remedies have been recommended to lessen this age-long managerial problem.
Explain briefly THREE of these remedies

Answer

Find Related Questions by Tags, levels, etc.

Tags: Agency Conflicts, Interest
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2018

BMF – May 2018 – L1 – SB – Q2b – Basics of Business Finance and Financial Markets

compounded interest for a 10-year savings plan.

Question

Nike Kenny is a student of a state-owned polytechnic in Yobe. She planned to save N5,000 each year out of the emolument she collects from the work-study club of a school. How much will she have at the end of the tenth year if interest on her savings is 6% compounded semi-annually?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Compound Interest, Earnings Per Share
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2018

BMF – May 2018 – L1 – SB – Q2a – Basics of Business Finance and Financial Markets

Computes key financial ratios for TYX Limited for 2014 and 2015

Question

The following are extracts from the financial position and income statement of TYX Limited for 2014 and 2015:

	1 Jan 2014	31 Dec 2014	1 Jan 2015	31 Dec 2015
Share capital of N1 each	200,000	200,000	200,000	200,000
Share premium	100,000	100,000	100,000	100,000
Accumulated profits	500,000	600,000	600,000	750,000
Bank loans	200,000	600,000	600,000	350,000

	2014	2015
Profit Before Taxation	210,000	294,000
Taxation	75,000	100,000
Profit after taxation	135,000	194,000
Interest charges on bank loans	30,000	25,000
Dividend	45,000	45,000
Sales	5,800,000	6,670,000

You are required to compute the following ratios:
i. Return on Equity
ii. Return on Capital Employed
iii. Net Profit Percentage
iv. Earnings Per Share
v. Dividend Per Share

Answer

Find Related Questions by Tags, levels, etc.

Tags: Earnings Per Share, Financial Ratios, Return on Capital
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2018

BMF – May 2018 – L1 – SA – Q19 – Basics of Business Finance and Financial Markets

Identifies methods for measuring trends in time series.

Question

Which of the following methods CANNOT be utilized for trend measurement in time series data?
A. Free hand method
B. Semi-average method
C. Moving average method
D. Least squares method
E. Spearman’s ranking method

Answer

Find Related Questions by Tags, levels, etc.

Tags: Statistical Methods, Time series, Trend Measurement
Level: Level 1

Topic: Basics of Business Finance and Financial Markets
Series: MAY 2018

BMF – May 2018 – L1 – SA – Q11 – Basics of Business Finance and Financial Markets

Distinguishing between revenue and capital expenditure.

Question

Expenditure that does not create a long-term asset is called:
A. Capital expenditure
B. Investment expenditure
C. Revenue expenditure
D. Sundry expenditure
E. Capital budgeting expenditure

Answer

Find Related Questions by Tags, levels, etc.

Tags: Capital Expenditure, Expenditure, Revenue Expenditure
Level: Level 1