Hawassa University Department Of Accounting and Finance
Financial Management I- Assignment I
Submission Date: 03/04/2017 maximum number of students in a group: 6
Q1.
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Hawassa University Department Of Accounting and Finance
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Hawassa University Department Of Accounting and Finance
Instruction
a) Compute and interpret the following financial ratios for EMC Manufacturing
Company for the fiscal year 2006 based on the information given above
A. Current ratio L. Gross profit margin ratio
B. Quick ratio M. Operating profit margin ratio
C. Accounts Receivable turnover N. Net profit Margin ratio
D. Average collection period O. Return on investment
E. Inventory turnover P. Return on equity
F. Fixed asset turnover Q. Earnings per share
G. Total assets turnover R. Price/earnings ratio
H. Debt ratio S. Book value per share
I. Debt –equity ratio T. Dividend per share
J. Time-interest-earned ratio U. Dividend payout ratio
K. Fixed-charge-coverage ratio
b) Based on industry average given above, Evaluate the company strength and weakness
with respect to liquidity, asset management, solvency and profitability.
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Hawassa University Department Of Accounting and Finance
Q2. A person deposits Birr 10,000 in a savings account that pays 6% compounded
semi-annually. Three years later, this person deposits an additional Birr 8,000 in the
savings account. Also, at this time, the interest rates changes to 8% compounded
quarterly. How much money is in the account 5 years after the original Birr 10,000 is
deposited?
Q3. Birr 2000 is deposited in an account. After one year of monthly compounding, the
balance in the account is Birr 2,166. What is the annual percentage rate for this
account?
Q4. A person deposits Birr 200 a month for four years in to an account that pays 7%
compounded monthly. After the four years, the person leaves the account untouched
for an additional six years. What is the balance after the 10 year period?
Q5. Mrs. X has a saving goal of Birr 25,000 which she would like to reach 10 years
from now. During the first five years she is financially able to deposit only Birr 100
each month into the savings account. What must her monthly deposits over the last
five years be if she is to reach the goal? The account pays 12% interest compounded
monthly.
Q6. What is the cash value of a car that can be bought for Birr 200 down payment
and Birr 82 a month for 18 months, if money is worth 12% interest compounded
monthly?
Q7. Suppose you borrow Birr 5000 from a bank and agree to repay the loan in
five equal installment including all interests due. The banks interest charges
are 5% compounded annually. How much should each annual payment be in
order to retire the debt including the interest in 5 years?
Q8.Your rate of return expectations for the stock of Kayleigh Computer
Company during the next year are:
a. Compute the expected return [E(Ri)] on this investment, the
variance of this return (σ2), and its standard deviation (σ).
b. Under what conditions can the standard deviation be used to
measure the relative risk of two investments?
c. Under what conditions the coefficient of variation must be used to
measure the relative risk of two investments?
Q9. Refer to the following information on joint stock returns for stock 1, 2,
and 3 in the table below
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Hawassa University Department Of Accounting and Finance
If you must choose only two stocks to your investment portfolio, what would be
your choice? a) stocks 1 and 2; b) stocks 1 and 3; c) stocks 2 and 3; d) other
decision. Present your arguments and calculations, to explain your decision.
Q10. Explain why most investors prefer to hold a diversified portfolio of
securities as opposed to placing all of their wealth in a single asset.
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