Acc501 Assignment No. 1 solution

Virtual University Of Pakistan
ACC501 1 Spring Semester 2011
“Business Finance (ACC501)”

Assignment No. 01 Total Marks: 15

Question # 01
JJ Corporation’s last year Return on Equity (ROE) was only 2.5 percent. Management wants to improve Return on Equity (ROE), for this purpose they has developed a new plan and made following amendments:

For new plan total debt ratio is of 55 percent, it will result in interest expense of Rs. 300,000 per year. Projected EBIT of Rs. 1,000,000 on sales of Rs. 15,000,000 and it expects to have a total assets turnover ratio of 2. Under these conditions, the tax rate will be 30 percent.

Required:
1. What will be the effect of new plan on company’s ROE?
2. Either management should consider new plan or not?
NOTE: Show complete working for this in proper format

Question # 02
A textile company has Rs. 650,000 of debt outstanding and pays interest 65,000 annually on debt. Its annual sales are Rs. 3 million its tax rate is 35percent and its net profit margin on sales is 6 percent. Textile Company has applied for loan from bank. There is a conditionfrom bank for loan sanction, company has to maintain TIE ratio at least 4times, and otherwise bank will reject loan request.

Required:
1. Calculate Time Interest Earned Ratio (TIE).
2. By keeping in view your result, what do you think that bank will sanction loan on the basis of given condition of Time Interest Earned Ratio (TIE)?
 

Important Tips
1. This Assignment can be best attempted from the knowledge acquired after
watching video lecture no. 1 to lecture no 12 and reading handouts as well as
recommended text book).
2. Video lectures can be downloaded for free from Online VU Lectures.

Assignment Schedule
Opening Date and Time 18th April , 2011 At 12:01 A.M. (Mid-Night)
Due Date and Time 21st April , 2011 At 11:59 P.M. (Mid-Night)

Note: Only in the case of Assignment, 24 Hrs extra / grace period after the above mentioned due date is usually available to overcome uploading difficulties which may be faced by the students on last date. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.

Important Instructions:
Please read the following instructions carefully before attempting the assignment solution.

Deadline:
• Make sure that you upload the solution file before the due date. No assignment will be accepted through e-mail once the solution has been uploaded by the instructor.

Formatting guidelines:
• Use the font style “Times New Roman” and font size “12”.
• It is advised t compose your document in MS-Word 2003.
• Use black and blue font colors only.

Solution guidelines:
• For acquiring the relevant knowledge don’t rely only on handouts but watch the video lectures and use other reference books also.

Rules for Marking
Please note that your assignment will not be graded or graded as Zero (0) if:
• It has been submitted after due date
• The file you uploaded does not open or is corrupt
• It is in any format other than .doc (MS. Word)
• It is cheated or copied from other students, internet, books, journals etc…
::::::::::::::::::::::::::::


Solution:


Calculating the ROE using Du Pont model:
From Debt ratio:
Debt ratio = 0.55
Therefore, the company has $0.55 in debt for every $1 in assets. Therefore, there is $0.45 in equity (1-$0.55) for every $0.55 in debt.
Debt-equity ratio = Total debt / Total equity
= $0.55 / $0.45
= 1.2
Equity multiplier = 1 + Debt-equtiy ratio
= 1 + 1.2
= 2.2
ROE = (Net income / Sales ) * (Sales / Assets) * (Assets / Total equity)
= Profit margin * Total asset turnover ratio * Equity multiplier

But Net income is calculated as:
EBIT $1,000,000
(-) Interest $300,000
-----------------------------------
EBT $700,000
(-) Taxes 30% $210,000
---------------------------------
Net income $490,000
------------------------------
ROE = ($490,000 / $15,000,000) * 2.0 * 2.2
= 0.03267 * 2.0 * 2.2
= 0.1437 or 14.37%
The company's ROE will increase by 11.87%
b) The company should take up the new plan as it is giving the higher ROE.

Acc501 Assignment No. 1 solution

Virtual University Of Pakistan
ACC501 1 Spring Semester 2011
“Business Finance (ACC501)”

Assignment No. 01 Total Marks: 15

Question # 01
JJ Corporation’s last year Return on Equity (ROE) was only 2.5 percent. Management wants to improve Return on Equity (ROE), for this purpose they has developed a new plan and made following amendments:

For new plan total debt ratio is of 55 percent, it will result in interest expense of Rs. 300,000 per year. Projected EBIT of Rs. 1,000,000 on sales of Rs. 15,000,000 and it expects to have a total assets turnover ratio of 2. Under these conditions, the tax rate will be 30 percent.

Required:
1. What will be the effect of new plan on company’s ROE?
2. Either management should consider new plan or not?
NOTE: Show complete working for this in proper format

Question # 02
A textile company has Rs. 650,000 of debt outstanding and pays interest 65,000 annually on debt. Its annual sales are Rs. 3 million its tax rate is 35percent and its net profit margin on sales is 6 percent. Textile Company has applied for loan from bank. There is a conditionfrom bank for loan sanction, company has to maintain TIE ratio at least 4times, and otherwise bank will reject loan request.

Required:
1. Calculate Time Interest Earned Ratio (TIE).
2. By keeping in view your result, what do you think that bank will sanction loan on the basis of given condition of Time Interest Earned Ratio (TIE)?
 

Important Tips
1. This Assignment can be best attempted from the knowledge acquired after
watching video lecture no. 1 to lecture no 12 and reading handouts as well as
recommended text book).
2. Video lectures can be downloaded for free from Online VU Lectures.

Assignment Schedule
Opening Date and Time 18th April , 2011 At 12:01 A.M. (Mid-Night)
Due Date and Time 21st April , 2011 At 11:59 P.M. (Mid-Night)

Note: Only in the case of Assignment, 24 Hrs extra / grace period after the above mentioned due date is usually available to overcome uploading difficulties which may be faced by the students on last date. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.

Important Instructions:
Please read the following instructions carefully before attempting the assignment solution.

Deadline:
• Make sure that you upload the solution file before the due date. No assignment will be accepted through e-mail once the solution has been uploaded by the instructor.

Formatting guidelines:
• Use the font style “Times New Roman” and font size “12”.
• It is advised t compose your document in MS-Word 2003.
• Use black and blue font colors only.

Solution guidelines:
• For acquiring the relevant knowledge don’t rely only on handouts but watch the video lectures and use other reference books also.

Rules for Marking
Please note that your assignment will not be graded or graded as Zero (0) if:
• It has been submitted after due date
• The file you uploaded does not open or is corrupt
• It is in any format other than .doc (MS. Word)
• It is cheated or copied from other students, internet, books, journals etc…
::::::::::::::::::::::::::::


Solution:


Calculating the ROE using Du Pont model:
From Debt ratio:
Debt ratio = 0.55
Therefore, the company has $0.55 in debt for every $1 in assets. Therefore, there is $0.45 in equity (1-$0.55) for every $0.55 in debt.
Debt-equity ratio = Total debt / Total equity
= $0.55 / $0.45
= 1.2
Equity multiplier = 1 + Debt-equtiy ratio
= 1 + 1.2
= 2.2
ROE = (Net income / Sales ) * (Sales / Assets) * (Assets / Total equity)
= Profit margin * Total asset turnover ratio * Equity multiplier

But Net income is calculated as:
EBIT $1,000,000
(-) Interest $300,000
-----------------------------------
EBT $700,000
(-) Taxes 30% $210,000
---------------------------------
Net income $490,000
------------------------------
ROE = ($490,000 / $15,000,000) * 2.0 * 2.2
= 0.03267 * 2.0 * 2.2
= 0.1437 or 14.37%
The company's ROE will increase by 11.87%
b) The company should take up the new plan as it is giving the higher ROE.

Acc501 Assignment No. 1 announced

Virtual University Of Pakistan
ACC501 1 Spring Semester 2011
“Business Finance (ACC501)”

Assignment No. 01 Total Marks: 15

Question # 01
JJ Corporation’s last year Return on Equity (ROE) was only 2.5 percent. Management wants to improve Return on Equity (ROE), for this purpose they has developed a new plan and made following amendments:

For new plan total debt ratio is of 55 percent, it will result in interest expense of Rs. 300,000 per year. Projected EBIT of Rs. 1,000,000 on sales of Rs. 15,000,000 and it expects to have a total assets turnover ratio of 2. Under these conditions, the tax rate will be 30 percent.

Required:
1. What will be the effect of new plan on company’s ROE?
2. Either management should consider new plan or not?
NOTE: Show complete working for this in proper format

Question # 02
A textile company has Rs. 650,000 of debt outstanding and pays interest 65,000 annually on debt. Its annual sales are Rs. 3 million its tax rate is 35percent and its net profit margin on sales is 6 percent. Textile Company has applied for loan from bank. There is a conditionfrom bank for loan sanction, company has to maintain TIE ratio at least 4times, and otherwise bank will reject loan request.

Required:
1. Calculate Time Interest Earned Ratio (TIE).
2. By keeping in view your result, what do you think that bank will sanction loan on the basis of given condition of Time Interest Earned Ratio (TIE)?
 

Important Tips
1. This Assignment can be best attempted from the knowledge acquired after
watching video lecture no. 1 to lecture no 12 and reading handouts as well as
recommended text book).
2. Video lectures can be downloaded for free from Online VU Lectures.

Assignment Schedule
Opening Date and Time 18th April , 2011 At 12:01 A.M. (Mid-Night)
Due Date and Time 21st April , 2011 At 11:59 P.M. (Mid-Night)

Note: Only in the case of Assignment, 24 Hrs extra / grace period after the above mentioned due date is usually available to overcome uploading difficulties which may be faced by the students on last date. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.

Important Instructions:
Please read the following instructions carefully before attempting the assignment solution.

Deadline:
• Make sure that you upload the solution file before the due date. No assignment will be accepted through e-mail once the solution has been uploaded by the instructor.

Formatting guidelines:
• Use the font style “Times New Roman” and font size “12”.
• It is advised t compose your document in MS-Word 2003.
• Use black and blue font colors only.

Solution guidelines:
• For acquiring the relevant knowledge don’t rely only on handouts but watch the video lectures and use other reference books also.

Rules for Marking
Please note that your assignment will not be graded or graded as Zero (0) if:
• It has been submitted after due date
• The file you uploaded does not open or is corrupt
• It is in any format other than .doc (MS. Word)
• It is cheated or copied from other students, internet, books, journals etc…

ACC311 GDB No. 1 Announced

Ali & Ahmad Co. consisting of two partners Mr. Ali and Mr. Ahmad who acts as auditors of Shafee group. Ali & Ahmed splits up and, by mutual agreement Mr. Ali continues the practice in the name of Ali & Ahmad Co. while Mr. Ahmad starts his practice as Ahmad & Co”  

Required:

Keeping in view the above situation answer the following questions:

(i) Will Ahmad on his cessation as partner of Ali & Ahmad Co. automatically cease to be auditors of Shafee group, or will he be deemed to continue as auditor of Shafee group?

(ii) If Ahmad is deemed to continue as auditors, would Ahmad and Ali & Ahmed Co. automatically become joint auditors of Shafee group?

Your answer must be confined in two to three lines. Avoid including extra material for answering. Just provide to the point answer for requirements.

ACC301 Final Term Current Paper (Feb 2011)

ACC301 Final Term Current Paper (Feb 2011)

currten parper 64 total Question tha 
jin main sa 54 mcqs tha or zida tar 31 to 40 lects main sa ay tha

Casual Vacancy
a) Any casual vacancy shall be filled by directors. [Sec 252(4)].

Casual
Vacancy
Within 30 days
of the vacancy

Following aspects of assets must be verified:
1. Cost
2. Authorization
3. Value
4. Existence
5. Beneficial Ownership
6. Presentation in the accounts

or sub to tauf tha n lengthy b like
scop of audit on
solo paro
partnetship
company 

if u r an auditor of a bank wht pross u may take for auditing on online trans etc

Suppose you have been appointed as the auditor of a company and have started examining the entity by taking initial interviews of the concerned personnel. During this course, one of the person from management has asked you the following information:

1. What are the matters about which an auditor may disagree with the management? 

2. What should an auditor do if such disagreements are material? 

Give your answers in brief

A company has hired auditors at the year end. Auditors used audit sampling techniques which made them enable to gather audit evidence efficiently. State the objectives auditors might have defined first to achieve by using sampling techniques and also briefly explain further steps the auditors might undertake to complete the sampling process.

expainl th Verification Methods:

Cut-off. Verify cut-off. For example a trade creditor should hot be included unless the goods were
acquired before the year end.

ACC501 Final Term Current Paper (Feb 2011)

ACC501 Final Term Current Paper (Feb 2011)

Total 59 mcq'a 
10 questions

what is optimal credit policy state? 3
what is difference between market value and book value? 3
how cost of debt can be measured? 3
define benchmarking and its method? 5
find out portfolio? 5
find out capita gain and dividend yeild and total percentage of return? 5
describe difference type of firm's inventory and retail business? 5
what is the best cash policy lec 41 page no.219 5

two question was also from last lectures. 
mcq's were not from past papers aur online quizez just 10 out of 59. all mcq's were new very conceptual

ACC501 Final Term Current Paper (Feb 2011)

ACC501: Business Finance 
Paper start time at 7:30 Am dated 11/02/2011
paper consists of 69 Questions
out of which 62 are multiple choice. out of which some are from Past papers.

Question having total marks 03. are
1- What does "Stand alone principle" state.
2- What does "Optimal credit Policy" state
3- Identify systematic and unsystematic risk from followings
1- Interest Rate
2- Strike call in a company
3- Gross Domestic product
Question having total marks 05. are
1- Prepare a Projected income statement
2- Define the term"Bankruptcy" and types of Bankruptcy cost.
3- Prepare liquid Ratios from a given Balance sheet
4- Define following Terms:
1- Operating Cycle
2- Cash cycle
3- Inventory Period
4- A/R Period
5- A/P Period