Complete HSC exams 2012- 2019 Finance questions PDF

Preview

Summary

MCQ, Short Answers, Extended Response and Business Report questions all organised by dotpoints from 10 years of HSC papers (new syllabus)...

Description

Name: _____________________________

HSC Exam Questions 2012- 2019 10.3

HSC topic: Finance

25% of indicative time

The focus of this topic is the role of interpreting financial information in the planning and management of a business. Students learn about: role of financial management •

strategic role of financial management

•

objectives of financial management

–

profitability, growth, efficiency, liquidity, solvency

–

short-term and long-term

•

interdependence with other key business functions

influences on financial management •

internal sources of finance – retained profits

•

external sources of finance

–

debt – short-term borrowing (overdraft, commercial bills, factoring), long-term borrowing (mortgage, debentures, unsecured notes, leasing)

–

equity – ordinary shares (new issues, rights issues, placements, share purchase plans), private equity

•

financial institutions – banks, investment banks, finance companies, superannuation funds, life insurance companies, unit trusts and the Australian Securities Exchange

•

influence of government – Australian Securities and Investments Commission, company taxation

•

global market influences – economic outlook, availability of funds, interest rates

processes of financial management •

planning and implementing – financial needs, budgets, record systems, financial risks, financial controls

–

debt and equity financing – advantages and disadvantages of each

–

matching the terms and source of finance to business purpose

•

monitoring and controlling – cash flow statement, income statement, balance sheet

•

financial ratios

–

liquidity – current ratio (current assets ÷ current liabilities)

–

gearing – debt to equity ratio (total liabilities ÷ total equity)

–

profitability – gross profit ratio (gross profit ÷ sales); net profit ratio (net profit ÷ sales); return on equity ratio (net profit ÷ total equity)

–

efficiency – expense ratio (total expenses ÷ sales), accounts receivable turnover ratio (sales ÷ accounts receivable)

–

comparative ratio analysis – over different time periods, against standards, with similar businesses

•

limitations of financial reports – normalised earnings, capitalising expenses, valuing assets, timing issues, debt repayments, notes to the financial statements

•

ethical issues related to financial reports

financial management strategies •

cash flow management

–

cash flow statements

–

distribution of payments, discounts for early payment, factoring

•

working capital management

–

control of current assets – cash, receivables, inventories

–

control of current liabilities – payables, loans, overdrafts

–

strategies – leasing, sale and lease back

•

profitability management

–

cost controls – fixed and variable, cost centres, expense minimisation

–

revenue controls – marketing objectives

•

global financial management

–

exchange rates

–

interest rates

–

methods of international payment – payment in advance, letter of credit, clean payment, bill of exchange

–

hedging

–

derivatives

Students learn about: Role of financial management

• •

strategic role of financial management

objectives of financial management -profitability, growth, efficiency, liquidity, solvency -short-term and long-term • interdependence with other key business functions

2014 Q2 A business is planning to increase its market share by merging with a competitor. What financial objective does this best illustrate? (A) (B) (C) (D)

Growth Liquidity Profitability Solvency

Syllabus dot point:………………………………………………………………………………………………………………. 2016 Q4 Solvency is the ability of a business to: (A) Maximise its profits (B) Increase market share (C) Meet long-term financial commitments (D) Meet short-term financial commitments Syllabus dot point:………………………………………………………………………………………………………………. 2017 Q4 A business ensure all its debts are paid as they fall due. Which financial objective is the business satisfying? (A) Efficiency (B) Growth (C) Liquidity (D) Solvency Syllabus dot point:……………………………………………………………………………………………………………….

2012 Question 22 (d) Explain the interdependence of finance and operations in a business. Support your answer with relevant examples. 4 ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………….. ………………………………………………………………………………………………………………………………………… Syllabus dot point:………………………………………………………………………………………………………………. 2016 Question 21 Sue is a sole trader whose business is growing rapidly as sales are increasing. As a result of the growth, she needs to purchase stock worth $10, 000. (a) Explain a potential conflict between a short-term and long-term financial objective for Sue. 3 ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… Syllabus dot point:……………………………………………………………………………………………………………….

2018 Question 24 (a) Why is liquidity an objective of financial management?

2

……………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………… Syllabus dot point:………………………………………………………………………………………………………………. 2019 A business sells luxury cars. The cars are stylish, high performance and include advanced safety features integrating leading edge technology. (b) Explain the interdependence between marketing and finance for the business. …………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………… Syllabus dot point:……………………………………………………………………………………………………………….

4

Students learn about: Influences on financial management

• •

internal sources of finance – retained profits external sources of finance -debt – short-term borrowing (overdraft, commercial bills, factoring), long-term borrowing (mortgage, debentures, unsecured notes, leasing) -equity – ordinary shares (new issues, rights issues, placements, share purchase plans), private equity • financial institutions – banks, investment banks, finance companies, superannuation funds, life insurance companies, unit trusts and the Australian Securities Exchange • influence of government – Australian Securities and Investments Commission, company taxation • global market influences – economic outlook, availability of funds, interest rates

2014 Q14 Why would a business use a debenture as a source of funding? (A) To reduce financial risk (B) To provide security over assets (C) To retain ownership and control (D) To obtain cheap, short- term finance Syllabus dot point:………………………………………………………………………………………………………………. 2015 Q6 What is a source of new capital for a new company? (A) Primary market of the Australian Securities Exchange (B) Secondary market of the Australian Securities Exchange (C) Primary market of the Australian Securities and Investment Commission (D) Secondary market of the Australian Securities and Investment Commission Syllabus dot point:………………………………………………………………………………………………………………. Q10 What is a characteristic of external equity finance? (A) Specific maturity date (B) Low interest payments (C) Fixed returns to owners (D) Diluted business ownership Syllabus dot point:………………………………………………………………………………………………………………. 2016 Q14 Which of the following is an example of a unit trust? (A) An investor purchases shares in a public company (B) Investors lend money directly to businesses and receive interest in return (C) Investors pool their money together and it is invested in the property market (D) An investor deposits money with a financial institution and receives a fixed rate of interest Syllabus dot point:……………………………………………………………………………………………………………….

2017 Q6 A sole trader invests $500, 000 into her business. What is this an example of? (A) An overdraft (B) Retained profits (C) Internal debt finance (D) Internal Equity finance Syllabus dot point:………………………………………………………………………………………………………………. Q13 Why would a business factor its accounts receivables? (A) To improve cash flow (B) To increase owner’s equity (C) To increase the value of current assets (D) To improve the value of the business Syllabus dot point:………………………………………………………………………………………………………………. Q18 Which organisation ensures that Barb’s Batteries Pty Ltd operates in a financially responsible manner? (A) (B) (C) (D)

Australian and Securities Investment Commission Australian Prudential Regulation Authority Australian Securities Exchange Reserve Bank of Australia

Syllabus dot point:………………………………………………………………………………………………………………. 2018 Q7 In which of the following are both sources of funds appropriate for a business purchasing extra stock before a busy trading period? (A) Debentures and factoring (B) Retained profits and unsecured notes (C) Debentures and bank overdraft (D) Retained profits and bank overdraft Syllabus dot point:……………………………………………………………………………………………………………….

2019 Q2 A business is purchasing a new property. Which source of finance would be the most appropriate? (A) (B) (C) (D)

Shares Mortgage Debenture Letter of credit

Syllabus dot point:………………………………………………………………………………………………………………. Q4 A business requires new manufacturing equipment. Which of the following would provide leasing for this equipment? (A) (B) (C) (D)

Unit trusts Property trusts Finance companies Superannuation funds

Syllabus dot point:………………………………………………………………………………………………………………. Q8 What effect would a global downturn in the economic outlook have on Australia’s unemployment, output and exchange rates?

Syllabus dot point:………………………………………………………………………………………………………………. Q12 Which of the following allows shareholders of a public company to acquire additional shares at a discount? (A) (B) (C) (D)

New issues Placements Private equity Unsecured notes

Syllabus dot point:………………………………………………………………………………………………………………. Q16 Which independent federal body ensures that businesses adhere to government regulations, maintain appropriate financial information and provide consumer protection? (A) (B) (C) (D)

Reserve Bank of Australia Australian Securities Exchange Australian Prudential Regulation Authority Australian Securities and Investment Commission

Syllabus dot point:……………………………………………………………………………………………………………….

2013 Question 22 MK Pty Ltd is a successful chain of frozen yoghurt stores with low gearing. The owners are planning to take over a smaller chain which has poor human resource management.

(b)Discuss ONE source of finance to fund the takeover.

4

………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… Syllabus dot point:………………………………………………………………………………………………………………. 2014 Q24 10 Marks (b) Explain government influences on the management of business.

4

………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………………………

………………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………….. ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………….. Syllabus dot point:……………………………………………………………………………………………………………….

2016 Question 21 Sue is a sole trader whose business is growing rapidly as sales are increasing. As a result of the growth, she needs to purchase stock worth $10, 000. (c) Discuss ONE internal and ONE external source of finance for Sue’s purchase of stock. ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………….. ………………………………………………………………………………………………………………………………………… Syllabus dot point:……………………………………………………………………………………………………………….

6

2018 Question 24 A business has decided to expand into a larger factory and is now considering its financial options. (d) Discuss the use of leasing and the use of mortgages as a source of long-term finance for this business.

5

………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… Syllabus dot point:……………………………………………………………………………………………………………….

2019 Q 22 (b) Explain ONE advantage of debt financing.

3

………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… Syllabus dot point:………………………………………………………………………………………………………………. (c) Explain ONE disadvantage of equity financing.

3

………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… ………………………………………………………………………………………………………………………………………… Syllabus dot point:………………………………………………………………………………………………………………. Students learn about: Processes of financial management

•

planning and implementing – financial needs, budgets, record systems, financial risks, financial controls -debt and equity financing – advantages and disadvantages of each -matching the terms and source of finance to business purpose • monitoring and controlling – cash flow statement, income statement, balance sheet • financial ratios -liquidity – current ratio (current assets ÷ current liabilities) -gearing – debt to equity ratio (total liabilities ÷ total equity) -profitability – gross profit ratio (gross profit ÷ sales); net profit ratio (net profit ÷ sales); return on equity ratio (net profit ÷ total equity) -efficiency – expense ratio (total expenses ÷ sales), accounts receivable turnover ratio (sales ÷ accounts receivable) -comparative ratio analysis – over different time periods, against standards, with similar businesses • limitations of financial reports – normalised earnings, capitalising expenses, valuing assets, timing issues, debt repayments, notes to the financial statements • ethical issues related to financial reports

2014 Q10 Which of the following would be found on an income statement? (A) Accounts payable (B) Gross profit (C) Intangibles (D) Net assets Syllabus dot point:……………………………………………………………………………………………………………….

2016 Q11

Use the information below to answer Questions 11.

If Steve is a sole trader, how much equity does he have in the business? (A) $12 800 (B) $35 500 (C) $135 500 (D) $146 000 Syllabus dot point:………………………………………………………………………………………………………………. 2019 Q 14 Which of the following is the correct order for financial planning? (A) developing budgets, determining financial needs, maintaining record systems, identifying financial risks, establishing financial controls (B) Determining financial needs, establishing financial controls, identifying financial risks, maintaining record systems, developing budgets (C) Determining financial needs, developing budgets, maintaining record systems, identifying financial risks, establishing financial controls (D) Developing budgets, maintaining record systems, identifying financial risks, establishing financial controls, determining financial needs

Q 15 Use the information to answer Question 15.

What is the gearing ratio (total liabilities / total equity) for this business? (A) (B) (C) (D)

0.67:1 0.73:1 0.75:1 0.81:1

Q24 10 Marks (a) This table shows an extract from a cash flow statement for a business.

(i)

Calculate the opening cash balance for ...