1

Explain the following statement:

“In order to understand today’s prevailing approach to modern corporate financial decision-making, one must consider a seminal 1974 article, which was substantiated two decades later by a pair of statistical studies.” (7 Marks)

2.

Explain the following statement:

"The key to understanding difference between company value improvement and temporary buybacks effects lies in an understanding both numerator and denominator of the EPS (or alternatively, the CF/S) ratio." (4 Marks)

3.

Regarding corporate equity versus corporate term borrowing, contrast relative cost and covenant requirements for both, with supporting reasons. (6 Marks)

4.

This question contains TWO (2) parts. You are to answer BOTH parts.

a) Describe the importance of the NFJ ratio, as applied in CAPEX investment evaluation.

b) Differentiate between “term financing” and “seasonal financing”.

5.

Explain the following statement: "Whilst large amounts of underutilised, excess cash are widely interpreted as reflecting financial underperformance, there is no such thing as FREE (that is, zero cost) cash." (7 Marks)

6.

Compare and contrast “Treasury Shares” with “Cov Light”

7.

Consider the statement that follows. Do you agree? Do you disagree? Both? Neither? Provide your reasoning along with your answer. (6 Marks subtotal)

The statement:

From the perspective of the FD of the customer company, reducing the potential number of suppliers of a key component or service element is never a good idea, as more suppliers mean more competition and lower prices, after all!