| Q.1 |
Please write the alphabate of selected choice
in the answer column: (10) |
i |
You are formulating the plan for new branches of your bank. Which
of the following do you consider to be the key factor in this process
:
A) The break even point of the new branches
B) Number of staff
C) Number of teller points D)
None of the above |
ii |
Which of the following is a non cash expense in the cash flow
statement
A) Salary B)
Depreciation C)
Rental
D) Advertising E)
None of the above
|
iii |
Which of the following is the best technique for analyzing financial
statements :
A) Ratio analysis of balance sheet and profit and loss
B) ALM
C) Increase in the assets held D)
Decrease in the Cash and cash equivalent
E) None of the above |
iv |
Which of the following is classified as a short tem liability
in the balance sheet :
A) Capital B)
Current assets
C) Accrued expenses
D) 3 years Term deposits E)
None of the above |
v |
You are considering to either rent or buy premises for a new
branch of your bank In this process you would need :
A) the amount of the likely capital gain
B) Location of the branch
C) Choice of the branch manager D)
A comparison of the two options
E) None of the above |
vi |
You are considering to launch housing finance product in the
consumer banking division of your bank. Which of the following will
be the critical deciding factor in this process :
A) Mismatch of maturities in the assets and liabilities B)
Sales staff
C) Management desire D)
Decision of the head of Consumer banking wing of your bank
E) None of the above |
vii |
Which of the following you will need to complete expense budget
for branches :
A) Actual expenditure incurred so far and the run rate B)
Future plan for staff hiring
C) New branches to be opened
D) All of the above E)
None of the above |
viii |
Liquidity management is a function of the
A) Asset and liability committee (ALCO) of the bank B)
Budget committee
C) Audit Committee D)
None of the above |
ix |
Liquidity ratio analysis covers the following basic question
:
A) Does the bank have the ability to handle
the demands of its creditors in the short term?
B) How well does the bank manage its profitability
and growth?
C) What is the quality of the assets of the bank?
D) All of the above |
x |
Good companies choose the following which reflects stability
of the business :
A) Bonus issue instead of cash dividend
B) Capital increase
C) Dividend in alternate year only D)
A stable dividend policy
E) None of the above |
Q.2 |
State True or False in
the answer column. Give brief reason for your selection at the space
provided below the question: (10) |
i |
Sources –uses =change in net working
capital. |
ii |
In a bank risk management is a function of
all ,may it be the top level middle level or operational level ,true
risk management can be achieved only by participation of all management
levels. |
iii |
Risk that arises due to possibility of a default
/delay in the repayment of an obligation by a customer is called
liquidity risk. |
iv |
Bonus share issue by a bank by capitalization
of profit will appear in the cash flow statement as part of the
investing activities since it represents an alternative to paying
a dividend. |
v |
In a production budget the quantity of production
may be calculated by :
SALES-OPENING STOCKOF FINISHED GOODS +CLOSING STOCK OF FINISHED
GOODS |
vi |
The present value of RS 10 Million to be received
today will be calculated with reference to the inflation rate applied
on this amount. |
vii |
The cash flow for a given period is the total
cash received minus the total cash paid out. |
viii |
The NPV and the IRR methods of evaluating
capital expenditure proposals are superior to the pay back period
in that they are based on time value of money. |
ix |
The current ratio of a company has increased
from 1.5 to 1.9 .This could be due to granting of more cash discounts
to the customers of the company. |
x |
In finalizing a medium term plan and the annual
budget it is appropriate to use a top down and a bottom up approach
respectively. |
| Q.3 |
Fill in the blank. Give
brief reason for your selection at the space provided below the
question : (05) |
i |
A business having total sales of Rs 60,000,profit
of Rs 3000 and fixed cost of Rs 12,000 will have a break even point
at Rs _________ in terms of sales value . |
ii |
Price /earning ratio is calculated with reference
to market price of the share and _______________ per share |
iii |
The agreement between two parties to exchange
a series of future cash flows to hedge interest rate risk is called
a ________________. |
iv |
Duration represents a more precise measurement
of the ____________ profile of the promised cash flows of a fixed
income security and is defined as a weighted average of the times
at which cash flows from an asset are obtained. |
v |
Value at risk model is used to measure ____________________
risk and capital requirements relating to these risks. |
| Q.4 |
Computational Questions: |
| |
XYZ Limited is considering to launch a project having following
cash flows:
Year
Cash
inflow (RS Million)
1
15
2
17
3
22
4
2
The investment required in fixed assets now is Rs 36 Million.The
assets would be expected to be sold at the end of the project for
Rs 2 Million.
|
i |
Calculate the NPV of the project using 10% and 20% discount factors.
(05) |
ii |
What is meant by rate of internal return. (01) |
iii |
Comment on use of these two net present values. (01) |
| Q.5 |
A unit of product uses 3 kg of raw materials
.The year’s production is shown below: |
| |
Budget sales 12,000
units
Increase in raw material stock 2000
kg
Decrease in finished goods stock 2000
units
Calculate the budgeted quantity of purchases of raw materials for
the year showing all your calculations: (05)
|
Q.6 |
ABC company has an authorized
capital of RS 750 Millions and its paid up capital comprises of
50 Millions shares of Rs. 10 each .The market value of the share
is Rs 35 per share and the net profit after tax aggregated Rs 140
Millions. The Company declared cash dividend of 10% and a bonus
issue of 10 shares for every 100 shares held. |
i |
Calculate the price /earning ratio. (03) |
ii |
What is the earning per share. (01) |
iii |
What will be the revised paid up capital after issue of bonus shares
(01) |
| |
Show all your calculations. |
Q.7 |
The Assets and Liabilities
Committee(ALCO) of your bank after obtaining approval of the Board
of directors has imposed a total ceiling of RS 200 Millions on the
investment in the shares of selected companies .The data relating
to these shares held as at 31st December 2006 is as under : |
| |
| SCRIP |
PURCHASE PRICE |
MARKET VALUE |
NUMBER OF SHARES |
OGDC |
100 |
120 |
1 million |
PSO |
200 |
250 |
0.5 million |
OGDC paid dividend of Rs 5 per share and PSO RS 10 per share .The
bank pays tax @5% on inter-corporate dividends.
|
i |
Calculate the mark to market impact on revaluation of shares showing
calculation. (05) |
ii |
Calculate the net of tax dividend income. (01) |
iii |
Calculate the dividend yield to the company of the two scrips. (02) |
| Q.8 |
SBP Circular BSD 6 of 2005 requires all banks
to increase their paid up capital as under : |
| |
| |
Capital required |
| By end 2006 |
Rs 3 Billion |
| By end 2007 |
Rs 4 Billion |
| By end 2008 |
Rs 5 Billion |
| By end 2009 |
Rs 6 Billion |
|
| |
The financial data of your bank shows the following as at 31st December
2005:
| Paid up capital |
Rs 2 Billion |
| Reserves |
Rs 2 Billion |
| Authorized capital |
600 million shares of Rs 10 each |
|
| |
Extract from the Budget / plan is under :
(Rs
in billion)
| |
2006 |
2007 |
2008 |
2009 |
| Profit after tax |
2 |
3 |
4 |
5 |
| Assets |
70 |
80 |
90 |
100 |
| Deposits /other liabilities |
66 |
75 |
84 |
93 |
|
i |
Prepare your strategy paper on meeting the
capital requirement of SBP using not more than one page of your
answer sheet. (04) |
ii |
Present your capital plan year after year listing
down the amount as well as the method you propose to increase the
paid up capital. (04) |
iii |
Highlight the impact of increase in capital
on the Earning Per Share (EPS) of the bank and suggest to the management
focusing increase in revenue if the impact of increase in capital
is negative on the EPS. (02) |
Q.9 |
You are treasury Manager
of your bank responsible for Asset Liability Management and the
liquidity position of the Bank .After meeting the reserve requirement
of SBP and internal requirement for advances and other assets you
are left with surplus liquidity .Explain different modes available
to you to utilize this surplus liquidity in an effective manner.
Also suggest your choice with reasoning. (10) |
Q.10 |
You are branch manager
of XYZ Bank and have been asked to prepare the budget of the branch
for the year 2007.The branch has been in operation for last 5 years
and is located in a growing market area with tough competition from
other banks .You are suggesting in your budget that you would need
two bill boards to advertise products, the cost will be amortized
over next 4 years .Your branch will bear the amortization cost.
Furthermore you want to put up a new signage on the branch and introduce
a customer help counter as well as a priority customer area.
You have been requested by the management to prepare an estimate
of expenses of your branch as the first step of the budgeting exercise.
Prepare a comprehensive list of all items of expenses that you will
include in the expense budget of your branch for 2007 and recommend
steps you would take to enhance revenue of the branch to meet additional
expenses on your business and service initiatives. (15) |
Q.11 |
The following balances
have been taken from the Books of a company for the year ended 31st
December, 2005 and 31st December 2006. (15) |
| |
| Assets |
2006 (Rs) |
2005 (Rs) |
| Cash |
390,000 |
270,000 |
| Accounts |
550,000 |
420,000 |
| Inventory |
780,000 |
980,000 |
| Total current assets |
1,720,000 |
1,670,000 |
| Plant and Equipment-cost |
1,930,000 |
1,520,000 |
| Less: Accumulated depreciation. |
(560,000) |
(470,000) |
| |
3,090,000 |
2,720,000 |
|
| |
Liabilities and shareholders Equity
| Accounts Payable |
170,000 |
130,000 |
| Taxes Payable |
240,000 |
350,000 |
| Short-term notes payable |
110,000 |
120,000 |
| Total current liabilities |
520,000 |
600,000 |
| Bonds Payable |
1,450,000 |
1,000,000 |
|
| |
Shareholders Equity
| Paid-up Capital |
390,000 |
630,000 |
| Retained earnings |
730,000 |
490,000 |
| Total share holder’s equity |
1,120,000 |
1,120,000 |
| Total liabilities & shareholders equity |
3,090,000 |
2,720,000 |
|
| |
The company reported net income during 2006
of 320,000. It sold three assets during 2006 for their net book
values. The total cost of these assets was Rs. 260,000 and the total
accumulated depreciation was Rs. 150,000. |
| |
Required:
A statement of cash flows for the year ended 31st December 2006
using indirect method according to IAS-7 together with calculations. |
|