The standard in this paper was exceptionally poor with
candidates struggling with very elementary concepts and
exhibiting poor exam technique. Questions covered a wide
variety of topics all included in depth in the syllabus.
Candidates had been made aware that they would not be
asked any detailed book keeping.
Question
1 - Net present value and payback period
Candidates showed lack of understanding of basic discounting
techniques and relevant cash flows.
Question
2 - Depreciation
A straightforward calculation of depreciation, with the
only complication arising in the motor vehicles. Surprisingly
most candidates knew the sum of digits method but few
the more common reducing balance.
Question
3 - Report to the Board on Financial Performance
A popular question with calculations relatively good except
in the case of gearing and efficiency. Interpretation
of the results was poor.
Question
4 - Cash Flow Statement
The most popular question and generally well done.
Question 5 - Raising Capital
-Choice Between Share Issue or Bank Loan
This question concerned the debt/equity debate with simple
calculations based on gearing and shareholder wealth to
support the arguments. Although an easy question, it was
selected by only a few candidates who were not aware of
the basic arguments and characteristics of finance sources.
Question 6 - Equipment Leasing
Calculation
A leasing question requiring the allocation of interest
and capital over the lease period. In part (a), no candidate
allocated quarterly a required but credit was given for
an understanding of the allocation process.
In part (b) only one candidate demonstrated an understanding
of the more commonly used actuarial method.
Question 7 - Modification of Credit
Terms
A fairly tricky question but a surprisingly popular one
although only a few candidates provided convincing answers.
Part (b) was a simple exposé of overtrading which
was answered poorly.
Question
8 - Effect of Currency Fluctuations
Another popular choice. Most candidates showed a comprehensive
knowledge of port costs but little appreciation of the
problems of dealing in foreign currency and risk management
concepts.
