Finance Answers

1. Review the Credit Risk Management guidelines issued by any two Central Banks. Highlight the main elements and compare with Basel guidelines on credit risk management.

2.

Comment on the major challenges to Basel II implementation in the Caribbean in relation to credit risk management

#3

(a) Suppose in winters demand of dry fruits increases. Further supply of dry fruit increases due to favorable environmental condition. Explain with the help of demand and supply curve, how price and quantity will respond

(b) Consider an economy can produce two goods butter and guns. Draw Production possibility frontier for butter and guns. Assume that scientific inventions have doubled the productivity of society's resources. Redraw the Production Possibility frontier

An investment cost N800,000. You know that it will produce an inflow after operating cost of N170,000 a year for 10 years. If the opportunity cost of capital is 14 percent, what is the net percent value of the investment? What will the investment be worth at the end of 5years

2014

2015

2.1.1  Gross Profit Margin (Gross profit percentage)

Gross profit margin = (Total

(3000000-2250000) x 100

       3000000             1

Sales-cost of sales) x 100

           Total Sales     1

(4000000-3000000) x 100

 4000000                   1

=25%

= 25%

2.1.2  Net Profit Percentage

  Net income/net profit

Net income x 100

112 000/350 000*100/1

112 000/ 390 000

=32%

=29%

2.1.3  Working Capital (Current) Ratio

Current assets/current liabilities

Current assets/current liabilities

550 000/250 000

530 000/ 430 000

=2.2%

=1.2

2.1.4  Debt to Equity Ratio

Total assets/shareholders’ equity

Total assets/shareholders’ equity

1350 000/ 850 0000

1710 000/950 000

=1.58

=1.8

2.1.5  Rate of return on Total Capital (after tax)

Net income+ equity

Net income+ equity-dividends

112 000-5000/ 850 000

112 000+950 000=1062 000

12.

=12.58

12.1

2.1.6    Yield on Shareholder’s Interest

1 EXPLAIN your bank’s policy on corporate clients – what do you need to consider when determining who is a desirable corporate client and who is not?   ASSESS the profitability, liquidity, solvency and financial structure of ABC Limited for the two years by CALCULATING the following financial ratios for each year: 

2014

2015

Yield on Shareholder’s Interest

 DISCUSS how ABC Limited could have improved their profitability in the less profitable year and PROVIDE recommendations to management on how ABC could be more profitable in the future.

 COMPILE a written report on the information that you have gathered in assignment question 2.1, as well as your analytical procedures, comparison and interpretation of the Annual Financial Statements of ABC Limited, for the past two years. Include the following in your report:

Graphs, diagrams and tables, where appropriate

3.1    IDENTIFY the role players and drivers that create the need for a new product (please note this question refers to the need and does not require you to identify the people involved in the development of the new product). Consider the following role players:

3.1.1     Internal

3.1.2     External and market

3.1.3     Regulatory

EXPLAIN how the product pricing (fee) is determined and DISCUSS the importance of determining the correct fee

(a) Suppose the GDP per capita (income) has increased from $5000 to $10,000, whereas the demand for luxury apartments has increased from 1000 to 2000, whereas the demand for burgers has increased from 10,000 to 12,000. Calculate the income elasticity of demand for apartments and burgers

You have been hired as the Chief Strategist and Policy Analyst for a commercial bank in your jurisdiction. You are to assess the impact the global financial crisis of 2007/2009 had on the pace of the Basel 2/3 reform agenda in your jurisdiction. What are the implications of the current covid 19 on this agenda and what are five immediate steps that you will take to position your institution as a resilient bank for the future

Explain the causes of Balance of Payment disequilibrium in any country (10mks)