Question 1

Construct a statement of financial position for Hamadzemoyo Enterprises Pvt Ltd. using the
following financial information:
Land and building $870,000
Motor vehicle $590,000
Plant and equipment $400,000
Furniture and fittings $469,000
Inventory $79,000
Accounts receivable $69,000
Cash at bank $72,000
Cash in hand $41,000
Loan $800,000
Accounts payable $50,000.

Question 2
Prepare an income statement for Associated Butcheries Private Limited given the information
below:
Sales $4,290,000
Inventory at start $378,000
Inventory at end $249,000
Interest expense $97,000
Lease payments $50,000
Wages and salaries $360,000
Goods purchased $705,000
Repairs and maintenance $47,000
discount allowed $50,000
Discount received $70,000

Depreciation is charged on the straight-line basis at the rate of 30 % on cost (cost of motor
vehicle and equipment are $900,000 and $700,000 respectively)

Corporate tax is 25 % on profit.

Question 3
What are the uses and limitations of financial ratios?

Question 4
Unique Mechanics is a small business owned by Mrs Wokwedu. It specialises in the
servicing and repairing of vehicles on contract from corporate bodies such as the CMED,
Care International and Plan. Mrs Wokwedu is in the process of preparing a monthly cash
budget for the period September to December 2021. Revenues are highly seasonal, peaking in
the months of October and November. The following information has been availed to you to
assist Mrs Wokwedu in preparing the cash budget for the period:
 1. About 25 % of Unique Mechanics’ revenue is collected one month after the service
delivery and the balance (75 %) is collected two months after the servicing is
rendered.
2. Unique Mechanics purchases amount to 55 % of revenues and are made one month in
advance of anticipated revenues. Payments are made in the month following the
purchase
3. Wages and salaries for the four months are projected to be $250, $650, $750, and
$350 respectively,
4. Unique Mechanics rents a premises where they are charged $250 per month as rentals
5. In September, Mrs Wokwedu intends to buy some additional equipment for the
workshop which cost $1000. In September, quality mechanics will pay interest
expense of US$400 on its medium-term debt. The interest expense relates to the
period September–December.
6. In November, Mrs Wokwedu needs to pay a loan repayment instalment for an existing
debt of $800. Interest on the US$800 short-term debt for the period September –
November is US$20, which is paid in November.
7. A tax payment of US$590 is made in November.
8. Unique Mechanics has a cash balance of US$1,500 and maintains a minimum cash
balance of US$1,500 to meet any unanticipated shortfall in NCF.
9. Unique Mechanics needs to borrow to maintain that minimum cash balance.
Borrowing is done at the beginning of the month in which the funds are needed.
Interest rate on funds borrowed is 12 % per annum, or 1 % per month, and this is paid
in the month following the month in which funds are borrowed. Thus, interest rate on
funds borrowed in October will be paid in November equal to 1 % of the loan amount
outstanding in October.
10. Revenues for Unique Mechanics for the second half (H2) of 2021 are estimated as
follows:
July $6,200
August $5,000
September $6,000
October $8,000
November $8,500
December $7,000, while sales for January 2022 are expected to be $6,500. (25
marks)

Question 5
When determining the financial objectives of an entrepreneurial venture, it is necessary to
take three types of decision into account: investment decisions; financing decisions and
dividend policy.

Required
a. Discuss the nature of these three types of decision, commenting on how they are
interrelated and how they might affect the value of the firm (that is the present value
 of projected cash flows) (15
marks)
b. State and critically discuss the main clauses in the memorandum of association of a
limited liability company (5 marks)
c. State and explain the listing requirements for a company to list its securities on a
capital market like the Zimbabwe Stock Exchange (5
marks)

Question 6
a. Critically evaluate the main sources of finance for an entrepreneurial venture clearly
showing the difference between internal and external sources of raising funds. (10
marks)
b. State the merits and demerits of public deposits and retained earnings as methods of
business finance. (15 marks)

Question 7
Mukute Industries is a local company owned by former GZU students who have identified a
niche in the customised bottled water market. The projected cashflows of the project are as
follows:
Year Cash flows
0 −300,000
1 150,000
2 120,000
3 90,000
4 30,000

The cost of capital of the project is 10 %.

Required:
a. if the payback period is three years, should the project be accepted based on the
payback rule?
b. If the discounted payback period of Glax Limited is 3.5 years, should the project be
accepted based on the discounted payback period rule?
c. Based on the NPV rule, should the project be accepted?
d. Based on the IRR rule, should the project be accepted?

Question 8
a. How different are business angels from venture capital?
b. Discuss what is involved in determining the financing requirement of MSMEs.
c. Examine the factors that influence MSMEs’ choice of financing.