REVISION

SOURCES OF FINANCE

1. What are the advantages and limitations to a business in using

debentures?
2. What criteria do business angels and venture capital firms use when
deciding whether to invest in a business?
3. What are the differences between short term, medium term and long term
borrowing?
4. What are the various sources of finance for public sector organizations?
5. What factors do managers need to decide on before choosing their
sources of finance?

WORKING CAPITAL MANAGEMENT

1. Explain why minimising net working capital is considered to be a risky

policy.
2. Explain the reasons that John Maynard Keynes suggested individuals (or
firms) hold cash.
3. Explain the differences between the following pieces of terminology:
'working capital management', 'net working capital', and 'gross working
capital'.

DIVIDEND POLICY

1. What does it mean to say that dividends are “irrelevant” in a world

without taxes or other market frictions?
2. What do you think is the typical stock market reaction to the
announcement that a firm will increase its dividend payment? Why?
3. Briefly explain the information content of share repurchase.

MERGERS AND ACQUISITION

1. Define the term “merger” as used in corporate finance

2. Explain motives for mergers in at least four categories
3. Alpha Plc plans to acquire Beta Plc. The Present Values (PV) of Alpha
and Beta are TZS 20,000,000 and TZS 10,000,000 respectively. The
advisersꞌ fees, underwritersꞌ fees and legal and accounting fees are TZS
 500,000, TZS 500,000 and TZS 1,000,000 respectively. The Value of the
merged firms is TZS 40,000,000.

Required:
1) What is value for the transaction costs?
2) What is the net gain from merger?