CHALIMBANA UNIVERSITY

FINANCIAL MANAGEMENT (BFM 3100)

INSTRUCTIONS:
 All questions must be attempted
 Clearly Type all your work and use; Font-Times new Roman, Font- Size 12, line and
paragraph spacing 1.5
 Clearly label your answers with Question Numbers
 This Assignment carries a total of 100 marks.

 Due date for submission is TUESDAY 30th August, 2022

 PLEASE strictly observe submission date to avoid losing marks.
 Students DURING CLASS BEFORE THE LECTURE
 Ensure that you QUOTE OR REFERENCE your work

NOTE THAT YOU CAN DO THIS ASSIGNMENT AS A GROUP OR INDIVIDUAL

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QUESTION ONE

Mr. Sanitiser Tembo has just been appointed as the Board Chairman of Corona Ltd, a company
dealing in manufacturing and it is operating on the Copperbelt. The Chief Executive Officer of
the company has requested you to orient Mr. Sanitizer Tembo on the Company’s policy and
guide concerning the dividend of its shareholders.

Required

You are therefore, asked to prepare notes for your orientation as follows;

a. Briefly discuss the implications of share repurchase(4marks)

b. Explain the theory of dividend irrelevance(4marks)
c. Explain the difference that is between scrip dividends t and bonus issues (3marks)
d. Highlight the influence of shareholder expectations on the dividend decision( 3marks)
e. Discuss the meaning of a dividend policy (4 marks)
f. Explain the influence of liquidity constraints on the dividend decision(3marks)
g. Discuss the impact that the issue of dividends may have on a company’s share
price(4marks)

[Total Marks 25]

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QUESTION TWO

Pimpo Zimba and Tecno Zulu are planning to establish a manufacturing company. The company
will be located on the Copperbelt. The company is scheduled to start operating in the second
quarter of the year 2022. As the incoming Finance Director of the same company you realise that
most manufacturing companies usually faces a number of risks. As a way of putting up strategies
to help you prevent, control and manage the risks in business, you have decided to prepare a
presentation to present to management and the board members on risks.

Required

(i) Discuss on risk management (5marks)

(ii) State and briefly explain on the types of financial risks (6 marks)
(iii) Identify the ways of dealing with risk (6marks)
(iv)Briefly explain the process involved in risk management ( 8marks)

[Total: 25 Marks]

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QUESTION THREE

Penga Ujane Plc. has a policy of preparing cash forecast during the year in order to help its
management to make progressive decisions. This is usually prepared as a primary tool in a short-
term cash flow planning.

The company has the following information available.

April 2022 May 2022 June 2022

Zmw Zmw Zmw
Sales 10,000 11,000 9000
Wages 3200 2100 4000
Overheads 1,600 2,000 1,300
Purchases 3,000 1,500 2,300
The following information is relevant
i. 15% of sales are for cash, the balance is received the following month. The amount
received in April for March sales is K4, 000.
ii. Wages are paid in the month they are incurred.
iii. Overheads include K350 per month for depreciation. Overheads are settled in the
following month. K2, 000 is to be paid in April for March’s overheads.
iv. Purchases of direct materials are paid in the month after purchase. Purchases for March
were K1, 000.
v. A machine is expected to be purchased in April for K5, 000. Paid for 50% in the month
of purchase and the balance in the following month.
vi. A tax bill of K900 is to be paid in June.
vii. The opening cash balance in April is K1, 500.
Required
a. Define cash budget and state why companies ought to prepare it (5 marks)
b. As a Finance Director you asked to prepare for the cash budget for the three months:
April, May and June 2022. The cash forecast is to be used for planning purposes.
(20marks)
[Total: 25 Marks]

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QUESTION FOUR

Management of Asset is said to be an important component which must be properly understood

by finance personnel. It is therefore, required that finance managers has to ensure that staff that
falls under them are equipped in this area so that the assets of the firm are properly managed.
The understanding of asset management and its component is therefore crucial.

Required

a) Discuss the importance of asset management (8msrks)

b) Describe what comprises asset management and what it does not. (6marks)
c) Explain what asset management is (4 marks)
d) Briefly explain the responsibilities of an asset manager. (7marks)

[Total: 25 marks]

END OF ASSIGNMENT

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