Which of the stocks do you consider to be of greater risk? Discuss your reasoning
finance
Description
SECTION TWO
STRUCTURED ANSWERS
Answer
ONE question.
Answer any ONE (1)
questions from the TWO (2) listed below.
Question 1
a.
Compute the following ratios:
i.
Accounts Receivable Turnover
ratio; (3 marks)
ii.
Accounts Payable Turnover
ratio; (3 marks)
iii.
Average Collection Period; (3 marks)
iv.
Average Payable Period; (3 marks)
v.
Quick Ratio; (3 marks)
vi.
Gross Profit Margin. (3 marks)
vii.
Net Profit Margin (3 marks)
viii.
Debt ratio (3 marks)
b.
Explain briefly what is
factoring? (6 marks)
Total 30 marks
Questions 2
Given the following probable states of the
economy and the expected return on a security in each state:
|
State of
Economy |
Probability |
Return of Stock A |
Return of Stock B |
|
Recession |
0.50 |
20% |
18% |
|
Normal |
0.40 |
45% |
35% |
|
Boom |
0.20 |
30% |
40% |
i.
Compute the expected returns
for Stock A and Stock B; (8
marks)
ii.
Compute the standard deviation
for Stock A and Stock B; (12
marks)
iii.
Compute the coefficient of
variation for Stock A and B; and (6 marks)
iv.
Which
of the stocks do you consider to be of greater risk?
Discuss your reasoning (4 marks)
Total 30 marks
