ACC501 – Business Finance

Practice (Numerical) Questions

(Lesson # 1 – 18)

IMPORTANT INSTRUCTIONS:

Dear Students,

It is advised to read the following instructions carefully before attempting the numerical
practice questions provided in this document:

• You are required to solve/attempt all the questions on your own. DO NOT send the
solution of any question to the teacher via MDB, Ticket or Email because the solution
file will also be uploaded in a few days. (Any query relevant to these questions will be
addressed in the upcoming interactive live session of the course.)

• You must consult the relevant lesson before attempting any question. In case you have
any problem while attempting the question, you may note it down for the discussion in
the upcoming interactive live session. DO NOT send any questions through MDB,
Ticket or Email.

• Once the solution file is uploaded, you may compare your attempts with the actual
solution of the questions.

• The questions provided in this file are solely for the practice purpose. If you try to
attempt/solve these questions with due attention, you may be able to attempt the
numerical questions in exam as well.

• For practicing MCQs, you are advised to attempt the ‘Formative Assessment Quizzes’
available in the “Reading” tab of Lessons # 3, 6, 10, 11, 14, 15, 17 and 19.

• As far as theoretical questions are concerned, you are advised to watch video lectures
carefully and consult the handouts along with recommended book(s).

Good Luck,
Instructor ACC501

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 Practice (Numerical) Questions
(Lesson # 1 – 18)
1. The following data is available for ZT Corporation for the year ended 31 December 2023.
You are required to prepare the Balance Sheet of this corporation:
• Short-term debt of Rs. 40,000
• Long-term debt of Rs. 500,000
• Current assets of Rs. 240,000
• Net fixed assets of Rs. 650,000

2. Calculate the Shareholder’s Equity of the ZT Company, if the company has:

Items Rs.
(in millions)
Cash and equivalents 425
Accounts payable 290
Notes payable 287
Inventories 329
Property, plant, & equipment 1470
Long term debts 578

3. Ali Corporation has a taxable income of Rs. 85,000. What will be the Total Tax for this
Corporation? Use the following schedule for tax calculations.

Taxable Income Tax Rate (%).

Rs. 0 - 50,000 15
50,001 - 75,000 25
75,001 - 100,000 34
100,001- 335,000 39

4. From the following information of Alfa Corporation, calculate the “Operating Cash Flow”:
Particulars Rs.
Sales 13,500
Cost of Goods Sold 6,400
Deprecation 12,00
Interest Expense 680
Tax 150

5. What would be the Net Capital Spending if Alfa Corporation had fixed assets of Rs.
100,000 at the start of the accounting year whereas at the end of the same accounting period,
the value of these assets is Rs. 150,000 while the depreciation is of Rs. 20,000 as per the
yearly income statement.

6. You are required to calculate Cash Flow to the Creditors and Cash Flow to the Stockholders
from the following financial data:
Cash Flows Rs. (‘000)
Operating cash flow 330
Capital spending 150
Additions to net working capital 25

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 Interest paid 45
Retirement of debt 116
Proceeds from new debt sales 76
Dividends paid 52
Repurchase of Stock 12
Proceeds from new stock issue 45

7. From the given information of Alfa Corporation, you are required to calculate the Cash
Flow from the firm’s assets and the Cash Flow to the investors:
Cash Flows Rs. (‘000)
Operating cash flow 325
Debt 95
Capital spending 179
Equity 27
Additions to net working capital 32

8. From the given information, prepare the Cash Flow Statement of Alfa Corporation by
estimating cash flows from operations, investments, and financing:
Cash flows Rs. (in '000)
Net Income 8,500
Acquisition of fixed assets 19,700
Proceeds from long-term debt sales 8,500
Dividends Paid 4,200
Sales of fixed assets 2,400
Increase in accounts receivable 2,300

9. From the following data pertaining to XYZ Corporation, you are required to calculate the
Current Ratio along with complete calculations:
Items Rs.
Cash 450,000
Accounts receivable 525,000
Accounts payable 830,000
Land and Machinery 620,000
Inventory 310,000
Notes payable 120,000

10. The following data represents the assets side of a corporation. You are required to convert
this data into a common size (standardized) statement.
Rs.
Particulars
(Million)
Current Assets
Cash 92
Receivables 178
Inventories 390
Total Current Assets 660
Fixed Assets
Plant and Machinery 2820
Total Assets 3480
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11. From the following data of a company, calculate the Current Ratio and Quick Ratio:
Items Rs.
Net profit 42,500
Cost of goods sold 365,000
Sales 525,000
Cash 63,000
Accounts payable 162,000
Accounts receivable 173,000
Net fixed assets 752,000
Inventory 87,000
Accruals 145,000
Bank loan and short-term loan 63,000
Common stock 165,000
Long term debt 425,000
Retained earnings 145,000

12. You are required to calculate “Receivables Turnover” and “Average Collection Period”
from the given data:
Items Rs. (‘000)
Accounts receivable 1,850
Inventory 6,550
Accounts payable 1,700
Sales 13,500
Net profit 3,500

13. From the following information, you are required to calculate the Total Debt Ratio
Items Rs.
Current Assets 500,000
Land 200,000
Building 100,000
Machinery 400,000
Total Equity 1,000,000

14. From the given information of Alfa Corporation, calculate its Debt Ratio, Equity Ratio and
Debt-to-Equity (D/E) Ratio:
Items Rs.
Cash 25,000
Accounts receivable 160,000
Inventory 50,000
Net fixed assets 640,000
Accounts payable 84,000
Accruals 110,000
Bank loan and short-term loan 64,000
Long term debt 260,000

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 Common stock 140,000
Retained earnings 130,000
Sales 430,000
Cost of goods sold 220,000
Net profit 32,000

15. From the given information calculate the following ratios of Alfa Corporation.
• Interest Coverage Ratio
• Cash Coverage Ratio
• Inventory turnover Ratio
• Day’s sales in Inventory
• Receivables turnover
Alfa Corporation.
Income Statement
Particulars Rs. (‘000)
Net Sales 4222
Cost of Goods Sold -2355
Depreciation -374
Earnings before interest and taxes 1493
Interest -240
Taxable Income 1253
Taxes -277
Net Income 976
Dividends 488
Retained Earnings 488
Additional Information
The inventory of the firm is worth Rs. 512,000 while accounts receivable are Rs. 280,000.

16. From the data given below, compute “Earning per Share” and “Price-Earnings Ratio”:
Items Rs.
(in Millions)
Current Assets 470
Net Fixed Assets 550
Outstanding shares 65
Sales 830
Net Income 615
Market price per share 65

17. From the given information, estimate the figures of total assets and total equity to further
calculate Return on Assets (ROA) and Return on Equity (ROE):
Items Rs.
Cash 30,000
Accounts receivable 89,000
Inventory 90,000
Net fixed assets 680,000
Accounts payable 155,000
Accruals 125,000

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 Bank loan and short-term loan 60,000
Long term debt 250,000
Common stock 250,000
Retained earnings 100,000
Sales 530,000
Cost of goods sold 360,000
Net profit 45,000
18. A company has a dividend payout ratio of 25%. Calculate its retention ratio and the amount
disbursed as dividends to shareholders if the net income of the company is Rs. 500 million.

19. The following data pertains to XYZ Company:

20. Particulars Rs. Particulars Rs.
(millions) (millions)
Gross Income 380 Cash Dividends 150
Net Income 200 Retained Earnings 50
You are required to calculate “Dividend Payout Ratio” and “Retention Ratio”.

20. Calculate the maximum sustainable rate of growth for a firm with an ROE (Return on
Equity) of 15 percent and dividend payout ratio of 35 percent.

21. By using the given information of a firm, calculate its Return of Equity (ROE) using
DuPont analysis technique:
Items Rs.
Cash 4,665
Accounts Receivable 5,250
Inventory 5,160
Net Plant and Equipment 35,400
Common Stock and Paid in surplus 9,900
Retained Earning 16,500
Net Income 9,900
Sales Revenue 34,500

22. Mr. Abid is planning to invest Rs. 500,000 at a simple interest rate of 8% for 5 years.
Calculate how much amount he would have after three years.

23. Mr. Shakir is planning to invest Rs. 500,000 at a compound interest rate of 8% for 5 years.
Calculate how much amount he would have after three years.

24. Mr. Nadeem plans to invest Rs. 1,000,000 for 5 years in a bank. Based on the information
provided below, suggest to him the best option for investment.
Annual Type of
Bank
Interest Rate Interest
Bank A 8.0% Simple Interest
Bank B 7.5% Compound Interest

25. Mr. Anwar invested Rs.50,000 in a 12%, 60-day certificate of deposit, what will be the total
proceeds at the end of certificate of deposit period?

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26. If you anticipate a need of Rs. 600,000 for a vacation in two years and you can earn 8%
interest on your savings, how much should you invest today to cover the cost of your
vacation?

27. Suppose you are 20 years old now and can invest money at 12%. Your aim is to get Rs. 1,000,000
at the age of 40. Calculate the amount you should invest today.

28. Suppose that you will receive Rs. 500,000 after 15 years from an investment into the bank.
You are now required to calculate the:
• Present value of the investment if you invest your money at
6 percent compounded annually?
• Present value of your investment if you invest the same
amount at 9 percent compounded annually?

29. Mr. Aqib needs Rs. 1,500,000 to buy a new vehicle. If he has Rs. 600,000 now to invest at
12 percent compounded annually, how long will it take to have the amount for buying new
vehicle?

30. Mr. Aqdas has Rs. 300,000 to invest today and he requires Rs. 500,000 after 5 years for his
child’s admission in a school. What interest rate he must earn on his investment to meet the
cost of school admission?

31. Considering the following year-end cash flows, calculate the present value if the discount
rate is 12%:
Years 1 2 3 4 5
Cash Flow (Rs.) 100,000 150,000 120,000 210,000 180,000

32. Mr. Hassan plans to buy a new car for Rs. 2,000,000. The local bank will provide him a
loan at 10% per year (0.83% per month) for 5 years (60 months). How much will each
monthly payment be?

33. Mr. Saeed wants to renovate his house after 5 years and requires Rs. 1,000,000 at that time.
He can earn 12% compounded annually if he decides to deposit an equal amount every year
for a period of 5 years. Find out the amount of each deposit.

34. An annuity with a cash inflow of Rs. 10,000 for each of the six (6) years assumes that
interest payments occur at the beginning of each year. What will be the future value of the
annuity after 5 years if it can earn 10 percent annually?

35. Determine the effective interest rate, compounded quarterly, equivalent to 15% annually.

36. A bank offers a 26% annual percentage rate (APR) on its consumer loan. The bank requires
you to make payments each month. What is the interest rate you actually pay?

37. A person intends to save up money for the future. Two banks provide following savings
account options. which banks provide a good choice for more effective interest rates.
• Bank A offers 22.5% rate compounded quarterly.
• Bank B offers 23 % rate compounded semiannually.

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38. Let's say you are thinking about making an investment that will yield Rs 15,000 per year
for the next eight years. What is the cash flow series' present value if your opportunity rate
is 9%?

39. A bond having a 11% coupon rate and ten years to maturity is issued by a corporation. The
bond has a face value of 50,000 rupees. Determine the coupon's present value if the market
interest rate is 10%.

40. Assume that a Company releases a 9-year bond with a face value of Rs. 10,000 and a
coupon rate of 8%. Given the current state of the market, what is the bond's current worth
assuming a 14% necessary rate of return is justified?

41. The face value of the bond issued by ABC Corporation is Rs. 2000. It provides Rs. 200 as
annual coupon for next 20 years. Determine the present value of the coupon payment if the
market demands a 10% rate of return on comparable bonds.

42. Bonds from SNT Inc. have a face value of Rs. 1200. The bonds mature in 12 years, with an
annual coupon of Rs. 100. For comparable bonds, the market requires a return of 10%.
Determine the bond's value and specify if it is a premium or discount bond.

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Important Note:
The solution file will be uploaded by the end of next week. You may compare your
attempts with the actual solution of the questions. DO NOT send the solution to any
question through MDB, Ticket or Email.