Question

QULUTIONS - February, 2020 Accounts, the Accountant declared a profit of Ghc926,800 for the mber 2018. The Human Resource Manager said if we made so is our cash balance only Gh040,000?' Give any THREE reasons 1. After preparing the Accounts, the Accoun period ended 31" December 2018. The much as profit, why is our cash balan for this difference. 2. State any three importance and three challeng 3. In terms of models, write down any FOUR of the portance and three challenges respectively, of insurance to a business odels, write down any FOUR of the types of financial planning THREE types of assets, giving examples under each case your financial counsel so he could put his money into an investment. un any FOUR questions you are likely to ask this colleague before he invests 5. A colleague needs your financial counsel so he cou his money? vould you look out for in a good, achievable financial plan? Give any TWO. 7. A Client has tasked you to prepare a financial plan for her. She requires to see the process you will use. Itemise the first FOUR of the processes. 8. Distinguish between the following pairs with respect to insurance business: a. Insurance and gambling b. Pure risk and speculative risk C. Insurable and uninsurable risk d. Liquidated and unliquidated damages o What THREE main decision-points will you expect to see in a financial strategy? 10. In terms of time horizon, briefly explain the types of financial planning. Your explanation should include the tenure and the emphasis. 11. Your Branch manager argues that since we are spending a lot on the repairs of our fixed assets, we shall not depreciate them'. He wants your opinion. 12. You received your company's bank statement from Fidelity Bank showing a balance of Ghc735,000 in your company's favour. But your office cash book shows that you were supposed to have Ghc1,500,000 at the bank. Identify any THREE factors that may have led to this difference. he six principles/laws of insurance and explain any one.

Answer 1

Please find the answers below:

1. Below are 3 reasons for High profit and less cash:

a. Credit Sale of product or service increases the Profits but the Cash balance depends upon the collection made from the customers. (Offering Credit to Customers)

b. Buying of Long-term Assets or Equipment with Cash.

c. Prepaying of Expenses or Repaying of Loan by cash.

2. Importance & Challenges of Insurance to a Busines:

a. Importance:

1. Business Assets/Properties are covered in case of an accident or fire or any other situation. Since value of the assets are high it is better to have it insured.

2. It protects the business against possible liabilities or claims. It sometimes covers legal expenses as well.

3. It can be a replacement of income in case of any disaster. At least the business can recover the cost incurred for the inventory.

b. Challenges:

1. Insurance company sometimes denies the claim due to insufficient documents or proof. They may delay the payment due to the business.

2. It increases as the size of the business grows. So, it becomes a fixed expense for the business without any direct benefit.

3. It may lead to crimes as the beneficiary may be tempted to commit any illegal activity to claim the insurance amount.

3. 4 types of Financial Planning:

1. Immediate Financial Plan - Plan made for the next month or next 6 months.

2. Short-term Financial Plan - Time period would be for the next year.

3. Medium-term Financial Plan - It covers planning for 1 to 5 years.

4. Long-term Financial Plan - It is planned for the next 10 years or more.

Financial Models include Discounted Cash Flow (DCF), Merger Model (M&A), Initial Public Offering (IPO), Leveraged Buy-Out (LBO)

4. 3 Types of Assets with Example:

1. Current Asset - Cash, Inventory, Accounts Receivables.

2. Non-Current Asset - Property Plan Equipment, Furniture, Vehicles.

3. Tangible Asset - Vehicles, Furniture, Inventory

4. Intangible Assets - Patent, Goodwill.