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Age 260 Agricultural Finance And Credit Management Question Paper
Age 260 Agricultural Finance And Credit Management
Course:Agricultural Economics
Institution: University Of Eldoret question papers
Exam Year:2012
UNIVERSITY OF ELDORET
SCHOOL OF AGRICULTURE AND BIOTECHNOLOGY
SECOND SEMESTER MAIN UNIVERSITY EXAMINATIONS
2012/2013 ACADEMIC YEAR (SESSION 3)
AGE 260: AGRICULTURAL FINANCE AND CREDIT MANAGEMENT
QUESTIONS INSTRUCTIONS: Answer any 5 questions
1.a) Using examples from Kenya, differentiate between micro and macro agricultural finance (4marks)
b) Explain the objectives of financial management? (5marks)
c) Assume you are a farmer and you borrowed a long term Ksh. 500,000 to be repaid in 5 years. How much interest would you pay if the amount is compounded quarterly at an annual rate of 15%? (5marks)
2.a) A investor deposited Ksh. 10,000. Ten years later it is worth Ksh. 17,910. What rate of return did the investor earn on the investment? (4marks)
b) Explain characteristics of good agricultural credit (10 marks)
3.a) using illustrations, explain the following concepts and terms as used in agricultural finance
I. Installment (2marks) IV. project appraisal (2 marks)
II. solvency (2marks) v. hypothecation (2 marks)
III. capital market (2marks)
b) Assume that BAT Company sold a 5 year old bond with a call option and whose coupon rate is 10%. The bond has a market of price of Ksh.19000 and per value of Ksh. 15,000. If the bond has a 2.5 years call option and a call price of ksh.24,000. What is the rate of return on bond? (4marks)
4 a) the following information relates to sunrise Flower Farm for the period ending 31st December, 2009; fixed assets 2,400,000, Current and intermediate assets 2,000,000, Current liabilities 400,000. Total liabilities 2,000,000. Equity capital 1,200,000, Net profit after tax 1,000,000, Net profit before tax 1,200,000, Sales 4,000,000, Gross revenue 6,000,000 and cost of goods sold 4,500,000.
Required
Compute the following ratios and interpret the results to advice sunrise flower farm on the financial position.
I. Gross margin ratio (2mks) III. Debt structure (2mks)
II. Net profit ratio (2mks) IV. Return on assets (2mks)
IV. Equity asset ratio (2mks)
b) List the main risks embedded in agricultural activities (4mks)
5. a) Briefly describe 3Cs and 3Rs of credit (6mks)
b) Explain any four major ways of in which farmers can strengthen their risk bearing abilities (8mks)
6. a) Suppose a supplier of inputs issues a trade credit worth 60 million with a condition stating 3/2n-22. But the farmer delays payment and only clears the debt after 2months. How much less or more money the farmer will pay if the farmer made payment within:
i) 10 days (2mks)
ii) On 22nd day (1mk)
iii) Delays payment until the end of 2 months (3mks)
b) Explain the function of a financial manager (8mks)
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