Some issues!

1) Your question would appear to refer to paying a supplier promptly in order to maintain his “goodwill” towards the company…. which basically means maintaining good relations with your suppliers by paying them within the terms of trade or supply agreed between the parties.

2) A Fixed Charge is a lien or mortgage on a specific fixed-asset (such as a parcel of land) to secure the repayment of a loan. The lender also registers a charge against the asset which remains in force until the loan is repaid.

A Floating Charge is a lien or mortgage on an asset that changes in quantity and/or value from time to time (such as an inventory), to secure the repayment of a loan. In this arrangement, no charge is registered against the asset and the owner of the asset can deal in it as usual. If a default occurs, or the borrower goes into liquidation, the floating asset ‘freezes’ into its then current state ‘crystallizing’ the floating charge into a fixed charge and making the lender a priority creditor.

3)When shares are not very marketable (when the volume of shares trading or changing hands is low or intermittent)we usually expect shareholders to demand a higher return in order to compensate them for the increased “Liquidity Risk” i.e because the shares cannot be easily resold.

4)ROCE can be calculated as (a) Average Annual Profit / Initial Investment or (b) Average Annual Profit / Average Investment The F9 Examiner favours dividing by the Average Investment, which is Initial Investment + Residual Value / 2

5) Discounted Payback
Year Period C/F Cumulative C/F
1 509,040 509,040
2 574,919 1,083,959 ***
3 1,104,430 2,098,389 ***
Thus, Payback is 2 years + 916,041 (Shortfall to full P/:) /
(Divided by) 1,014,430 (Year 3 Cashflow)…which is equal to .9030 of one year (i.e. 10.84 mts)…Answer 2.9 yrs

Hope this helps, Peter

Don’t hessitate to come back to me if you need further help. Peter

Hi Nice 36,
Definition of what a floating charge is:

it is a charge over a class of assets present and future;
that class will be changing from time to time; and
until the charge crystallises and attaches to the assets, the company may carry on its business in the ordinary way.

Floating Charge

A mortgage, debenture or other security documentation, is likely to create charges over particular assets as security for borrowings. There are essentially two types of charge, floating and fixed. A floating charge refers to assets which are subject to change on a day to day basis, such as stock. Individual items move into and out of the stock as they are bought and sold in the ordinary course of events. The floating charge crystallises if there is a default or similar event. At that stage the floating charge is converted to a fixed charge over the assets which it covers at that time. A floating charge is not as effective as a fixed charge but is more flexible.