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explain duties of a employer to an employee. (9 marks)July 2020
Payment of wages: One duty of an employer to an employee is the payment of wages. This includes paying the employee the agreed-upon rate of pay for the work they perform, as well as any additional compensation or benefits, such as overtime pay or bonuses. Provision of a safe and healthy work environRead more
- Payment of wages: One duty of an employer to an employee is the payment of wages. This includes paying the employee the agreed-upon rate of pay for the work they perform, as well as any additional compensation or benefits, such as overtime pay or bonuses.
- Provision of a safe and healthy work environment: A second duty of an employer to an employee is the provision of a safe and healthy work environment. This includes ensuring that the workplace is free from hazards and that appropriate safety measures are in place to protect the health and well-being of employees.
- Compliance with labor laws: A third duty of an employer to an employee is compliance with labor laws. This includes adhering to laws and regulations that govern working conditions, such as minimum wage laws, overtime regulations, and health and safety standards.
- Fair treatment: A fourth duty of an employer to an employee is fair treatment. This includes treating employees with respect and fairness, and not discriminating against them on the basis of race, religion, gender, age, or any other protected characteristic.
- Training and development: A fifth duty of an employer to an employee is providing opportunities for training and development. This includes providing employees with the necessary skills and knowledge to perform their job duties effectively, and offering opportunities for growth and advancement within the organization.
- Communication: A sixth duty of an employer to an employee is communication. This includes providing employees with clear and timely information about their job duties, expectations, and performance, as well as keeping them informed about changes or developments within the organization.
- Fair discipline: A seventh duty of an employer to an employee is fair discipline. This includes using disciplinary measures only when warranted, and using them in a fair and consistent manner.
- Respect for privacy: An eighth duty of an employer to an employee is respect for privacy. This includes respecting the employee’s right to privacy in the workplace, and not intruding on their personal space or personal affairs unless there is a legitimate business reason to do so.
See lessExplain four factors that may be considered by firn) when developing its credit policy. (8 marks)July 2020
Creditworthiness of the customer: One of the main factors that a firm may consider when developing its credit policy is the creditworthiness of the customer. This includes evaluating the customer's financial stability, credit history, and ability to pay back the credit extended to them. A customer wRead more
- Creditworthiness of the customer: One of the main factors that a firm may consider when developing its credit policy is the creditworthiness of the customer. This includes evaluating the customer’s financial stability, credit history, and ability to pay back the credit extended to them. A customer with a strong credit profile is more likely to be approved for credit and may be offered more favorable terms, such as a lower interest rate or longer repayment period.
- Type of product or service being offered: The type of product or service being offered can also influence a firm’s credit policy. For example, a firm may be more willing to extend credit for high-priced, high-quality products or services that are less likely to be returned or have a longer lifespan, as these may be seen as a safer investment.
- Credit terms and conditions: The credit terms and conditions offered by a firm can also be a factor in its credit policy. This includes the interest rate, repayment period, and any fees or charges associated with the credit. A firm may tailor its credit terms based on the creditworthiness of the customer, the type of product or service being offered, and the level of risk it is willing to accept.
- Credit limit: The credit limit, or the maximum amount of credit that a firm is willing to extend to a customer, can also be a factor in its credit policy. A firm may set a credit limit based on factors such as the customer’s creditworthiness, the type of product or service being offered, and the firm’s overall credit risk tolerance.
- Credit evaluation process: The credit evaluation process, or the method by which a firm assesses the creditworthiness of a customer, can also be a factor in its credit policy. A firm may use a variety of methods to evaluate creditworthiness, such as reviewing a customer’s credit report, verifying income and employment information, and conducting a financial analysis.
- Credit monitoring and collection: The credit monitoring and collection process, or the method by which a firm monitors the payment of its credit and manages any delinquencies or defaults, can also be a factor in its credit policy. A firm may have specific procedures in place for monitoring credit payments and collecting on overdue accounts, and these may be outlined in its credit policy.
- Credit insurance: The use of credit insurance, or insurance that covers the risk of default or nonpayment by a customer, can also be a factor in a firm’s credit policy. A firm may require customers to purchase credit insurance as a condition of extending credit, or it may offer credit insurance as an optional service.
- Legal considerations: Legal considerations, such as applicable laws and regulations regarding credit and consumer protection, can also be a factor in a firm’s credit policy. A firm may need to comply with certain laws and regulations when extending credit, such as the Fair Credit Reporting Act or the Truth in Lending Act, and its credit policy may outline how it will meet these requirements.
See lessState two disadvantages of using Pay-Back Period as a method of evaluating long term projects. (2 marks)July 2020
Ignores the time value of money: Payback period only considers the amount of time it takes for an investment to recoup its initial cost, and it does not take into account the time value of money. This means that it does not consider the fact that money has a different value at different points in tiRead more
- Ignores the time value of money: Payback period only considers the amount of time it takes for an investment to recoup its initial cost, and it does not take into account the time value of money. This means that it does not consider the fact that money has a different value at different points in time due to factors such as inflation and the opportunity cost of not investing it elsewhere.
- Does not consider cash flows after the payback period: Payback period only looks at the cash flows during the period of time it takes for the investment to pay back its initial cost, and it does not consider the cash flows that occur after the payback period. This means that it does not take into account the long-term profitability of the investment, which could be an important factor in evaluating its overall feasibility.
- Ignores risk: Payback period also ignores the risk associated with an investment, which can make it a less reliable method of evaluating long-term projects. For example, an investment with a shorter payback period may still be less attractive if it carries a higher level of risk compared to another investment with a longer payback period.
See lessState three tools that may be used by the Central Bank of Kenya to control credit in the economy. (3 marks)July 2020
Reserve requirements: The Central Bank of Kenya can require banks to hold a certain percentage of their deposits in reserve, which limits their ability to lend out money and helps to control the supply of credit in the economy. Interest rates: The Central Bank of Kenya can also use its power to setRead more
- Reserve requirements: The Central Bank of Kenya can require banks to hold a certain percentage of their deposits in reserve, which limits their ability to lend out money and helps to control the supply of credit in the economy.
- Interest rates: The Central Bank of Kenya can also use its power to set interest rates to influence the demand for credit. For example, by raising interest rates, the Central Bank can make borrowing more expensive, which may discourage people and businesses from taking out loans and reduce the overall demand for credit.
- Open market operations: The Central Bank of Kenya can also use open market operations to buy and sell government securities in the open market, which can affect the supply of money and credit in the economy. For example, if the Central Bank buys securities from banks, it will increase the banks’ reserve balances and allow them to lend out more money, which can increase the supply of credit in the economy. Conversely, if the Central Bank sells securities to banks, it will reduce their reserve balances and decrease the amount of money they can lend, which can help to reduce the supply of credit.
See lessHighlight three advantages of leasing as a source of finance. (3 marks)July 2020
Flexibility: Leasing allows companies to obtain the use of assets without committing to a long-term purchase, which gives them the flexibility to upgrade to newer equipment as needed or to adjust their assets in response to changes in business needs. Lower upfront costs: Leasing typically requires lRead more
- Flexibility: Leasing allows companies to obtain the use of assets without committing to a long-term purchase, which gives them the flexibility to upgrade to newer equipment as needed or to adjust their assets in response to changes in business needs.
- Lower upfront costs: Leasing typically requires lower upfront costs compared to buying, as it does not involve a large down payment or the need to raise capital to purchase the asset outright.
- Off-balance sheet financing: Leasing can be considered off-balance sheet financing, as the leased assets do not appear on the company’s balance sheet as a liability. This can help a company maintain a stronger financial position and potentially improve its debt-to-equity ratio.
- Tax benefits: Leasing can also provide tax benefits, as the payments made under a lease are typically treated as operating expenses and can be deducted from a company’s taxable income
See lessHighlight two limitations of using working capital in estimating the liquidity position of a business. (2 marks)July 2020
Working capital does not account for long-term liabilities: Working capital is a measure of a company's short-term liquidity, and it only considers the current assets and current liabilities on a company's balance sheet. This means that it does not take into account long-term liabilities, such as loRead more
- Working capital does not account for long-term liabilities: Working capital is a measure of a company’s short-term liquidity, and it only considers the current assets and current liabilities on a company’s balance sheet. This means that it does not take into account long-term liabilities, such as loans or bonds that are not due within the next year. As a result, a company with a high level of working capital may still have trouble meeting its long-term financial obligations.
- Working capital can be manipulated: Working capital is calculated by subtracting current liabilities from current assets, which means that a company can manipulate its working capital by changing the level of either of these items. For example, a company could temporarily increase its working capital by delaying the payment of bills or by selling off assets that are not critical to its operations. This can give a misleading impression of the company’s liquidity position.
See lessState three functions of insurance companies in Kenya. (3 marks)July 2020
Risk management: Insurance companies in Kenya provide risk management services to individuals and businesses by offering policies that protect against potential losses or liabilities. This can include car insurance, home insurance, life insurance, and other types of coverage. Investment: Insurance cRead more
- Risk management: Insurance companies in Kenya provide risk management services to individuals and businesses by offering policies that protect against potential losses or liabilities. This can include car insurance, home insurance, life insurance, and other types of coverage.
- Investment: Insurance companies in Kenya often invest the premiums collected from policyholders in a variety of assets, such as stocks, bonds, and real estate, in order to generate additional income and help cover the costs of future claims.
- Claim processing: Insurance companies in Kenya are responsible for processing and paying out claims to policyholders when a covered event occurs. This includes verifying the validity of the claim, evaluating the damages or losses sustained, and issuing payment to the policyholder.
See lessOutline two objectives of Business Finance to an organization.(4 marks)July 2020
To fund operations and growth: Business finance helps organizations secure the necessary funding to cover their operational expenses and invest in growth opportunities. This can include obtaining loans, issuing debt or equity securities, or using retained earnings to finance operations. To maximizeRead more
- To fund operations and growth: Business finance helps organizations secure the necessary funding to cover their operational expenses and invest in growth opportunities. This can include obtaining loans, issuing debt or equity securities, or using retained earnings to finance operations.
- To maximize shareholder wealth: Business finance helps organizations make financial decisions that are aligned with their goals and objectives. For example, an organization may seek to maximize shareholder wealth by investing in projects that are expected to generate a high return on investment or by paying dividends to shareholders. By making financially sound decisions, organizations can increase the value of their business and create value for their shareholders.
See lessThe current market price of an equity share of Malaba Limited is Ksh 40. The current dividend per share is Ksh 2. The dividends are expected to grow at the rate of 5%. Calculate the cost of the equity capital. (4 marks)July 2020
To calculate the cost of equity capital, you can use the dividend discount model, which states that the price of a share is equal to the present value of all future dividends. The formula for the cost of equity capital is: Cost of Equity = D / (R - G) Where: D is the current dividend per share R isRead more
To calculate the cost of equity capital, you can use the dividend discount model, which states that the price of a share is equal to the present value of all future dividends.
The formula for the cost of equity capital is:
Cost of Equity = D / (R – G)
Where:
Plugging in the values from the problem, we get:
Cost of Equity = 2 / (R – 5)
To solve for the required rate of return, we can rearrange the formula to solve for R:
R = D / Cost of Equity + G
Substituting in the values, we get:
R = 2 / (40 / 100) + 5 = 0.05 + 5 = 5.05 or 5.05%
Therefore, the cost of equity capital for Malaba Limited is 5.05%.
See lessState three reasons why money has time value. (3 marks)July 2020
Opportunity cost: The opportunity cost of holding money is the potential return that could have been earned by investing it instead. For example, if you have $100 in cash and decide to hold onto it for a year, you are forgoing the opportunity to invest that money and earn a return on it. Inflation:Read more
- Opportunity cost: The opportunity cost of holding money is the potential return that could have been earned by investing it instead. For example, if you have $100 in cash and decide to hold onto it for a year, you are forgoing the opportunity to invest that money and earn a return on it.
- Inflation: Inflation is the general increase in prices over time, which means that the purchasing power of money tends to decrease over time. For example, if the inflation rate is 2% per year, then something that costs $100 today will cost $102 in one year. This means that the value of your money will be worth less in the future, which makes it more valuable to use it now rather than holding onto it.
- Risk: The value of an investment can fluctuate over time due to various factors such as changes in market conditions, company performance, and overall economic conditions. Holding money carries less risk than investing it, so it may be more valuable to hold onto cash in times of uncertainty or high risk.
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