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Professor Akinlabi has been teaching physics at a frontline public university in Nigeria for 30 years. He made quite some money from research grants and has over the years saved about 75 million naira, which he has been keeping in a fixed deposit facility. He complained to his friend, Dr. Albert, who is a professional accountant and expert in risk management, about the low interest rate on fixed deposits and how the high inflation rate in the country is fast eroding the real value of his savings. He is thinking of investing his savings in a poultry farm, but he is quite averse to risks.
Having tried to get some information on the diverse dimensions and dynamics of risks involved in business, he asked Dr. Albert to offer some clarifications. As Dr. Albert, you are required to offer clarifications on the following:
a. Exposure to risk and the nature of qualitative risks. (5 Marks)
b. Residual risk. (3 Marks)
c. The dynamic nature of risk assessment. (7 Marks)
d. Risk-based approach to business. (5 Marks)
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EXPEE CONSTRUCTION PLC.
Expee Construction Plc. has been awarded a contract to construct a 50-kilometer feeder road from Abekoko to Idi Magoro by Adatan State. Unfortunately, the company’s earth-moving machine (bulldozer) suffered a major mechanical fault, making it impossible to mobilize to the site for execution of the contract.
Similar machines are not available for sale in the open market. Management is therefore considering the option of either importing a new machine from Japan or leasing one from Odogunyan Machines Limited located in Eko-Akete. The lease may be a finance or operating lease; either option would release the machine to the lessee for immediate use. Management’s decision on this choice is dependent on its willingness to either retain or transfer the risks involved in the usage of the machine.
Required:
a. Evaluate the risk exposure of the company in adopting the import option.
(5 Marks)
b. Identify and formulate strategies that might be used by the company in managing:
i. The finance lease option
(5 Marks)
ii. The operating lease option
(5 Marks)
Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
Professor Akinlabi has been teaching physics at a frontline public university in Nigeria for 30 years. He made quite some money from research grants and has over the years saved about 75 million naira, which he has been keeping in a fixed deposit facility. He complained to his friend, Dr. Albert, who is a professional accountant and expert in risk management, about the low interest rate on fixed deposits and how the high inflation rate in the country is fast eroding the real value of his savings. He is thinking of investing his savings in a poultry farm, but he is quite averse to risks.
Having tried to get some information on the diverse dimensions and dynamics of risks involved in business, he asked Dr. Albert to offer some clarifications. As Dr. Albert, you are required to offer clarifications on the following:
a. Exposure to risk and the nature of qualitative risks. (5 Marks)
b. Residual risk. (3 Marks)
c. The dynamic nature of risk assessment. (7 Marks)
d. Risk-based approach to business. (5 Marks)
Find Related Questions by Tags, levels, etc.
EXPEE CONSTRUCTION PLC.
Expee Construction Plc. has been awarded a contract to construct a 50-kilometer feeder road from Abekoko to Idi Magoro by Adatan State. Unfortunately, the company’s earth-moving machine (bulldozer) suffered a major mechanical fault, making it impossible to mobilize to the site for execution of the contract.
Similar machines are not available for sale in the open market. Management is therefore considering the option of either importing a new machine from Japan or leasing one from Odogunyan Machines Limited located in Eko-Akete. The lease may be a finance or operating lease; either option would release the machine to the lessee for immediate use. Management’s decision on this choice is dependent on its willingness to either retain or transfer the risks involved in the usage of the machine.
Required:
a. Evaluate the risk exposure of the company in adopting the import option.
(5 Marks)
b. Identify and formulate strategies that might be used by the company in managing:
i. The finance lease option
(5 Marks)
ii. The operating lease option
(5 Marks)
Find Related Questions by Tags, levels, etc.
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