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Financial Analysis 30 Below are the financial data of Mong Sdn Bhd for financial year ended 31 st December 2008. MONG SDN BHD BALANCE SHEET AS AT 31 DECEMBER 2008 (RM) Cash Accounts receivables inventories Prepaid expenses 3,000 104,000 87,000 2,400 Accounts Payable Accruals Notes payable Other current liabilities Long term debt Common stock Retained earnings Total Claims 90,000 3,100 10,000 6,500 48,400 21,600 157,200 336,800 Plant and equipment (NET) 140,400 Total Assets 336,800 MONG SDN BHD INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008 (RM) Sales Less: Cost of goods sold Gross Profit Less: Operating expenses Interest Earnings before tax Less: taxes Net Income 700,400 501,600 198,800 98,000 13,600 87,200 29,040 58,160 Industry Average Ratios Current Ratio Quick ratio Debt ratio Times interest earned 1.70 X 1.0 X 49% 12 X Average collection period Inventory turnover Net profit margin Return on assets 40 days 7 X 12% 25% Based on the above financial statements: a) Calculate the relevant ratios. (12 marks) b) Based on your answer in (a), evaluate the company's according to liquidity, activity, leverage and profitability performance of year 2008. (8 marks) Part I Financial Management and Planning 30 Financial Analysis As a financial analyst of Avatar Corporation, you are being provided with the company's most recent financial statements as follows: AVATAR CORPORATION BALANCE SHEET AS AT 31 DECEMBER 2009 (RM) Cash Accounts receivable Inventories Land Net buildings & equipment 9,000 16,500 29,000 20,000 65,000 Accounts Payable Notes Payable Long term debt Common stock Retained earnings 22,500 27,000 28,750 31,500 29,750 139,500 TOTAL ASSETS 139,500 TOTAL LIAB. & EQUITY AVATAR CORPORATION INCOME STATEMENT FOR THE YEAR ENDING 31 DECEMBER 2009 (RM) Sales (all credit) Cost of goods sold Gross Profit General & admin. expense Depreciation expenses Operating profit (EBIT) Interest expenses Earnings before taxes Taxes Net Income 130,000 75,000 55,000 33,500 4,500 17,000 3,000 14,000 3,780 10,220 Financial Ratios for the year 2008 Current Ratio Quick ratio Debt ratio Times interest earned Average collection period 0.8 x 0.48 X 50 % 6.5 X Inventory turnover Total asset turnover Gross Profit Margin Net profit margin Return on Assets 1.5 X 0.8 X 42% 10 % 8.5 % 55 days a) Calculate the financial ratios for Avatar Corporation corresponding to the ratios provided for year 2008. (note: Use 360-days for calculation) (12 marks) b) Perform a ratio analysis for the company based on its liquidity, profitability, leverage and efficiency condition. (8 marks) Part I Financial Management and Planning 28 Financial Analysis Lexus Company is applying for a loan from NBB Bank to finance its project. As a financial manager of the bank, you are required to evaluate the company's financial performance in comparison with the industry. The following information is given for the analysis. LEXUS COMPANY BALANCE SHEET AS AT 31 DECEMBER 2010 (RM) Cash Marketable Securities Accounts receivable Inventories 30,000 600,000 830,000 400,000 Accounts Payable Notes payable Accruals Other current liabilities Long term debt Common stock Paid up capital Retained earnings TOTAL LIAB & EQUITY 460,000 270,000 150,000 200,000 1,000,000 80,000 240,000 1,600,000 4,000,000 Net Plant & Equipment 2,140,000 TOTAL ASSETS 4,000,000 LEXUS COMPANY INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2010 (RM) Sales (100% credit) Less: Cost of goods sold Gross Profit Less: Operating expenses Earnings before interest and taxes Less: interest expenses Profit before taxes Less: Taxes Earnings after taxes 8,000,000 3,600,000 4,400,000 3,700,000 700,000 120,000 580,000 140,000 440,000 INDUSTRY AVERAGE RATIOS Current Ratio 2 times 40 days Acid test ratio Debt ratio Times interest earned 1.8 times 55 % 5.8 times Average collection period (based on 360 days) Inventory turnover Net profit margin Return on assets 7 times 6.5 times 19 % Based on the above financial statements: a) Calculate the indicated ratios for Lexus Company. (12 marks) b) Evaluate the overall performance of the company according to liquidity, activity, profitability and leverage ratios. (8 marks) 27 Part I Financial Management and Planning Financial Analysis Below are financial statements for Q.A.E. Berhad for the financial year ending 2010. Q.A.E BERHAD BALANCE SHEET AS AT 31 DECEMBER 2010 (RM) Cash Accounts receivable Inventory Prepaid expenses 33,500 49,200 40,750 30,000 Account payable Taxes payable Notes payable Accruals 23,000 12,000 15,000 20,000 Fixed assets Less: Depreciation Patent 39,750 11,250 25,000 Debentures Mortgage Bonds Mortgage Loan 57,000 15,000 8,450 Preferred stock Common stock Retained Earning TOTAL CLAIMS 7,500 8,000 41,000 206,950 TOTAL ASSETS 206,950 Q.A.E. BERHAD INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2010 (RM) Revenue Less: Cost of goods sold Gross profit Less: Selling and administrative expenses General expenses Interest expenses Net profit before tax Less: Tax Net profit after tax 250,000 150.000 100,000 53.400 25,000 2,600 19,000 10,000 9,000 Industry Average Ratios Current ratio ACP Debt ratio Net Profit Margin 2.50 X 60 days 50 % 12.50 % Quick Ratio Fixed Asset t/over Times interest earned Return on Asset 2.00 X 9.50 X 6.5 X 5.50 % Based on the above financial statements: a) Calculate the indicated ratios for Q.A.E Berhad. (Use 360 days per year) (12 marks) b) Evaluate the overall performance of the company according to liquidity, activity, profitability and leverage ratios. (8 marks) Part I Financial Management and Planning 26 Below are financial statements for Nasarudin Ahmad Berhad for the financial year ending 2007. (Assumption :360 days per year) NASARUDIN AHMAD BERHAD BALANCE SHEET AS AT 31 DECEMBER 2007 (RM) Accounts Payable Accrued expenses 505,000 35,000 Cash Marketable Securities Accounts receivable Inventories 40,000 40,000 400,000 300,000 773,900 Long term debt Net plant and equipment 1,390,000 Common stock Paid in capital Retained earnings TOTAL CLAIMS 76,000 264,000 516,100 2,170,000 TOTAL ASSETS 2,170,000 NASARUDIN AHMAD BERHAD INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 (RM) Sales (100% CREDIT) Less: Cost of goods sold Gross Profit Less: Selling expenses Earnings before interest and tax Less: interest expenses Earnings before tax Less: taxes Earnings after taxes 1,875,000 1,310,000 565.000 304,700 260,300 85,000 175,300 55,600 119,700 Industry Average Ratios Current Ratio Quick ratio Debt ratio Times interest earned 2.4 times 1.4 times 44.1 % 6.61 times Average collection period Inventory turnover Net profit margin Return on assets 39 days 5.11 times 7.96 % 8.95 % Based on the above financial statements: a) Calculate the indicated ratios for Nasarudin Ahmad Berhad (12 marks) b) Evaluate the overall performance of the company according to liquidity, activity, profitability and leverage ratios. (8 marks) Part I Financial Management and Planning 35 Financial Analysis Below are financial statements for Nasarudin Ahmad Berhad for the financial year ending 2007. (Assumption : 360 days per year) NASARUDIN AHMAD BERHAD BALANCE SHEET AS AT 31 DECEMBER 2007 (RM) Accounts Payable Accrued expenses 505,000 35,000 Cash Marketable Securities Accounts receivable Inventories 40,000 40,000 400,000 300,000 773,900 Long term debt Net plant and equipment 1,390,000 Common stock Paid in capital Retained earnings TOTAL CLAIMS 76,000 264,000 516,100 2,170,000 TOTAL ASSETS 2,170,000 NASARUDIN AHMAD BERHAD INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2007 (RM) Sales (100% CREDIT) Less: Cost of goods sold Gross Profit Less: Selling expenses Earnings before interest and tax Less: interest expenses Earnings before tax Less: taxes Earnings after taxes 1,875,000 1,310,000 565,000 304,700 260,300 85.000 175,300 55,600 119,700 Industry Average Ratios 39 days Current Ratio Quick ratio Debt ratio Times interest earned 2.4 times 1.4 times 44.1 % 6.61 times Average collection period Inventory turnover Net profit margin Return on assets 5.11 times 7.96 % 8.95% Based on the above financial statements: a) Calculate the indicated ratios for Nasarudin Ahmad Berhad (12 marks) b) Evaluate the overall performance of the company according to liquidity, activity, profitability and leverage ratios. (8 marks) Part I Financial Management and Planning 35

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