ABMF3184 BUSINESS FINANCE Tutorial Questions

T1 – NATURE AND SCOPE OF FINANCIAL MANAGEMENT (Week 2)

1. Using a Statement of Financial Position / balance sheet, describe the major decisions of financial
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T2 – FINANCIAL ENVIRONMENT AND FINANCIAL MARKETS (Week 3) Cap 9 dl b

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1. Is an initial public offering an example of a primary or a secondary market transaction? Explain.

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5. Investors expect a company to announce a 10% increase in earnings, but instead the company
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ABMF3184 BUSINESS FINANCE Tutorial Questions

T3 – TOOLS OF FINANCIAL ANALYSIS AND PLANNING (Week 4)

1. Shown below are the financial statements of Kent & Roger International Bhd.

Profit & Loss Accounts for the year ended 31 December 2019 and 2020
2020 2019
RM’000 RM’000
Net sales (Revenue) 11,378 9,587
Cost of goods sold 7,918 6,717
Other expenses 1,291 1,033
Depreciation 559 474
EBIT 1,610 1,363
Net Interest 205 165
Tax 541 444
Net Profit 864 754
Preferred stock dividend 19 21
Earnings applicable to common stock 845 733

Balance Sheets as at 31 December 2019 and 2020

2020 2019
RM’000 RM’000

Timberland, plant and equipment 7,002 5,906

Other long-term assets 1,484 891
Fixed assets / NCA / LTA 8,486 6,797

Cash and short term securities 102 122

Trade Receivables 1,517 1,153
Inventories 1,355 971
Other current assets 120 97
Total Current Assets 3,094 2,343

Total assets 11,580 9,140

Debt due 1,017 252

Trade Payables 934 672
Other current liabilities 779 638
Total Current Liabilities 2,730 1,562

Common equity 5,147 4,557

Long term debt 3,703 3,021
8,850 7,578

Total equity and liabilities 11,580 9,140

Required:

a) Based on the financial information given, calculate the following ratios for the year 2019 and
2020. (Assuming 360 days in a year)
ABMF3184 BUSINESS FINANCE Tutorial Questions

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b) Comment on the overall performance of the company using the ratios calculated.

2. The Balance Sheet and Income Statement for Home Industries Sdn. Bhd. are shown as follows:

Home Industries Sdn. Bhd

Balance Sheets as at 31 December

Year 20120 Year 2019

RM ‘000 RM ‘000
Assets
Current assets:
Cash 683 325
Account receivable 1,490 3,599
Inventories 1,430 2,436
Total current assets 3,603 6,360

Property, plant and equipment (net) 1,066 1,541

Others 123 157
Total assets 4,792 8,058

Liabilities
Current liabilities:
Bank borrowing 622 2,250
Account Payables 485 993
Other payables 38 116
Accrued expenses 576 586
Total current liabilities 1,721 3,945

Long term debt 122 179

Other liabilities 81 131
Total liabilities 1,924 4,255

Shareholders’ Equity
Common stock (1,500,000 shares) 1,500 1,500
Retained earnings 1,368 2,303
Total shareholders’ equity 2,868 3,803

Total liabilities and shareholders’ equity 4,792 8,058

ABMF3184 BUSINESS FINANCE Tutorial Questions

Profit and Loss Statement for the Year Ended 31st December

2020 2019
RM ‘000 RM ‘000
Sales 7,570 12,065
Other income 261 345
Total revenue 7,831 12,410

Cost of goods sold 4,850 8,048

General, administrative & marketing expenses 1,531 2,025
Interest expenses 22 78
Total costs and expenses 6,403 10,151

Net profit before tax 1,428 2,259

Tax 628 994
Net profit after tax 800 1,265

(a) Assume share price of Home Industries Sdn Bhd in 2019 and 2020 is RM2 and RM2.50,
respectively. You are required to compute the following for year 2019 and 2020:

Ratios 2019 2020

Acid test ratio
Return on assets
Return on equity
Earnings per share
Price/earnings ratio

3. Explain the limitations of financial ratio analysis.

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