COURSE CODE: ACC117/106/100
DECLARATION FORM OF GROUP ASSIGNMENT
NAME OF GROUP LEADER AND MATRIX NO.
MEMBER
MARLINDAH BINTI RAHIM 2022662022
ZAYD ZUHAIRY BIN ZULKAFLY 2022625108
AZRIL HADIF BIN ASHAIRIL 2022617038
GROUP : 7
DECLARATION: We declare that the assignment submitted here
is original and no part of this assignment has been copied from
other person’s work except when due acknowledgement is
made in the text and all member of the group have read and
checked all part of the piece of work, irrespective of whether
they are contributed by individual members or all members as
a group, here submitted are original except for source material
explicitly acknowledged.
Signature of group leader: submission
date:
DISCLAIMER: A lecturer has a right not to mark this assignment
if the above declaration has not been signed. If the above
declaration is found to be false, no mark will be rewarded for
this assignment.
COURSE CODE: ACC117/106/100
GROUP PROJECT 2
(SEMESTER OCT 2022 – FEB 2023)
PREPARED BY :
NAME OF GROUP LEADER AND MATRIX NO.
MEMBER
MARLINDAH BINTI RAHIM 2022662022
ZAYD ZUHAIRY BIN ZULKAFLY 2022625108
AZRIL HADIF BIN ASHAIRIL 2022617038
GROUP: 7
PREPARED FOR:
MISS IFFAH HANANI BINTI AZMAN
DEADLINE OF SUBMISSION:
29 JANUARY 2023
QUESTION
Study the following financial statements for two very similar
enterprises owned by Puan Khairiah that are located in the city
center of Perak and then answer the questions which follow.
Statement of Profit or Loss for the year ended 31 December 20x9
FARMASI TAPAH FARMASI SERI ISKANDAR
RM RM RM RM
‘000 ‘000 ‘000 ‘000
SALES 2,880 5,320
LESS: COST OF (2,240) (3,664)
SALES
GROSS PROFIT 640 1,656
LESS: EXPENSES
DEPRECIATION (35) (184)
OTHER (509) (1,108)
EXPENSES
NET PROFIT 96 364
Statement of Financial Position as at 31 December 20x9
FARMASI TAPAH FARMASI SERI
ISKANDAR
RM RM
‘000 ‘000
NON-CURRENT ASSETS
SHOP HOUSE AT CARRYING 72 320
VALUE
OFFICE EQUIPMENT AT 34 244
CARRYING VALUE
106 564
CURRENT ASSETS
INVENTORY 224 316
ACCOUNT RECEIVABLE 422 191
PREPAID EXPENSES 2 -
BANK 6 36
760 1,107
FINANCE BY:
OWNER’S EQUITY
OPENING BALANCE 334 460
ADD: NET PROFIT 96 364
LESS DRAWINGS (112) (118)
318 706
NON-CURRENT LIABILITIES 50 153
CURRENT LIABILITIES
ACCOUNT PAYABLE 380 245
ACCRUED EXPENSES 2 -
SHORT-TERM LOAN 10 3
760 1,107
Additional information:
1. 10% of the sales were cash sales.
2. The net purchase incurred during the year were RM2,080,000 and RM3,700,000
for Farmasi Tapah and Farmasi Seri Iskandar respectively.
3. Assume a year has 365 days.
a. Compute the following ratios for both businesses:
i. Current ratio : current asset
Current liability
Farmasi Tapah :
= 1.67 : 1
Farmasi Seri Iskandar :
= 2.19 : 1
ii. Quick ratio : current asset - inventory - prepayments
Current liability
Farmasi Tapah :
= 1.09 : 1
Farmasi Seri Iskandar :
= 0.92 : 1
iii. Inventory turnover ratio : cost of sales
Average inventory
Farmasi Tapah :
2240000
384000 + 224000
2
= 7 times
Farmasi Seri Iskandar :
3664000
280000 + 316000
2
= 12 times
iv. Accounts receivable collection period : account receivables
X 365 days
Credit Sales
Farmasi Tapah :
X 365
= 59 days
Farmasi Seri Iskandar :
X 365
= 15 days
v. Gross profit : Gross Profit
X 100
Sales
Farmasi Tapah :
X 100
= 22.22%
Farmasi Seri Iskandar :
X 100
= 31.13%
vi. Net profit margin : Net profit
X 100
Sales
Farmasi Tapah :
X 100
= 3.33%
Farmasi Seri Iskandar :
X 100
= 6.84%
b) i. Interpret each of the accounting ratios for both businesses.
Farmasi Tapah Ratio Farmasi Seri Iskandar
For every RM1 of current For every RM1 of current
liabilities, the firm has CURRENT liabilities, the firm has
RM1.67 RATIO RM 2.19
of current asset to repay that of current asset to repay that
RM 1 of current liability RM 1 of current liability
For every RM1 of current For every RM1 of current
liabilities the firm has QUICK liabilities the firm has
RM1.09 RATIO RM0.92
of liquid asset to repay that of liquid asset to repay that
RM 1 of current liabilities RM 1 of current liabilities
It indicates that the business It indicates that the business
has replaced its inventory by INVENTORY has replaced it inventory by
7 times in an TURNOVER 12 times in an
accounting period RATIO accounting period
ACCOUNTS
The business takes RECEIVABLE The business takes
59 days to collect COLLECTION 15 days to collect
PERIOD
For every RM100 of sales For every RM100 of sales
22.22% gross profit GROSS PROFIT 31.13% gross profit
was made before any was made before any
expenses were paid expenses were paid
For every RM100 of sales For every RM100 of sales
3.33% net profit NET PROFIT 6.84% net profit
was made after any MARGIN was made after any
expenses were paid expenses were paid
ii. State which business has difficulty in paying its short-term obligations
without using its inventory and give ONE (1) impact on business when it has
liquidity ratio less than 1.
Farmasi Seri Iskandar.This is because, the firm has RM0.92 of liquid
asset to repay that RM 1 of current liabilities.
If the value of the liquidity ratio is not impressive, the business has the
possibility to crash down. It means it can’t convert assets into cash. With
a lower liquiditiy ratio it indicates that the business is unable to buy and sale
assets without affecting its price.
C.Identify which business seems to be the most efficient in using its capital to
generate the profit. Justify your opinion.
Return in investment = Net Profit
X 100
Capital employed
FARMASI TAPAH :
X 100
= 26.09%
FARMASI SERI ISKANDAR :
X 100
= 42.37%
Farmasi Seri Iskandar. Farmasi Seri Iskandar is the most efficient in using its
capital to generate the profit because they have a higher positive ROI. The
higher ROI is good because it indicates a more lucrative investment.
Moreover, they have a higher current ratio compared to Farmasi Tapah
because of the higher the ratio is, the more capable you are in paying off your
debts. If your current ratio is low, it means you will have a difficult time paying
your immediate debts and liabilities. In general, a current ratio of 2 or higher is
considered good, and anything lower than 2 is a cause for concern.
Other than, it’s because of the account receivable collection period a lower
average collection period is generally more favorable than a higher one. The
low average collection period indicates that the organization collects
payments faster.
The last one is because of the net profit margin. The higher the
net profit margin means that the company is more efficient at
converting sales into actual profit.
