1. Zafran Sdn Bhd is a service company which offers laundering service in Kuala Kangsar, Perlis.
The
balance sheet of the company is as follows :
Zafran Sdn Bhd
Balance Sheet as at December 31, 2019 and 2020
2019 2020
Current Assets:
Cash 10,000 15,000
Debtors 50,000 60,000
Inventory 70,000 75,000
Total current assets 130,000 150,000
Fixed assets 70,000 100,000
Total assets 200,000 250,000
Current liabilities:
Creditors 40,000 60,000
Short term loans 20,000 40,000
Total current liabilities 60,000 100,000
Long-term debt 25,000 30,000
Owners' equity:
Common equity 100,000 100,000
Retained earnings 15,000 20,000
Total liabilities and owners' equity 200,000 250,000
(i) Calculate the following ratio for both 2019 and 2020
a) Two (2) types of liquidity ratios
b) Two (2) types of leverage ratios
(ii) What is the purpose of leverage ratios?
2. Katy Sdn Bhd has a gross profit margin of 25% and sales of RM 18,500,000 for 2013. 75% of the
firm’s sales are on credit, and the remainder is on cash terms. Katy Sdn Bhd’s current assets now
stand at RM3,100,000, current liabilities at RM660,000 , fixed assets at RM 4,000,000 and long term
liabilities at RM 360,000.
a) If Katy Sdn Bhd’s trade debtors balance is RM 1,100,000 , what is the firm’s trade debtors
average collection period?
b) If Katy Sdn Bhd attempts to reduce its trade debtors collection period to 25 days, which
would be the targeted level of trade debtors?
c) Suppose you are told that the stock turnover is 7 times. What is Katy Sdn Bhd’s level of
stocks?
d) What is the current ratio of Katy Sdn Bhd?
e) What is the debt ratio of Katy Sdn Bhd?
3. Emmet Co. had a net profit of RM 2,254,000 and sales of RM 16,800,000. The operating profit
margin is 0.23 whereby the gross profit of the company is RM 9,870,000. Emmets’ current assets
equal RM 18,150,000 which include inventory RM 4,050,000, and its fixed assets at RM 9,000,000
whereby its total liabilities a RM 31,250,000
a) Calculate the company’s return on asset ratio.
b) Calculate the company’s gross profit margin ratio.
c) What is the operating profit of Emmet Co?
d) Calculate the company’s acid test ratio.
4. Below are the Balance Sheet and Income Statement for AdamMaya Sdn Bhd
Balance Sheet as at 31 December 2020
Cash 200,000 Account payable 1,200,000
Account receivable 2,300,000 Accrued expenses 500,000
Inventories 1,000,000 Bank overdraft 300,000
Total current assets 3,500,000 Total current liabilities 2,000,000
Gross fixed assets 5,000,000 Bonds 1,800,000
Accumulated (500,000) Long term debts 2,000,000
depreciated
Ordinary shares 1,400,000
Retained earnings 800,000
Net fixed assets 4,500,000
Total assets 8,000,000 Total liabilities & equities 8,000,000
Income Statement for the year ended 31 December 2020
(RM)
Net sales 7,500,000
(-) Cost of goods sold 2,150,000
Gross profit 5,350,000
(-) Operating Expenses 4,115,000
EBIT 1,235,000
(-) Interest expenses 250,000
EBT 985,000
(-) Tax (30%) 295,500
Net profit after tax 689,5000
i. Calculate the following ratios for 2020
a) Current ratio
b) Acid test ratio
c) Average collection period
d) Inventory turnover
e) Debt ratio
f) Times interest earned ratio
g) Net profit margin
h) Total asset turnover
i) Operating profit margin
j) Return on investment
k) Return on equity
Industry Average
Current ratio 2.0 times
Acid test ratio 1.1 times
Average collection period 30 days
Total asset turnover 1.4 times
Inventory turnover 2.4 times
Debt ratio 0.48
Times interest earned ratio 3.5 times
Operating profit margin 15.5%
Net profit margin 10.1%
Return on investment 6.2%
Return on equity 19%
ii.) Based on your answer in (a), analyze AdamMaya Sdn Bhd’s financial performance.
5. The financial ratio for Muslimah Clothing Enterprise for the year ended 31 December 2020 and 2019
are listed as below ;
Financial Ratio 2020 2019
Current ratio 1.2 1.3
Quick ratio 0.8 1.0
Inventory turnover 4.0 times 5.0 times
Average Collection period 39 days 35 days
Fixed assets turnover 3.6 times 3.1 times
Total assets turnover 3.8 times 3.7 times
Financial Ratio 2020 2019
Debt ratio 35% 35%
Debt to equity ratio 36% 31%
Times interest earned 6.5% 7.5%
Gross profit margin 48% 49%
Net profit margin 12% 13%
Return on investment 7% 6.5%
Return on equity 6% 7%
i) As financial analyst, you are requested to analyze the financial performance of Muslimah Clothing
Enterprise for year 2020 as compared to the performance in year 2019 according to liquidity, activity, and
leverage and profitability ratio.
i) Explain two (2) functions of a financial manager
