BKAL1013 A191 TUTORIAL 4

Tutorial 4: Topics 6 - COMPANIES ANNUAL REPORT

1. How often is the annual report being issued?

A. Every six month

B. Every month
C. Once a year
D. None of the above is correct

2. An annual report contains a great many statements and reports. Which one of the following
statements/reports is not covered either by statute or by accounting standards?

A Periodic summary
B Cash flow statement
C Auditors' report
D Directors' report
3. These statements are TRUE:
i. Financial reporting provides a basis of forecasting demand and supply in the market.
ii. Annual report is a formal comprehensive published business document given to
interested Parties by public companies.
iii. Financial statements must be prepared according to the provision under Schedule Six,
Company Act 1965.
iv. One objective of financial reporting is to provide useful information in making rational
investment, credit and similar economic decisions.

A. i, ii and iii only.

B. ii, iii and iv only.
C. i and iii only.
D. ii and iv only.

4. The following items are disclosed voluntarily by companies, EXCEPT:

A. Chairman’s statement.
B. Corporate information.
C. Notice of annual general meeting.
D. Important events calendar and corporate activities
5. External users of financial statements ______________________________________

A. have accessed to detailed records of the business.

B. are involved in the daily operations of the business.
C. rely on the financial statements to help make informed decisions.
D. do not have any other sources for gathering information about a business.
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6. Information about the accounting policies adopted in preparing the financial statements are
explained in the:

A. statement of changes in owner’s equity.

B. notes to the financial statements.
C. statement of cash flow.
D. corporate governance statement

7. External Auditor’s opinion on the sufficiency of financial records are in accordance to the
stated act and compliance with the approved accounting standards can be found in which
of the following report for his client?

A. Director’s report
B. Audit committee’s report
C. Chairman’s statement
D. Auditor’s report

8. Which of the following is NOT the purpose of financial statement analysis?

A. To evaluate the company’s non-financial measures effectiveness.

B. To evaluate the current performance of a company with an ideas toward
correcting problem areas.
C. To use the past performance of a company to predict how it will do in the future.
D. To compare the performance of the company with other competitors within the
same industry.

9. Which of the following BEST describes a Chairman’s Statement?

A. A statement specifically directed to the company’s management

B. A statement specifically directed to the company’s shareholders
C. A statement specifically directed to the auditors
D. A statement specifically directed to the company’s employees

10. The members of annual general meeting includes all the following EXCEPT

A. suppliers
B. creditors
C. auditors
D. registered shareholders
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Tutorial 4: Topics 7 - FINANCIAL STATEMENT ANALYSIS

11. In a vertical analysis of Income Statement, which of the following is given a designation of 100 percent?

A. Cost of goods sold

B. Net sales
C. Total liabilities
D. Net income

12. Net sales are RM6,000, beginning total assets are RM2,800, and the asset turnover ratio (ratio
of net sales to assets) is 3.0 times. What is the ending total asset balance?

A. RM2,000
B. RM1,200
C. RM2,800
D. RM1,600

13. Which of the following indicates that a company may fail to pay its short term obligations if
they are due for payment?

A. Low current ratio

B. High current ratio
C. High earnings per share
D. Low gross profit percentage

14. The accounts receivable turnover is used to evaluate

A. the ability of a company to pay its current liabilities

B. the ability of a company to collect its receivables
C. the overall profitability of a company
D. evaluating stock in a company from an investor's perspective

15. Debt to total assets ratio measures

A. the company's profitability

B. whether interest can be paid on debt in the current year
C. the proportion of interest paid relative to dividends paid
D. the percentage of the total assets provided by creditors
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16. Which of the following is TRUE about accounts receivable turnover?

A. The ability of a company to pay its current liabilities

B. The ability of a company to pay its long-term liabilities
C. The overall profitability of a company
D. The ability of a company to collect its debts

17. The primary purpose of the liquidity ratios is to determine:

A. how much working capital is tied up in inventory.
B. the relative level of short-term debt.
C. how well a firm is able to pay off short-term obligations.
D. more than one of the above.

Use the following information for questions 18 to 20.

The Naqiu Sdn Bhd had sales of RM10 million; operating income of RM3 million; after tax
income of RM1 million; assets of RM8 million; owner’s equity of RM5 million; and a total debt
of RM3 million.

18. What is Naqiu's return on assets?

A. 37.5%
B. 12.5%
C. 30.0%
D. 25.0%

19. What is Naqiu's return on equity?

A. 37.5%
B. 10.0%
C. 20.0%
D. 60.0%

20. What is Naqiu's profit margin?

A. 10.0%
B. 20.0%
C. 30.0%
D. 33.0%
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PART B: STRUCTURED QUESTION

The condensed balance sheet and income statement of GEGAR SDN BHD appear as follows:

GEGAR SDN BHD

Income Statements for the years ended 31 December

2018 2017

Revenue
Sales 740,000 700,000
Sales return and allowance 40,000 50,000
Cost of goods sold 420,000 400,000

Gross profit 280,000 250,000

Expenses
Operating expenses 236,000 218,000

Profit for the period 44,000 32,000

GEGAR SDN BHD

Balance Sheets as at 31 December
2018 2017

Current Assets:
Cash 25,000 20,000
Accounts receivables 50,000 45,000
Other current assets 90,000 85,000

Non-Current Assets
Plant and machinery 400,000 370,000
Equipment 75,000 70,000

TOTAL ASSETS 640,000 590,000

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Current Liability
Accounts payable 45,000 43,000
Other current liabilities 30,000 37,000

Non-current Liability
Bank loan 80,000 85,000

Equity
Ordinary share RM10 par 340,000 300,000
Retained earnings 145,000 125,000

TOTAL EQUITY AND LIABILITIES 640,000 590,000

1. Prepare a comparative statements of profit or loss and other comprehensive income with
horizontal analysis and vertical analysis by indicating the increase (decrease) for the current
year when compared with the previous year. (round to one decimal place).

2. Compute the following ratios for the year 2018:

a) Current ratio
b) Assets turnover
c) Debt to total assets ratio
d) Profit margin