CASE STUDY

There are THREE (3) questions to be answered.

You are the financial manager of Snax Cracker Sdn. Bhd. in Kelang. The board of directors of the
company will be visiting the branch next month. You have been asked by the branch manager to prepare
a financial analysis report to be presented in the meeting. Given below are the balance sheet and
income statement for 2018 and 2019:

Snax Cracker Sdn Bhd Balance Sheet: As of 31st 2018 and 2019 (RM)

Assets 2018 2019

Cash 33,500 24,400

Marketable Securities 25,000 32,800
Accounts Receivable 49,200 55,000
Prepayment 30,000 25,000
Inventory 40,750 15,000
Gross fixed assets 38,500 60,000
Less : Depreciation 10,000 22,700
Total Assets 206,950 189,500

Liabilities and Net Worth

Accounts Payable 25,000 25,000

Notes Payable 15,000 24,000
Accruals 18,000 22,000
Taxes Payable 12,000 9,000
Leases 7,500 6,600
Mortgage Loans 8,450 7,000
Mortgage Bonds 14,000 10,250
Debentures 55,000 15,000
Preferred Stock 3,000 3,000
Common stock 8,000 8,000
Retained Earnings 41,000 59,650
Total liabilities and Net Worth 206,950 189,500

Snax Cracker Sdn Bhd Income Statement for the: year ended 2018 and 2019 : (RM)

2018 2019
Sales 350,000 450,000
Cost of goods sold 250,000 284,300
Gross Profit 100,000 165,700
Selling & Administrative expenses 20,000 38,800
General Expenses 58,400 68,000
Net operating income 21,600 58,900
Interest expense 3,600 5,600
Net Income before taxes 18,000 53,300
Income tax (50 %) 9,000 26,650
Net Income after tax 9,000 26,650
Industry Averages

Current ratio 4.0 times Fixed asset turnover 10.0 times

Quick ratio 3.0 times Inventory turnover 15 times
Average collection period 90 days Net profit margin 4.0 %
Debt ratio 33.0 % Return on asset 20.0 %
Times interest earned 7.0 times Return on equity 12.0 %

1. You are required to:

(a) Compute the following ratios for 2018 and 2019 :

i) current ratio vi) Inventory turnover

ii) quick ratio vii) Net Profit Margin
iii) average collection period viii) Times Interest Earned
iv) Fixed Assets Turnover ix) Return On Investment
v) Debt Ratio x) Return On Equity

For b and c below, evaluate the overall performance of the company according to liquidity,
activity, profitability and leverage ratios.

(b) Comment on the performance of the company based on the ratios you have calculated
for TREND analysis.(compare 2018 and 2019)

(c) Comment on the performance of the company based on the ratios you have calculated
for COMPARATIVE analysis. (compare 2019 and Industry Averages)

(d) Based on (b) and (c), do you think that this company will be able to borrow more money
in the future? Comment.

2. Prepare a statement of sources and uses of funds on a cash basis for the balance sheet
above.

3. Given the following balance sheet above, using 2019 as your base year, construct a pro
forma statement for the year 2020 for Snax Cracker Sdn Bhd.

The following are additional information that can be used:

i. Sales are expected to increase to RM540,000.

ii. Both NPM and DPR for 2020 will be maintained at 2019 level.
iii. Dividends for shareholders in 2019 amounted to RM10,660.
iv. The firm is operating at full capacity.
v. All external financing is absorbed and met by notes payable.

DUE DATE: __________________