Name : Ikhsan Uiandra Putra Sitorus

NIM : 2301896803
Class : LA16
Jawaban UTS Business Valuation and Analysis

Question No. 1 - LO-1 (30%)

Two basic competitive strategies are: Cost leadership and Product / service differentiation.
You have two business choices in the current pandemic, (1) cleaning service or (2) healthy
homemade cooking. Naturally many things are different from the two types of business that
you want to be in.
Make a business analysis of 2 this type of choice is both qualitative and quantitative, and all
of them are supported by reference data and simple calculations to support your competitive
strategy
Answer :

Healthy Homemade Cooking

A Healthy Homemade Cooking business has the opportunity to reap huge profits. The reason
is, now people's habits in meeting the needs of their stomach have changed. In the past, most
households routinely cooked every day at home. Now, on the contrary. Most couples and
singles prefer to buy food outside through Go Food, Grab Food, Shopee Food.

The reason is because in terms of practicality and cost, it is cheaper to buy ready-made food
or subscribe to Healthy Homemade Cooking. Discounts, menu variations, and deliciousness
are the considerations, compared to cooking at home. Therefore, a Healthy Homemade
Cooking business has a good opportunity.

A Healthy Homemade Cooking business can be started with small capital. By using a home
kitchen and existing cooking utensils, this home business can be started. The calculation is as
follows:

Monthly Operating Cost

 Food ingredients Rp 100,000 x 30 days = Rp 3,000,000
 Gas 3 kg @ Rp 18,000 x 10 cylinders = Rp 180,000
 Employee salary = Rp 1,500,000
 Transportation = Rp 300,000
 Electricity and water = Rp 500,000
 Promotion = Rp 500,000
 Others = Rp 500,000
 Amount = Rp 6,480,000

Monthly Sales Results

It is assumed that daily sales are 30 portions x Rp. 15,000 (price per portion) = Rp. 450,000
So in one month the average sales result is Rp 450,000 x 30 days = Rp 13,500,000

Monthly Profit
Sales proceeds - Operating expenses = Profit
Rp 13,500,000 - Rp 6,480,000 = Rp 7,020,000
This Healthy Homemade Cooking business analysis is an example of the cost components
and how to profit from the business. While the value of the price depends on each region.

Promotional costs are still budgeted for, but may be large in value at the beginning of a home
catering business, then get smaller in the following months.

On the other hand, sales results are expected to increase from month to month as the taste and
quality of food becomes more recognized in your Healthy Homemade Cooking business.

The importance of making a business analysis is that you have a plan, research and survey,
estimate or predict and evaluate the activities of a home culinary business. Although starting
from a small scale, business analysis still needs to be done. This is useful so that you can
avoid all the bad possibilities that occur while the business is being run. Any business, must
have its own risks.

Question No. 2 - LO-2 (40%)

As the chartered public accountant for Leopard Ltd., you have been asked to develop some
key ratios from the comparative financial statements. This information is to be used to
convince creditors that the company is solvent and will continue as a going concern. The data
requested and the computations developed from the financial statements follow.

Leopard Ltd. asks you to prepare a list of brief comments stating how each of these items
supports the solvency and going-concern potential of the business. The company wishes to
use these comments to support its presentation of data to its creditors. You are to prepare the
comments as requested, giving the implications and the limitations of each item separately.
Then prepare a collective inference that may be drawn from the individual items about
Leopard’s solvency and going-concern potential.
Answer :

2017 2016 Remark

Current Ratio 3.4 times 2.1 times An increase in the current
ratio is a favorable indicator
from a liquidity/solvency
point of view.
Acid-test Ratio .8 times 1.3 times A decrease in the acid test
ratio is an unfavorable
indicator for liquidity.
Asset Turnover 2.6 times 2.2 times An increase in the asset
turnover ratio due to an
increase in turnover is an
indicator of a profitable
business.
Net Income Up 32% Down 9% An increase in net profit is a
favorable indicator for the
business.
Earnings per Share $3.30 $2.50 An increase in EPS is only
profitable if it is caused by an
increase in earnings and not
because of a change in the
number of shares.

Explanation :

 Current ratio

The current ratio shows the company's ability to meet its obligations. An
increase in the current ratio is an indication of favorable liquidity, but
does not indicate business continuity. From the change in this ratio it is
difficult to know the changes in the individual accounts of current assets
and current liabilities, the reasons for further changes are also unknown
so it is impossible to comment on business continuity.

 Acid Test Ratio

The quick ratio or acid test ratio is a liquidity ratio that measures a
company's ability to pay its current maturing liabilities only with fast
assets. Quick assets are current assets that can be converted into cash
within 90 days or in the short term.

The decrease in the acid test ratio is a bad indicator of the company's
liquidity. Furthermore, the company's current ratio has increased and the
acid test ratio has decreased, which means that the company's liquid
assets have decreased. This decrease is also not good for the company's
going concern prospects because it reflects a decrease in liquid assets
(cash etc.) and raises questions about the reasons for the increase in
other current assets, such as inventories.
  Asset Turnover Ratio

Asset turnover is a financial ratio that measures the efficiency of the use
of company assets in generating sales revenue to the company.
Companies with low profit margins tend to have high asset turnover,
while companies with high profit margins have low asset turnover.

An increase in asset turnover can be caused by an increase in sales or a

decrease in business assets. If it is due to an increase in business sales, it
is profitable for both liquidity/solvability and business continuity.

 Net income

The increase in net income is a good indicator of solvency and business

continuity prospects.

 Earnings Per Share

Earnings per share (EPS) is the portion of a company's profits allocated

to each share of common stock outstanding. Earnings per share serves as
an indicator of the company's profitability.

EPS has increased by 32% which is less than the % increase in profit.
This indicates that there must be an increase in the number of shares or
an increase in the nominal value of the shares. The increase in book
value per share is a good indicator of the solvency and potential viability
of the company.

Question No. 3 - LO-2 (30%)

Alex Thompson the owner-president of Computer Services Company, is unfamiliar with the
statement of cash flows that you, as his accountant, prepared. He asks for further explanation.
Instructions
Write him a brief memo explaining the form and content of the statement of cash flows.
The cash flow statement on below.
Answer :
Memo to Alex Thompson
A Cash flow statement an important part of the financial statements issued by the reporting
company. A cash flow statement summarizes the movement of cash from the opening balance
to the ending balance and understands whether the movement is due to operating, investing,
and financial activities. Most of the current regulatory requirements have made a cash flow
statement mandatory to be issued together with its Financial Statements. Cash flow
statements can help shareholders in making informed decisions regarding their investments.

Uses of Cash Flow Statement:

 Helps in understanding the company's cash financial position
 Helps manage finances based on cash flow forecasts
 Helps in making short-term decisions regarding financial needs
 Helps manage cash which is essential for any business
 Helps understand the movement of working capital due to operating
activities
 Helps in raising capital and investment decisions
Cash flow from operating activities can be prepared using the direct method or the indirect
method. In certain cases cash flows have been prepared using the indirect method. In the
indirect method when calculating cash from operating activities non-cash costs will be added
back such as depreciation, loss on sale of fixed assets, etc. Once earnings before working
capital changes arrive, then adjustments are made for working capital items such as accounts
receivable, inventory, accounts payable, prepaid expenses, unpaid expenses payable, etc. And
finally the taxes paid are deducted to obtain income from operating activities

Cash flow from investing activities are usually associated with investments such as the
purchase and sale of property, plant and equipment, land, etc.

Cash flow from financing activities are usually associated with the issuance of new equity,
dividend payments, etc.