Study Questions 2B (part 2)

No. 1
BALIK PULAU CONSTRUCTIONCORPORATION
2010 & 2011 Balance Sheet
(RM in millions)
2010 2011
Assets
Current Assets
Cash RM210 RM215
Account Receivable 335 310
Inventory 507 328
Total Current Asset RM1,072 RM853

Fixed Asset
Net Plant and equipment RM6,085 RM6,527
Total Assets RM7,157 RM7,380

Liabilities and Owners’ Equity

Current liabilities
Accounts payable RM207 RM298
Notes payable 1,715 1,427
Total Current Liabilities RM1,922 RM1,725
Long term debt RM1,987 RM2,308
Owners’ equity
Common Stock and paid in
surplus RM1,000 RM1,000
Retained Earnings 2,248 2,347
Total Owners’ Equity RM3,248 RM3,347
Total Liability & owner equity RM7,157 RM7,380

1
 BALIK PULAU CONSTRUCTIONCORPORATION
2011 Income Statement
(RM in millions)
Sales 4,053
Cost of good sold 2,780
Depreciation 550
Earnings before interest taxes (EBIT) 723
Interest paid 502
Taxable income 221
Taxes (34%) 75
Net Income 146

Dividends 47
Additional Retained Earnings 99
Question.
Based on the balance sheets and income statement of Balik Pulau, calculate the following ratio
for 2011.(Assume there are 365 days for a year)
BALIK PULAU CONSTR Industry average
1) Current Ratio 0.30 times
2) Quick ratio 0.30times
3) Account Receivables Turnover) 11times
4)Average Collection Period(ACP) 67days
5) Inventory Turnover 5.7times
6) Gross profit margin 16.69%
7) Net Profit margin 4%
8) Total debt ratio 67%
9) Long term debt ratio 45%
10) Times interest earned ratio 1.33times

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No. 2
Consider the following balance sheet and income statement for the Perlis Road Corporation.

PERLIS ROAD TRANSPORTATION

Balance Sheet of December 31, 2006 and 2007 (RM)
2006 2007
Current assets
Cash 209 207
Accounts receivable 355 315
Inventory 507 428
Total Current Asset 1071 950
Fixed assets

Net plant and equipment 6,085 6,527

Total assets 7,156 7,477
Current Liabilities
Account payable 206 318
Notes payable 1,715 1,427
Total Current Liabilities 1,921 1,745

Long term debt 1,987 2,385

Owner equity
Common stock and paid
in surplus 1,000 1,000
Retained earnings 2,248 2,347
Total 3,248 3,347

Total liabilities and

owner’s equity 7,156 7,477

3
 PERLIS ROAD TRANSPORTATION
2007 Income statement (RM)
Sales 4,200
Cost of good sold (COGs) 2,927
Depreciation 550
Earnings before interest and taxes(EBIT) 723
Interest paid 502
Taxable income 221
Taxes (34%) 75
Net income 146
Dividends 47
Addition to retained earnings 99

i) Based on the balance sheet and income statement in the previous two problems, calculate the
following ratio for 2007.(Assume there are 365 days for a year)

Perlis Road Transport Industry Norms

Firm Liquidity
a)Current Ratio 0.72 times
b) Quick ratio 0.40 times
c) Inventory turnover 12 times
d) Receivable turnover 16 times
e) Average collection period 40 days
Financing decision & profitability
f) Total debt ratio 60%
g) Long term debt ratio 45%
h) Times interest earned ratio 1.97 times
i) Net profit margin 2.7%
j) Gross profit margin 27%

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Study Questions 2C (part 2)
SUHAIR TEXTILE CORPORATION
Balance Sheet of December 31, 2009 and 2010 (RM000)
2009 2010
Current assets
Cash 84 98
Accounts receivable 165 188
Inventory 400 400
Total Current Asset 649 686
Fixed assets

Net plant and equipment 2,724 2,902

Total assets 3,373 3,588
Current liabilities
Account payable 312 344
Notes payable 231 196
Total Current Liabilities 543 540

Long term debt 531 457

Owner equity
Common stock and paid
in surplus 500 550
Retained earnings 1,799 2,041
Total Equity 2,299 2,591

Total liabilities and

owner’s equity 3,373 3,588
Notes : Suhair Textile has 60,000 share outstanding for 2010 and the stock sold for RM25 per
share at the end of the year.

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 SUHAIR TEXTILE CORPORATION
2010 Income statement (RM000)
Sales 2,400
Cost of good sold 1,433
Depreciation 276
Earnings before interest and taxes(EBIT) 691
Interest paid 141
Taxable income 550
Taxes (34%) 187
Net income 363
Dividends 121
Addition to retained earnings 242
a) Based on the above financial statements , please compute and analyze the following ratios
for SUHAIR TEXTILE CORPORATION 2010.
b) Briefly explain and compare your answers with industry ratio

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LIQUIDITY RATIOS SUHAIR TEXTILE Industry ratio/peer group
CORPORATION

a)Current ratio 1.2 times

b)Quick ratio 0.40 times

SOLVENCY RATIO/ LEVERAGE

c)Total debt ratio 0.20 times
d)Debt-equity ratio 0.12 times
e)Long term debt ratio 0.10 times
f) Time interest earned ratio 3.0 times

TURNOVER RATIO/ ASSET

UTILIZATION
g) Inventory turnover 2.0times
h) Receivable Turnover 10 times
i) Average Collection Period (ACP) 35 days
j) Fixed assets turnover 0.60 times
k) Total assets turnover 0.58 times

PROFITABILTY RATIOS
l) Net Profit Margin 6%
m) Operating profit margin 8%
n) Return on Asset (ROA) 10%
o) Return on equity(ROE) 12%

MARKET VALUE RATIO

p) EPS 6
q) Price earnings ratio 9
r) Book value Per share 30
s) Market to book ratio 0.90