BAC 2684 Financial Statement Analysis Tri 1, 2022/23

BAC 2684 Financial Statement Analysis

TRIMESTER 1, 2022/23

GROUP ASSIGNMENT

ASSIGNMENT GUIDELINES
1. This is a group assignment. Hence, no individual assignments will be accepted.

2. Each group should have a maximum of 5 members only. Please appoint a group leader for
each group. Group leader is responsible for managing the group and to ensure that each
member completes the task given.

3. Submission requirements:
(a) Font: Times New Roman, size 12
(b) Spacing: 1.5
(c) Please use the cover page template and include the group member’s declaration as per
Appendix A.

4. Marks will only be given to those whose names are on the assignment cover page. Please
ensure that your name and student ID number are on it. Those whose names do not appear
on the assignment will automatically be assumed to have not submitted the assignment.

5. For group member that do not participate in the group assignment, the group leader has the
right not to include his/her name in the assignment cover page.

6. Please take note that if two assignments are very similar in content, both assignments will get
automatic zero mark.

7. Any act of plagiarism is a serious academic offence, and you may get an F grade for your
paper.

SUBMISSION

1. Due date for this assignment is on Thursday, 12th January 2023 by uploading to Google
Classroom or by email. Email address: rajagopal.raghavan@mmu.edu.my

2. Late submissions will result in deduction of marks.

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BAC 2684 Financial Statement Analysis Tri 1, 2022/23

GRADING

1. The lecturer will examine the thoroughness of your work and the presentation of your
assignment i.e. content, format, grammar, etc.

2. The total marks for this assignment are 100 and this contributes 20% towards the total grade
of the course. Make sure you do it well.

APPENDIX A

BAC 2684 FINANCIAL STATEMENT ANALYSIS

Trimester 1,2022/23

Due date: 12th. January 2023 for Assignment.

Lecturer: Rajagopal Raghavan

Faculty of Business

Group members:
Student ID Student Name
Eg. 99523626355 Ali bin Baba (Group Leader)

1.

2.

3.

4.

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BAC 2684 Financial Statement Analysis Tri 1, 2022/23

Declaration by group leader

(This section is to be filled in by group leader’s own handwriting.)

I hereby declare that all group members’ names are correctly included in the above section. I hold
a copy of this assignment which I can produce if the original is lost or damaged. I certify that no
part of this assignment has been copied from any other student’s work or from any other source
except where due acknowledgement is made in the assignment.

Group leader’s signature : _____________________________

Group leader’s name : _____________________________
Group leader’s student ID : _____________________________
Date : _____________________________

Group member’s declaration

(Each group member, including the group leader, must individually fill up and submit this form, in the student’s own
handwriting. This form is to be inserted in the report, in the Appendix)

Group member’s name : ____________________________

Student ID : ____________________________

For the purpose of completing this assignment, I have performed the following tasks (please list):

I hereby declare that I have assessed the final submission and I take full responsibility should
there be any inaccuracies, incompleteness, omissions, delays or non-submission.

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BAC 2684 Financial Statement Analysis Tri 1, 2022/23

Group member’s signature : ________________________________

Group member’s name : ________________________________

Group member’s ID : ________________________________

Date : ________________________________

Verified by Group Leader :_________________________________

(Signature)

GROUP ASSIGNMENT

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BAC 2684 Financial Statement Analysis Tri 1, 2022/23

Question 1

You have been assigned to construct Victor Bhd’s December 31, Year 6 balance sheet. The
following information is provided:

1. Beginning and ending balances are identical for both accounts receivable and inventory
2. Net Income is RM 1,300
3. Times earned interest is 5 (income taxes are zero). Company has 5% bonds outstanding
issued at par value.
4. Net profit margin is 10%. Gross margin is 30%. Inventory turnover is 5.
5. Days’ sales in receivable is 72 days
6. Sales-to-end-of-year working capital is 4. Current ratio is 1.5
7. Acid test ratio is 1.0 (excludes prepaid expenses)
8. Plant and equipment (net) is RM 6,000. It is one-third depreciated
9. Dividends paid on 8% non-participating preferred stock are RM 40.00. There is no
change in common shares outstanding during Year 6. Preferred shares were issued two
years ago at par.
10. Earnings per common share are RM 3.75
11. Common stock has a RM 5.00 par value and was issued at par
12. Retained earnings at January 1, Year 6 are RM 350.

Required

a) Given the information available, prepare the company’s balance sheet as of December 31,
Year 6 (include the following account classifications: cash, accounts receivable,
inventory, prepaid expenses, plant, and equipment (net), current liabilities, bonds
payable, and stockholders’ equity). To support your answer, show all relevant
calculations to derive each of the balance sheet items.

(21 marks)

b) Determine the amount of dividends paid on common stock in Year 6.

(4marks)

(Total Marks 25)

Question 2

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BAC 2684 Financial Statement Analysis Tri 1, 2022/23

a) The comparative income statement and balance sheet for MISC Berhad is as follows:

Year 2 Year 1
Income Statement (RM’000) RM RM
Net sales 47,716 40,343
Cost of goods sold 28,977 22,444
Gross profit 18,739 17,899
Selling, general, & administrative expense 6,531 6,469
Depreciation & amortization expenses 1,464 1,277
Interest expense 342 329
Income before tax 10,402 9,824
Income tax expense 3,121 3,002
Net income 7,282 6,822
Outstanding shares 2,976 2,976

Year 2 Year 1
Balance Sheet (RM’000) RM RM
Cash 3,287 4,255
Receivables 5,215 5,262
Inventories 3,579 3,022
Other current assets 880 1,059
Total current assets 12,961 13,598
Property, plant and equipment 18,956 16,707
Accumulated depreciation 5,853 5,225
Net property, plant and equipment 13,103 11,482
Other noncurrent assets 17,942 15,075
Total assets 44,006 40,155

Accounts payable and accrued liabilities 5,904 5,391

Short-term debt and current maturity of LT debt 4,067 3,319
Income taxes payable 1,573 1,244
Total current liabilities 11,544 9,954
Deferred income tax & liabilities 11,614 11,768
Long-term debt 4,799 3,601
Total non-current liabilities 16,413 15,369
Common stock 30 30
Capital surplus 6,907 6,266

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BAC 2684 Financial Statement Analysis Tri 1, 2022/23

Retained earnings 31,500 27,395

Treasury stock (22,387) (18,858)
Shareholders’ equity 16,050 14,833
Total liabilities & equity 44,007 40,156

Required
a) Use the following ratios to prepare the following:

i. A projected Income Statement.

(16 marks)
ii. A projected Balance Sheet.
(18 marks)
iii. Statement of Cash Flow.

(11 marks)

(Total marks 45)

1. Sales growth 18.27%

2. Gross profit margin 39.27%
3. Selling, general, and administrative expense/Sales 13.69%
4. Depreciation expense/prior-year property, plant &equipment (gross) 8.76%
5. Interest expense/Prior-year long-term debt 4.94%
6. Income tax expense/Pretax income 30%
7. Accounts receivable turnover (Sales / Accounts receivable) 9.15
8. Inventory turnover (Cost of goods sold/Inventory) 8.10
9. Accounts payable turnover (cost of goods sold / Accounts payable 4.91
10. Taxes payable/Tax expense 50.41%
11. Total assets/stockholders’ equity (financial leverage) 2.35
12. Dividends per share RM 1.06
13. Capital expenditures/ sales 9.04%

Question 3

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BAC 2684 Financial Statement Analysis Tri 1, 2022/23

Matrix (M) Bhd has the following comparative statement of financial position as of 31 March
2021.

Matrix (M) Bhd

Comparative Balance Sheets 2021 2020
December 31, 2021, and 2020
Assets RM RM
Current Assets:
Cash 55,500 14,500
Accounts Receivable 51,400 53,900
Inventory 65,600 59,600
Prepaid Insurance 3,900 5,200
Total Current Assets 176,400 133,200
Land 34,000 96,500
Equipment, net 71,600 70,100
Investments 9,500 6,500
Total assets 291,500 306,300

Liabilities
Current liabilities:
Accounts payable 4,700 3,400
Notes payable, short term 43,200 48,200
Income tax payable 13,700 15,700
Salary payable 9,700 12,800
Interest payable 8,400 7,000
Accrued liabilities 1,500 3,500
Total current liabilities 81,200 90,600
Long-term liabilities 48,600 93,400
Total liabilities 129,800 184,000
Stockholders’ Equity
Common stock 69,400 61,200
Retained earnings 92,300 61,100
Total stockholders’ equity 161,700 122,300
Total liabilities & Equity 291,500 306,300

The following transaction data for the year ended March 31, 2021, includes the following:

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BAC 2684 Financial Statement Analysis Tri 1, 2022/23

RM
1. Net Income 76,400
2. Paid long-term notes payable 60,000
3. Loss on sale of land 9,500
4. Equipment was acquired by issuing long-term notes payable 15,200
5. Depreciation expenses on equipment 13,700
6. Paid short-term note payable by issuing common stock 5,000
7. Paid dividend 45,200
8. Received cash for issuance of common stock 3,200
9. Sold land for cash 53,000
10. Purchase long-term investment 3,000

Required

a. Prepare the statement of cash flows for Matrix (M) Bhd for the year ended March 31,
2021, using the indirect method.
(13 marks)

b. Provide the relevant notes for noncash investing and financing activities.

(2 marks)

(Total marks 15)

Question 4

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BAC 2684 Financial Statement Analysis Tri 1, 2022/23

1. Explain what you understand by book value of shares. Why is the book value of shares
considered to be important in financial statement analysis?
(5 marks)
2. Duta Consolidate Bhd is a property developer listed on Bursa Malaysia. The extract of the
shareholder equity section for the year 2020 is reproduced below:

Extract of Equity Section of Duta Consolidated Bhd RM

Common Stock, par value RM 7.00
Authorized 50,000,000 shares. Outstanding 25,650,250 shares 179,551,750
as at December 31,2020.
Preferred stock, 6% cumulative, par value RM 50.00
Authorized 5,000,000 shares: outstanding 4,525,650 226,282,500
Retained Earnings 826,350,200
Treasury stock at cost (50,000 shares) (350,000)
Total shareholder equity 1,231,834,450

Note: Dividends for preferred stock for the year 2020 is in arrears.

Required

a) Calculate the book value per share for both the preferred stock and the common stock as of
December 31, 2020.

(10 marks)

(Total marks 15)

(Grand Total 100 marks)

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