ACC117

GROUP PROJECT 2
(SEMESTER OCT 2022-FEB 2023)

PREPARED BY:
NAME STUDENT ID

FADZREEN NAJWA BINTI ROSLAN 2022837416

NURUL IMAN ALEESYA BINTI MOHD YUSRI 2022822888

NURUL SHAFIQA HANI BINTI MOHD YUSOF 2022849402

NASRIN NATASYA BINTI BAHRIN 2022831898

GROUP:
JBA 111 1F

PREPARED FOR:
MADAM NUR FAIZAH BINTI MAT JABAR

DEADLINE OF SUBMISSION:
29 JANUARY 2023

1
 CONTENT
NO. PARTICULAR PAGE

1. QUESTION

2. a) Compute the following ratios for both

businesses:
i. Current ratio
ii. Quick ratio
iii. Inventory turnover ratio
iv. Accounts receivable collection
period
v. Gross profit
vi. Net profit margin

3. b) Based on your above answer in (a):

i. Interpret each of the accounting
ratios for both businesses.

ii. State which business has difficulty in

paying its short-term obligation
without using its inventory and give
ONE (1) impact on business when it
has liquidity ratio less than 1.

4. c) Identify which business seems to be the

most efficient in using its capital to generate the
profit. Justify your opinion.

2
 QUESTION
Study the following financial statements for two very similar enterprises owned by Puan
Khairiah that are located in the city center of Perak and then answer the questions which
follow.
Statement of Profit or Loss for the year ended 31 December 20x9
FARMASI TAPAH FARMASI SERI ISKANDAR
RM (‘000) RM (‘000) RM (‘000) RM (‘000)
Sales 2,880 5,320
Less: cost of sales (2,240) (3,664)
Gross profit 640 1,656

Less: expenses
Depreciation (35) (184)
Other expenses (509) (1,108)
Net profit 96 364

Statement of Financial Position as at 31 December 20x9

FARMASI TAPAH FARMASI SERI ISKANDAR
RM (’000) RM (’000)
Non-current assets
Shophouse at carrying value 72 320
Office equipment at carrying value 34 244
106 564
Current assets
Inventory 224 316
Accounts receivable 422 191
Prepaid expenses 2 -
Bank 6 36
760 1,107
Financed by:
Owner’s equity
Opening balance 334 460
Add: Net profit 96 364
Less: Drawings (112) (118)
318 706

Non-current liabilities 50 153

Current liabilities
Accounts payable 380 245
Accrued expenses 2 -
Short-term loan 10 3
760 1,107

3
Additional information:
1. 10% of the sales were cash sales.
2. The net purchase incurred during the year were RM2,080,000 and RM3,700,000 for
Farmasi Tapah and Farmasi Seri Iskandar respectively.
3. Assume a year has 365 days.
Required:
a) Compute the following ratios for both businesses:
vii. Current ratio
viii. Quick ratio
ix. Inventory turnover ratio
x. Accounts receivable collection period
xi. Gross profit
xii. Net profit margin
(30 marks)
b) Based on your above answer in (a):
iii. Interpret each of the accounting ratios for both businesses.
(12 marks)
iv. State which business has difficulty in paying its short-term obligation without
using its inventory and give ONE (1) impact on business when it has liquidity
ratio less than 1.
(2 marks)

c) Identify which business seems to be the most efficient in using its capital to
generate the profit. Justify your opinion.
(6 marks)
(Total: 50 marks)

4
 a) Compute the following ratios for both businesses:

Farmasi Tapah Farmasi Seri Iskandar

Current current assets current assets

¿ ¿
ratio current liabilities current liabilities
224,000+ 422,000+2,000+6,000 316,000+ 191,000+ 36,000
¿ ¿
3 80,000+ 2000+ 10,000 245,000+3,000
654,000 543,000
¿ ¿
392,000 248,000
¿ 1.67 :1 ¿2.19 : 1

Quick current assets−closing inventory current assets−closing inventory

ratio −prepaid expenses −prepaid expenses
¿ ¿
current liabilities current liabilities
654,000−224,000−2,000 543,000−316,000
¿ ¿
392,000 248,000
428,000 227,000
¿ ¿
392,000 248,000
¿1.09 : 1 ¿0.92 : 1

Inventory cost of sales cost of sales

¿ ¿
turnover average inventory average inventory
ratio
2,240,000 3,664,000
¿ ¿

2 [
1 ( 2,240,000−2,080,000+224,000 )
+224,000 ] [
1 ( 3,664,000−3,700,00+316,000 )
2 +316,000 ]
2,240,000 3,664,000
¿ ¿
1 1
[ 384,000+224,000 ] [ 280,000+316,000 ]
2 2
2,240,000 3,664,000
¿ ¿
1 1
( 608,000 ) ( 596,000 )
2 2
2,240,000 3,664,000
¿ ¿
304,000 298,000
¿ 7.37 ¿ 12.30
¿ 7׿ ¿ 12׿

5
Accounts average accountsreceivable average accountsreceivable
¿ ¿
receivable net credit sales net credit sales
collection
422,000 191,000
period ¿ ×365 ¿ × 365
[ 2,880,000−¿ ( 10 % ×2,880,000 ) ] [5,320,000−¿ ( 10 % ×5,320,000 ) ]
422,000 191,000
¿ × 365 ¿ × 365
2,880,000−288,000 5,320,000−532,000
422,000 191,000
¿ ×365 ¿ × 365
2,592,000 4,788,000
¿ 59.43 ¿ 14.56
¿ 59 days = 15 days

Gross gross profit gross profit

¿ ×100 ¿ ×100
profit net sales net sales
640,000 1,656,000
¿ ×100 ¿ ×100
2,880,000 5,320,000
¿22.22% ¿ 31.13 %

Net profit net profit net profit

¿ ×100 ¿ ×100
margin net sales net sales
96,000 364,000
¿ ×100 ¿ ×100
2,880,000 5,320,000
¿ 3.33 % ¿ 6.84 %

6
 b) Based on your above answer in (a):

Farmasi Tapah Farmasi Seri Iskandar

Current ratio For every RM1 of current liabilities, For every RM1 of current liabilities,
the business has RM1.67 of current the business has RM2.19 of current
assets to repay that RM1 of current assets to repay that RM1 of current
liabilities. liabilities.

Quick ratio For every RM1 of current liabilities, For every RM1 of current liabilities,
the business has RM1.09 of current the business has RM0.92 of current
assets to repay that RM1 of current assets to repay that RM1 of current
liabilities. liabilities.

Inventory turnover The business replaced 7 times of The business replaced 12 times of
ratio inventory during the one-year inventory during the one-year
accounting period. accounting period.

Accounts receivable The business takes 59 days to collect The business takes 15 days to collect
collection period debts from its accounts receivable. debts from its accounts receivable.

Gross profit For every RM100 of sales, RM22.22 For every RM100 of sales, RM31.13
gross profit was made before any gross profit was made before any
expenses were paid. expenses were paid.

Net profit margin For every RM100 of sales, RM3.33 For every RM100 of sales, RM6.84
net profit was made after any expenses net profit was made after any expenses
were paid. were paid.

7
 c) Identify which business seems to be the most efficient in using its capital to
generate the profit. Justify your opinion.

Farmasi Tapah Farmasi Seri Iskandar

Return on net profit net profit

¿ ×100 ¿ ×100
capital employed capital employed
Investmen
96,000 364,000
t ¿ ¿
654,000+ 72,000+34,000−392,000 543,000+ 320,000+ 244,000−248,000
96,000 364,000
¿ ×100 ¿ ×100
368,000 859 ,000
¿ 26.09 ¿ 42.37

Opinion The Farmasi Tapah is able to generate The Farmasi Seri Iskandar is able to
RM 26.09 profit for every RM 1.00 generate RM 42.37 profit for every RM
investment in assets. 1.00 investment in assets.