Reference no: EM132405341
Question
OBJECTIVE
To enable learners to utilize financial ratios for the purpose of evaluating a firm's financial performance and financial position as well as in recognizing firms facing financial distress and using ratios to make decisions for improvement.
REQUIREMENT
Financial Statement Analysis
Refer to the following financial statements of XYZ Sdn. Bhd. for 2018:
Statement of Profit or Loss for the Year Ending 31 December 2018
RM (000's) RM (000's)
Revenue 3,393
Cost of goods sold 2,482
Gross profit 911
Less: operating expenses
- Selling, general and administrative expenses 492
- Depreciation 147 639
Operating income 272
Other income 48
Earnings before interest and tax 320
Interest expense 75
Profit before tax 245
Corporation tax 74
Profit after tax 171
Preferred dividends 20
Earnings attributable to ordinary shareholders 151
Ordinary dividends 50
Retained earnings 101
Statement of Financial Performance as at 31 December 2018
RM (000's) RM (000's)
Non-current assets Current liabilities
Property, plant and equipment 2,135 Trade creditors 321
Less: depreciation (810) Other creditors and accruals 80
1,325 Short-term borrowings 335
Investments 375 736
1,700
Current assets Long-term liabilities
Stocks (inventories) 435 Long-term borrowings 707
Trade debtors 441 Deferred tax 176
Other debtors and prepayments 90 883
Cash at bank and in hand 216 Shareholders'equity
1,182 Ordinary shares 100
Preference shares 48
Capital reserves 552
Retained earnings 602
Treasury stock (39)
1,263
2,882 2,882
Required:
Calculate the following ratios for the company and explain the general implications of your results:
a. Gross profit; operating profit; and net profit after tax margins
b. Current and acid-test ratios
c. Debt ratios and interest cover ratios
d. Provide TWO (2) comments on the performance of XYZ Sdn. Bhd. for 2018.