Reference no: EM132469181

Question 1: The following are the financial information of OHPO Company that you are interested to invest. This company is involved in producing information technology (IT) products for high end users.

The beginning-of-year statement of financial position information are as follow:

                                                OHPO Co.

RM Account Receivable, net          81,300

Inventory                                  161,100

Total assets                               573,750

Share Capital                              309,000

Retained Earning                          140,400

The current year-end statement of financial position information is as follow:

                                           OHPO Co.

                                                     Assets RM

Cash                                            61,800

Account Receivable, net                  86,100

Inventory                                     198,750

Prepaid Expense                              10,425

Property, plant and equipment, net      456,600

Total assets                                     813,675

Liabilities and Equities

Current Liabilities                             139,950

2 years Loan                                   151,500

Share Capital                                    309,000

Retained Earnings                               213,225

Total liabilities and equity                      813,675

The information from the current year's statement of profit or loss:

                                 OHPO Co.

                                     RM

Sales                             1,320,300

Cost of goods sold              948,750

Interest expense                 19,500

Income tax expense             36,450

Profit for the year               315,600

• You have obtained the financial ratios of WIWO Company, a close competitor to OHPO Co., of which you are also considering to invest.

Required:

Problem (a) Compute the following ratios for OHPO Co. Show all your workings. Round your answer up to 2 decimal places.

Financial Ratios: WIWO Co. OHPO Co.

i. Current ratio 2.534

ii. Acid test ratio 1.076

iii. Account Receivable turnover 22.92

iv. Inventory turnover 8.356

v. Average days in inventory 43.68 days

vi. Profit margin 21%

vii. Return on asset 39%

viii. Return on ordinary shareholders' equity 55.80%

ix. Debt to equity ratio 46.9%

x. Debt to total assets ratio 32%

Problem (b) As a short term investor, identify the company you consider to be better in terms of liquidity and justify your answer.

Problem (c) Assuming the following information:

WIWO Co. OHPO Co.

Share Price as at December 31, 2016 RM 26 RM 29

Cash dividend paid RM 6 RM 5.30

Earnings Per Share RM 4.69 RM 5.29

Price-Earnings Ratio 28.85

Dividend Yield 23%

Compute the price-earnings ratio and dividend yield for OHPO Co.

Problem (d) Identify which company you think would be worth to invest and justify your selection.

QUESTION 2

(a) The following independent situations require professional judgement to determine when to recognize revenue from the transactions:

i) Air-Masia Berhad sells a non-refundable one-way airline ticket in September for a flight in December.

ii) Payment received for a one-year subscription of Iman Magazine in March 2018. The magazine is published twice a year, on January and July.

iii) Tickets for opening ceremony of Tokyo Olympic 2020 scheduled in July 2020 will be sold in January 2019.

Required:

Problem 1: Identify when (or in what situation) revenue should be recognized in each situation