hawangsair Co. is an international airline which flies to destinations all over the world. Mahawangsair Co experienced strong initial growth but in recent periods the company has been criticised for under-investing in its non-current assets. Extracts from Mahawangsair Co’s financial statements are provided below. Statements of financial position as at 30 June: 20X1 20X2 RM000 RM000 Assets
Mahawangsair Co. is an international airline which flies to destinations all over the world. Mahawangsair Co experienced strong initial growth but in recent periods the company has been criticised for under-investing in its non-current assets.
Extracts from Mahawangsair Co’s financial statements are provided below.
|
20X1 |
20X2 |
||||||
RM000 |
RM000 |
||||||
Assets |
|||||||
Non-current assets |
|||||||
Property, plant and equipment |
174,000 |
317,000 |
|||||
Intangible assets (note ii) |
16,000 |
20,000 |
|||||
190,000 |
337,000 |
||||||
Current assets |
|||||||
Inventories |
490 |
580 |
|||||
Trade and other receivables |
6,300 |
6,100 |
|||||
Cash and cash equivalents |
22,100 |
9,300 |
|||||
Total current assets |
28,890 |
15,980 |
|||||
Total assets |
218,890 |
352,980 |
|||||
Equity and liabilities |
|||||||
Equity |
|||||||
Equity shares |
3,000 |
3,000 |
|||||
|
41,800 |
44,100 |
|||||
Revaluation surplus |
Nil |
145,000 |
|||||
Total equity |
44,800 |
192,100 |
|||||
Liabilities |
|||||||
Non-current liabilities |
|||||||
6% loan notes |
150,400 |
130,960 |
|||||
Current liabilities |
|||||||
Trade and other payables |
4,250 |
10,480 |
|||||
6% loan notes |
19,440 |
19,440 |
|||||
Total current liabilities |
23,690 |
29,920 |
|||||
Total equity and liabilities |
218,890 |
352,980 |
|||||
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Other EXTRACTS from Mahawangsair Co’s financial statements for the years ended 30 June:
20X1 |
20X2 |
||||||
RM000 |
RM000 |
||||||
Revenue |
159,000 |
154,000 |
|||||
Profit from operations |
18,600 |
12,300 |
|||||
Finance costs |
(10,200) |
(9,200) |
|||||
Cash generated from operations |
24,310 |
18,480 |
|||||
The following information is also relevant:
(i) Mahawangsair Co. had exactly the same flight schedule in 20X1 as in 20X2, with the overall
number of flights and destinations being the same in both years.
(ii) In April 20X2, Mahawangsair Co. had to renegotiate its licences with five major airports, which
led to an increase in the prices Mahawangsair Co. had to pay for the right to operate flights
there. The licences with ten more major airports are due to expire in December 20X2, and
Mahawangsair Co. is currently in negotiation with these airports.
Required:
- Calculate the following ratios for the years ended 30 June 20X1 and 20X2:
(i) Operating profit margin;
(ii) Return on capital employed;
(iii) Net asset turnover;
(iv)
(v) Interest cover;
(vi) Gearing (Debt/Equity).
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