Adjustments to reconcile profit to net cash provided by operating activities: Depreciation expense Increase in accounts receivable Increase in inventory Decrease in accounts payable Net cash provided by operating activities Cash flows from investing activities Cash paid for equipment Net cash used in investing activities Cash flows from financing activities Cash paid for dividends Cash received from interest-bearing loan Net cash used in financing activities Net decrease in cash Cash balance at beginning of 20X3 Cash balance at the end of 20X3 18,750 (ii) Return on ordinary shareholders' equity 20.0% (850) (iii) Profit margin ratio 4.0% (140) ༅། བྷ། (420) (iv) Dividend yield 5.0% 26,064 (v) Current ratio 2.5:1 (22,470) (vi) Acid-test ratio 1.3.1 (22,470) (5,504) 980 (4,524) (930) 4,220 3,290 (vii) Days' sales uncollected (viii) Inventory turnover 28.1 days 6 (ix) Equity ratio 60.0% (x) Times interest earned 6 Note: All income tax payable was settled in the year when it was incurred. Additional information Market prices of issued shares at year end (20X3): Ordinary, $60.00 Use the information given in the above financial statements to answer Question 1(a) to (c). All ratios must be computed using the attached Formula Sheet. Round all your answers to 2 decimal places. Question 1a Calculate the following ratios for 20X3. The industry average for similar businesses is also provided. Question 1b Using the above industry averages, comment on the company's profitability, liquidity, efficiency, and solvency ratios. Question 1c Describe a key precaution that needs to be taken when making comparison with the industrial average. (i) Return on total assets Industry average 12.0% Question 1 ($'000) Financial statements for Sengkang Ltd are presented below: Sengkang Ltd Comparative Statements of Financial Position Revenue (net sales) Less: Cost of sales Gross profit 110,000 70,200 39,800 Less: Expenses As at 20X3 and 20X2 Selling and distribution expenses 14,200 ($'000) ($'000) Administrative expenses 9,940 20X3 20X2 Finance costs 3,120 Current assets Cash and cash equivalents Accounts receivable Inventories Total current assets Non-current assets Property, plant and equipment 34,380 30,660 Total non-current assets 34,380 30,660 Total assets 59,870 56,090 Current liabilities Total expenses 27,260 3,290 4,220 Profit before income tax 12,540 8,200 7,350 14,000 13,860 Income tax expense Profit 3,816 8,724 25,490 25,430 Additional information The total depreciation expense charged in the Income Statement for 20X3 was $18,750,000 and the total income tax paid was $3,816,000. Statement of Changes in Equity For the year ended 31 December 20X3 Account payable 11,560 11,980 ($'000) Total current liabilities 11,560 11,980 Share capital Non-current liabilities Ordinary (15,400,000 shares) Interest-bearing liabilities 19,880 18,900 Total share capital 15,400 Retained earnings Total non-current liabilities 19,880 18,900 Balance at the start of the period 9,810 Total liabilities 31,440 30,880 Total comprehensive income for the period 8,724 Equity Dividend paid ordinary (5,504) Share capital 15,400 15,400 Balance at the end of the period 13,030 Retained earnings 13,030 9,810 Total equity 28,430 25,210 Statement of Cash Flows For the year ended 31 December 20X3 Cash flows from operating activities ($'000) Income Statement For the year ended 31 December 20X3 Net profit/(loss) 8,724

Adjustments to reconcile profit to net cash provided by operating activities: Depreciation expense Increase in accounts receivable Increase in inventory Decrease in accounts payable Net cash provided by operating activities Cash flows from investing activities Cash paid for equipment Net cash used in investing activities Cash flows from financing activities Cash paid for dividends Cash received from interest-bearing loan Net cash used in financing activities Net decrease in cash Cash balance at beginning of 20X3 Cash balance at the end of 20X3 18,750 (ii) Return on ordinary shareholders' equity 20.0% (850) (iii) Profit margin ratio 4.0% (140) ༅། བྷ། (420) (iv) Dividend yield 5.0% 26,064 (v) Current ratio 2.5:1 (22,470) (vi) Acid-test ratio 1.3.1 (22,470) (5,504) 980 (4,524) (930) 4,220 3,290 (vii) Days' sales uncollected (viii) Inventory turnover 28.1 days 6 (ix) Equity ratio 60.0% (x) Times interest earned 6 Note: All income tax payable was settled in the year when it was incurred. Additional information Market prices of issued shares at year end (20X3): Ordinary, $60.00 Use the information given in the above financial statements to answer Question 1(a) to (c). All ratios must be computed using the attached Formula Sheet. Round all your answers to 2 decimal places. Question 1a Calculate the following ratios for 20X3. The industry average for similar businesses is also provided. Question 1b Using the above industry averages, comment on the company's profitability, liquidity, efficiency, and solvency ratios. Question 1c Describe a key precaution that needs to be taken when making comparison with the industrial average. (i) Return on total assets Industry average 12.0% Question 1 ($'000) Financial statements for Sengkang Ltd are presented below: Sengkang Ltd Comparative Statements of Financial Position Revenue (net sales) Less: Cost of sales Gross profit 110,000 70,200 39,800 Less: Expenses As at 20X3 and 20X2 Selling and distribution expenses 14,200 ($'000) ($'000) Administrative expenses 9,940 20X3 20X2 Finance costs 3,120 Current assets Cash and cash equivalents Accounts receivable Inventories Total current assets Non-current assets Property, plant and equipment 34,380 30,660 Total non-current assets 34,380 30,660 Total assets 59,870 56,090 Current liabilities Total expenses 27,260 3,290 4,220 Profit before income tax 12,540 8,200 7,350 14,000 13,860 Income tax expense Profit 3,816 8,724 25,490 25,430 Additional information The total depreciation expense charged in the Income Statement for 20X3 was $18,750,000 and the total income tax paid was $3,816,000. Statement of Changes in Equity For the year ended 31 December 20X3 Account payable 11,560 11,980 ($'000) Total current liabilities 11,560 11,980 Share capital Non-current liabilities Ordinary (15,400,000 shares) Interest-bearing liabilities 19,880 18,900 Total share capital 15,400 Retained earnings Total non-current liabilities 19,880 18,900 Balance at the start of the period 9,810 Total liabilities 31,440 30,880 Total comprehensive income for the period 8,724 Equity Dividend paid ordinary (5,504) Share capital 15,400 15,400 Balance at the end of the period 13,030 Retained earnings 13,030 9,810 Total equity 28,430 25,210 Statement of Cash Flows For the year ended 31 December 20X3 Cash flows from operating activities ($'000) Income Statement For the year ended 31 December 20X3 Net profit/(loss) 8,724

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 87PSB

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