POLITEKNIK SULTAN ABDUL HALIM MUADZAM SHAH COMMERCE DEPARTMENT DISEMBER 2011 P5127 BUSINESS FINANCE ASSINGMENT 2 ANSWER

ALL QUESTIONS THIS ASSINGMENT MUST BE PREPARED INDIVIDUALLY. You are the financial manager of HUTANG CORPORATION. The company is in the process of applying a term loan from a major bank in Hutan Kampung. As the financial manager you are given the task of determining the companys performance last year. The following financial statements will help you to prepare an analysis of the firms performance. HUTANG CORPORATION BALANCE SHEET AS AT 31 DECEMBER 2011 RM Current Assets Cash 165,000 Marketable securities 220,000 Accounts receivable 110,000 Inventories Total Current Assets Net Fixed Assets 220,000 1,210,000 Total Assets 1,925,000 70,000 Current Liabilities Accounts Payable 150,000 275,000 825,000 1,320,000 495,000 605,000 Accruals Notes Payable Total Current Liabilities Long Term Debt Common Shares 1,925,000 Total Liabilities and RM

Shareholders Equities HUTANG CORPORATION INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2011 RM Sales Revenue 2,750,000 Less: Cost of goods sold 2,029,500 Gross Profit 720,500 Less: Selling Expenses 275,000 General Expenses 316,800 591,800 Earnings Before Interest and Tax 128,700

Less: Interest Expenses Earnings Before Tax Less: Taxes (50%) Earnings After Taxes

13,200 115,500 57,750 57,750 INDUSTRY AVERAGE RATIOS 1.7x Average Collection Period days 0.9x Fixed Assets Turnover times 50% Net Profit Margin 9.10% 6 times Return on Equity (ROE) 16.70% 4.55 times Return on Total Assets (ROA) 18.72%

Current Ratio Quick Ratio Debt Ratio Times Interest Earned Inventory Turnover

20 5

Assuming 365 day per year. Based on the above Financial Statements:

a) Calculate the indicated ratios for HUTANG CORPORATION.

(20 marks) b) Evaluate the overall performance of the company according to liquidity, activity, profitability and leverage ratios. (5 marks)