D2ACC100
FINANCIAL ACCOUNTING
GROUP ASSIGNMENT
Sarigama owns and operates a furniture store “MUS-T BAIK”. The store is located in Kota
Dantenaere. The premises and Inyout of the business are outdated but the staffs are long
jenced and loyal. The store operates a six-day week from. Sarigama
Hotlines fom Pathan is Head foe yeas ago. Pathan feted dtect te Ducacss,
leaving Sarigama to nim business on his own. A smooth transition. things were relatively
easy initially. However, in vecent years there have been many changes to the store's trading
environment
‘The main changes during 2017 were:
‘a. A national franchising chain called “MEE-MANG BOLEH™ established a
wholesale outlet in the area. It operates a seven-day week, from 9 am to 9 pm.
b. Two of the main suppliers closed down and Sarigama was forced to look for new
suppliers. This has proved to be most difficult, causing many problems for the store
e. A number of the store’s larger customers began to order their fumiture from
competitore and large-scale euppliers, revulting that in the lost a mumber of valuable
customers:
The relevant financial information are as follows:
1, Information Extracted from Profit & Loss Statement 31 December 2017
RM
(Cash Sales 660,000
(Credit Sales 7,260,000
Sales returns 20,000,
Cost of goods sold 1,036,000
‘Gross profit 864,000
Selling expenses ‘310,000.
Adminisuative expenses 410,000,
Finance expenses ‘60,000,
‘Net profit 34,0002, Information Extracted from Statement of financial position at 31 December 2017
(Current assets
‘Current habilities
‘Non-current Liabilities,
Capital at bezinnin:
Capital at end
‘Non-current assets
Receivables (I Jan 2016)
Receivables (31 Dec 2016)
Tnventory CI Jan 2016)
Inventory (31 Dec 2016)
Drawings,
3. Previous three years’ ratio analysis results for “MUS-T BAIK™
Ratio
Retum on Total Assets
‘Net profit ratios
‘Gross profit ratios
| Operating Expenses ratio
Tnventory Tumover
Receivables Turnover
‘Current ratio
‘Quick Asset Ratio
Debt to Equity ratio
‘Retum on Owner's equity4, Other additional Information
The net profit was RM112,000 in 2016 compared to RM84,000 im 2017. The main
contributing factor was due to increase in sales commission, repairs and maintenance,
heating and lighting, interest, discounts and bad debts
REQUIRE]
a. Refer to the information above to calculate the relevant ratios.
b. Prepare a written report to help Sarigama decide whether to continue to run the
business as usual or to admit a partner to share his burden.
For report writing you may need to refer to information from the reports to
understand the performance and position of the business to get some points of
recommendation.
In the report you should explain the:
‘Trends in the financial profitability
Trends in the liquidity
Trends in financial stability
The efficiency of the management
Non-financial information that Sarigama will need to consider.
c. Explain to Sarigama his present situation.
* Outline the advantages and disadvantages to remain as sole proprietor.
* Outline the advantages and disadvantages of operating a business as a
partnership.