CONFIDENTIAL Ss BM/JUL 2017/FINGS58/665 Sk) eS UNIVERSITI TEKNOLOGI! MARA FINAL EXAMINATION COURSE : FINANCIAL STATEMENT ANALYSIS COURSE CODE : FIN658/665 EXAMINATION : JULY 2017 TIME : 3HOURS INSTRUCTIONS TO CANDIDATES 1 This question paper consists of two (2) parts: PART A (1 Question) PART B (6 Questions) 2 ‘Answer ALL questions from PART A and PART B in the Answer Booklet. Start each answer ona new page. 3 Do not bring any material into the examination room unless permission is given by the invigilator. 4. Please check to make sure that this examination pack consists of i) the Question Paper ii) an Answer Booklet ~ provided by the Faculty 5. ‘Answer ALL questions in English. DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of 9 printed pages © Hak Cipta Universit Teknologi MARA CONFIDENTIALCONFIDENTIAL 2 BM/JUL 2017/FIN658/665 PARTA QUESTION 4 Geranium Corporation is a manufacturing company that produces computer parts. As a financial analyst, you are evaluating the financial performance of Geranium Corporation for further recommendation during the coming Annual General Meeting. Below are the financial information provided by Geranium Corporation for the financial ending December 2014-2016. GERANIUM CORPORATION Statement of Financial Position as at December 31, 2016 (RM) 2015 (RM) 2014 (RM) Cash 160,056 150,400 131,085 Marketable securities 232,500 164,223 400,522 Accounts receivable 597,631 363,655 411,200 Inventory 298,000 274,400 54,000 Prepayment 23,000 56,700 657,303 Other current assets 130,067 224,366 183,790 Net plant and equipment 770,000 600,422 1,470,320 Land 480,000 420,000 Total Assets 314,166 Accounts payable 221,700 175,600 243,566 Accrual 145,000 235,088 689,703 Notes payable 50,123, 30,000 302,600 Term loans 350,000 350,023 125,663 Debentures 250,000 250,000 222,400 Common stock 400,000 380,000 920,000 Paid in capital 538,000 538,000 1,000,000 Retained earnings 355,455 Total liabilities and equities (© Hak Cipta Universiti Teknologi MARA, CONFIDENTIALCONFIDENTIAL 3 BM/JUL 2017/FING5S/665 GERANIUM CORPORATION Statement of Financial Performance for Years Ending December 31, 2016 (RM) 2015(RM) 2014 (RM) Sales 4,800,455 2,800,699 3,245,427 Cost of goods sold 3,567,723 100,545 156,670 Gross profit 4,032,732 600,154 4,188,757 Selling & admin expenses 140,033 220,677 278,855 General expenses 100,477 150,446 189,962 Depreciation 184,556 233,656 183,790 Operating profit 607,666 330,442 536,150 Interest 54,200 54,800 55,750 EBT 553,466 275,642 480,400 Taxes, 28% 154,970 77,180 134,512 EAT GERANIUM CORPORATION Year -to Year Change Statement of Financial Position as at December 31, 2016 2015 (%) (RM) % (RM) Cash 6.42 9,656 14.73 19,315 Marketable securities 41.58 68,277 -59.00 -236,299 Accounts receivable: 614.34 233,976 -11.56 47,545 Inventory 8.60 23,600 408.15. 220,400 Prepayment 59.44 -33,700, 91.37 600,603 Other current assets 42.03 94,299 22.08 40,576 Net Plant and equipment 28.24 169,578 59.16 869,898 Land 417 60,000 Total Assets (© Hak Cipta Universiti Teknolog! MARA CONFIDENTIALCONFIDENTIAL 4 Accounts payable 26.25 46,100 Accrual -38.32 — -90,088 Notes payable 67.08 20,123 Term loans -0.01 -23 Debentures 0.00 0 Common stock 5.26 20,000 Paid in capital 0.00 0 Retained earnings 112.81 Total liabilities and equities GERANIUM CORPORATION BM/JUL 2017/FING58/665 -27.90 -67,966 -65.91 454,615, -90.09 -272,600 178.54 224,360 12.41 27,600 -58.70 540,000 -46.20 462,000 58.48 131,167 37.93, Year- to- Year Change Statement of Financial Performance for Years Ending December 31, (2016 2015 a (RM) % (RM) Sales 1,799,756 -13.70 ~444,728 Cost of goods sold 1,367,178 7.00 143,875 Gross profit 432,578 49.51 -588,603 Selling & admin expenses -80,644 -20.86 -58,178 General expenses ~49,969 -20.80 -39,516 Depreciation ~49,100 27.13 49,866, Operating profit 277,224 -38.37 -205,708 Interest -600 -1.70 -950 EBT 100.79 277,824 42.62 -204,758 Taxes, 28% 100.79 77,790.72 42.62 -57,332.24 EAT 100.79 _ 200,033.28 -42.62 — -147,425.76 0 8 a 2 S218 a) Prepare a Statement of Cash Flow for Geranium Corporation for the year ended December 31, 2016 using indirect method. © Hak Cipta Universiti Teknologi MARA, (8 marks) CONFIDENTIALCONFIDENTIAL, 5 BM/JUL 2017/FINGSS/665 b) Using average value, calculate any two relevant financial ratios for each of the following areas that are useful in determining overall financial performance of Geranium Corporation for the Year 2015 and Year 2016. i) Ability to meet maturing obligations. i) Effectiveness in managing assets and efficiency in handling operations. )) Profitability and overall operating results. iv) Ability to service debts and degree of financial risk. v) ROE using DuPont Method (10 marks) ©) Draw inferences concerning Geranium Corporation's financial performance in 2016 relative to 2015 based on calculated financial ratios, statement of cash flows and the year-to-year change financial statements provided. Your discussion should include their ability to meet maturing obligations, effectiveness in managing assets and efficiency in handling operations, the degree of financial risks, profitability and overall operating results. (14 marks) d) Based on the findings in (a), (b), and (c), discuss two (2) financial strengths of Geranium Corporation in 2016. (4 marks) ) Based on your answer in (d), advice the top management on Geranium’s financial capacity to purchase the new plant by providing two (2) justifications. (4 marks) (© Hak Cipta Universiti Teknolog! MARA. CONFIDENTIALCONFIDENTIAL 6 BM/JUL 2017/FINGS8/665 PARTB QUESTION 1 You are evaluating Crampula Corporations financial performance. Below are the financial data extracted from their annual report for the financial year ended 31 December 2016. Net profit after tax RIM50,000,000 ividend payout ratio 30% ‘Common share issued at par RM2 RM70,000,000 | Paid-in-capital RM23,500,000 Treasury stock M120, 000. Market price per share RM25 a) Calculate the total amount of cash dividend declared, dividend per share (DPS), earnings per share (EPS), price eamings ratio (PER), book value per share (BVPS) and market to book value. (6 marks) b) Suggest whether the stock is worth buy for long term investment. Justify your answer based on your calculation in (a). (4 marks) QUESTION 2 Kayuwang Corporation Bhd Statement of Fit Perfor for ‘ears En December 31. 2016 (RM’000) 2015(RM’000) 2014 (RM'00 Sales 50,223 82,926 53,646 Cost of Goods Sold 29,342 31,143 30,765 Gross Profit 20,881 21,783 22,881 ‘Administrative Expenses 4,926 4,881 5,199 Marketing Expenses 1,956 2,098 2,203 Research and Development Expenses 7,634 7,581 7,247 Earnings Before Interest and Taxes 6,365 7,223 8,232 Interest 2,340 1,800 1,425 Earnings Before Taxes 4,025 5,423 6,807 Taxes 4,207 1,627 2,042 Earnings after taxes 2,818 3,798 4,765 a) Prepare Kayuwang Corporation Bhd using common-size analytical tool for all the three years, (6 marks) b) Identify two unfavorable operating activities that Kayumas Corporation Bhd is facing in Year 2016. (4 marks) (© Hak Cipta Universiti Teknologi MARA, CONFIDENTIALCONFIDENTIAL 7 BM/JUL 2017/FING58/665 QUESTION 3 The partial financial information is extracted from Rumbanan Bhd for the financial year ended December 31, 2016 Rumbanan Bhd Statement of Financial Position RM. ‘Account Payable 332,500 Accrual Expenses 205,000 Long term debt, 10% 1,250,000 Common stock @ RM1 par 300,000 Paid-In Capital 1,620,000 Retained earnings 4,021,500 Total liabilities & equities 4,729,000 Rumbanan Bhd Statement of Financial Perfomance RM. Sales 9,000,000 Net Income 900,000 Cash Dividend 630,000 Rumbanan Bhd estimates that the sales revenue for the year 2017 will increase increased by 35 percent while the net profit margin and the dividend payout ratio will maintain as it was in 2016. The total assets, account payable and accrual expenses are expected to increase spontaneously with sales. a) Prepare a partial pro-forma statement and determine the additional funds needed for the Year 2017. (6 marks) b) Given that the company total assets turnover cannot below than 1.5 times, should the company secure additional funds needed for the Year 2017 to finance its sales growth? Justify your answer with financial data. (4 marks) (© Hak Cipta Universiti Teknologl MARA CONFIDENTIALCONFIDENTIAL 8 BM/JUL 2017/FING58/665 QUESTION 4 Crocus Enterprise is a leading company in producing terra cotta pots. Following is the details of Crocus's inventory sales and purchases for the month of June 2017. Crocus is using a periodic inventory system to record its sales and purchases activity. Sales Purchases | ini Cost per unit Units | COSt EM | Units plod Beginning Inventory 180 50 2 June 150 5 165 45 4 June 170 85 8 June _| 410 65 170 55 10 June 400 70 180 60 14 June 180 50 18 June 190 55, 24 June 190 80 27 June 170 70 28 June 185 75 195 60 30 June 230 90 240 55 Using FIFO and LIFO cost method, determine the: a) Cost of goods sold and ending inventory (6 marks) b) Gross profit margin and inventory turnover. (4 marks) QUESTION 5 You are considering to purchase Citamara Corporation company's common stock. Below is the financial information of Citamara Corporation: * Book value at December 31, 2016 is RMG per share. * Predicted net income per share for Year 2017 through Year 2021 is RMO.9 RM1.2, RM1.6, RM2 and RM1.8 respectively. For Year 2022 and thereafter, predicted residential income is RMO. * Citamara Corporation is not expected to pay dividends for 2017 to 2021 (© Hak Cipta Universiti Teknologi MARA, CONFIDENTIALCONFIDENTIAL 9 BM/JUL 2017/FING58/665 © The cost of capital is 10 percent which is as follow; Year 2017 | 2018 | 2019 | 2020 | 2021 Cost of capital 0.909 | 0.826 | 0.751 | 0.683 | 0.621 a) Determine the intrinsic value of Citamara Corporation's common stock as of January 01, 2017 using the residual income valuation model. (7 marks) b) Elaborate any three possible reasons that the Capital Share might increase. (3 marks) QUESTION 6 Below is the summary of Cash Flow Statement for three different companies namely A Bhd, S Bhd, and X Bhd. Comparatively, each company has different pattern of cash flow from the others. ABhd = SBhd XBhd RM'000 RM'000 RM‘ 000 Net cash provided (used) by: Operating activities (4,500) 8,200 (5,500) Investing activities (8,500) (3,100) 4,900 Financing acti 16,500 (900) (5,100) Net increase (decrease) in cash 3,500 4,200 (5,700) a) You are required to identify which company is growing and is expanding rapidly, the company that is facing the risk of bankruptcy and the company which is older and expanding slowly. (4 marks) b) Support your identification with relevant explanation. (6 marks) END OF QUESTION PAPER (© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL,