QUESTION 01 Points : 5 + 20

Time : 9:30 AM to 11:20 AM

a. Explain the significance of the free cash flow to the firm, free cash flow to equity.

b. RAK Ceramics (Bangladesh) Ltd.

(For the year ended 31 December xxx)
Sales Revenue 5,233,144,472 6,408,004,827 6,830,783,735 6,956,185,329 Based on the information :
Net Income 6.30% 12.39% 13.04% 14.63% 1 . Critically evaluate the cashflow positions of the company.
2 . Compare RAK’s operating cash flow as a percentage of
Cash flows from operating activities Dec-20 Dec-19 Dec-18 Dec-17 revenue with RAK’s net profit margin.
Cash receipts from customers 96.45% 99.84% 95.54% 102.67% 3 . Discuss RAK’s use of its positive operating cash flow.
Cash payments to suppliers and employees -72.14% -72.72% -83.02% -71.43%
Cash generated from operating activities 24.30% 27.12% 12.52% 31.24%
Interest received from bank deposit 0.18% 0.09% 0.09% 0.13%
Income tax paid -2.58% -4.14% -4.30% -4.97%
Net cash (used in)/from operating activities 21.91% 23.07% 8.31% 26.39%
Cash flows from investing activities
Acquisition of property, plant and equipment -3.41% -4.31% -4.51% -4.73%
Sale of property, plant and equipment 0.04% 0.00% 0.00% -
Disposal proceeds of associate - - 1.08% 1.06%
Interest received from FDR 0.71% 0.30% 0.44% 0.14%
Income from rental 0.28% 0.36% 0.07% 0.15%
Intangible assets -0.01% -0.01% -0.17% -0.10%
Insurance claim received 0.73% 0.89% - -
Dividend received 0.88% 1.36% 0.00% 0.00%
Net cash (used in)/from investing activities -0.77% -1.41% -3.09% -3.48%
Cash flows from financing activities
Finance charges -0.34% -0.29% -0.70% -0.60%
Avail/(repayment) of term loan - -1.38% -3.97% -3.85%
Avail/(repayment) of short-term loan 0.59% -3.44% -3.49% -0.51%
Payment of lease liability -0.17% -0.15% 0.00% 0.00%
Dividend paid -12.12% -6.04% -5.15% -9.63%
Unclaimed share application refund 0.00% 0.00% 0.00% 0.00%
Adjustment related with non-controlling interest 0.00% 0.00% 0.00% 0.00%
Net cash (used in)/from financing activities -12.03% -11.30% -13.32% -14.58%
Effect of exchange rate changes in cash and cash equivalents 0.00% 0.00% 0.01% 0.00%
Net increase/(decrease) in cash and cash equivalents 9.11% 10.36% -8.09% 8.33%
Cash and cash equivalents as at 01 January 27.28% 11.93% 20.24% 11.54%
Cash and cash equivalents as at 31 December 36.39% 22.28% 12.15% 19.87%

Question 02: Points : 5 + 10

a. Explain moajor types of items included under other comprehensive income.

b. For the year ended 31 December 2009, Angler Products had net income of $2,500,000.
The company declared and paid $200,000 of dividends on preferred stock. The company
also had the following common stock share information:

Shares outstanding on 1 January 2009 1,000,000

Shares issued on 1 April 2009 200000
Shares repurchased (treasury shares) on 1 October 2009 (85,000)
Shares outstanding on 31 December 2009 1,115,000

1 . What is the company’s weighted average number of shares outstanding?

2 . What is the company’s basic EPS?

Question 02: Points : 5 + 15

a. Describe general principles of revenue recognition and expense recognition.

b. Stelle Technology has a contract to build a network for a customer for a total sales price
of €10 million. The network will take an estimated three years to build, and total building
costs are estimated to be €8 million. Stelle recognizes long-term contract revenue
using the percentage-of-completion method and estimates percentage complete based
on expenditure incurred as a percentage of total estimated expenditures.

1 . At the end of Year 1, the company had spent €5 million. Total costs to complete
are estimated to be another €3 million. How much revenue will Stelle recognize in
Year 1?

2 . At the end of Year 2, the company had spent an additional €2.4 million for an accumulated
total of €5.4 million. Total costs to complete are estimated to be another
€0.6 million. How much revenue will Stelle recognize in Year 2?

3 . At the end of Year 3, the contract is complete. The company spent an accumulated
total of €8 million. How much revenue will Stelle recognize in Year 3?
Market Price of RAK stock = 44.20 BDT
Total number of shares available (427968701 in 2020 and 427968701 in 2019)
Calculate and comment on following ratios:
Total Points : 20
a. Current ratio f. Price to earnings ratio
b. Dividend Payout Ratios g. Cash conversion cycle
c. Total assets turnover h. Market to Book Ratio.
d. Dupont's identity i. Cash flow per share
e. Debt to total equity j. Interest coverage
SQUARE PHARMACEUTICALS LTD.
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
2017 2018 2019 2020 SQUARE Pharma, the largest pharmaceuticals
GROSS REVENUE 100% 104% 134% 159% company in the Country, is a trusted name in
Less: Value Added Tax 13% 13% 13% 13% the pharmaceuticals sector of Bangladesh.
NET REVENUE 87% 87% 87% 87%
COST OF GOODS SOLD -46% -45% -44% -43% Trend analysisy of the gross revenues are
GROSS PROFIT 42% 43% 44% 45% presented here. For other numbers are presented
OPERATING EXPENSES: -18% -18% -17% -16% as a percentage of the gross revenues of the
Selling & Distribution Expenses -15% -15% -14% -14% respective year.
Administrative Expenses -3% -3% -3% -2%
Finance Cost 0% 0% 0% 0%
PROFIT FROM OPERATIONS 25% 26% 27% 28% Req: Critically evaluate the profitability and
Other Income 8% 11% 8% 6% efficiency of the company for the last four years.
PROFIT BEFORE WPPF & WF 33% 33% 33% 34%
Allocation for WPPF & WF -2% -2% -2% -2%
PROFIT BEFORE TAX 31% 32% 33% 34%
TOTAL POINTS : 20
Income Tax Expenses-Current -8% -7% -8% -8%
Income Tax Expenses-Deferred 0% 0% 0% 0%
PROFIT AFTER TAX 23% 24% 25% 26%
Other Comprehensive Income:
Gain/(Loss) on Marketable Securities (Unrealized) 0.92% -1.03% -0.06% -1.13%
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 24% 23% 25% 25%
Earnings Per Share (EPS) 10.57 11.15 12.51 15.35
SQUARE PHARMACEUTICALS LTD.
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
2017 2018 2019 2020
GROSS REVENUE 33,299,672,121 34,573,390,809 44,595,486,334 52,926,218,655
Less: Value Added Tax 4,413,733,070 4,568,415,918 5,909,830,520 7,049,769,814
NET REVENUE 28,885,939,051 30,004,974,891 38,685,655,814 45,876,448,841
COST OF GOODS SOLD -14,824,352,515 -15,598,608,803 -19,711,065,988 -22,536,669,960
GROSS PROFIT 14,061,586,536 14,406,366,088 18,974,589,826 23,339,778,881 NOT
OPERATING EXPENSES: -5,892,241,850 -6,684,319,753 -7,749,309,449 -8,602,829,820
Selling & Distribution Expenses -4,978,783,909 -5,661,467,912 -6,559,717,827 -7,382,790,764
Administrative Expenses -913,309,549 -1,022,766,391 -1,189,514,648 -1,219,931,966
Finance Cost -148,392 -85,450 -76,974 -107,090
PROFIT FROM OPERATIONS 8,169,344,686 7,722,046,335 11,225,280,377 14,736,949,061
Other Income 2,715,854,964 3,644,261,128 3,438,272,847 3,307,701,994
PROFIT BEFORE WPPF & WF 10,885,199,650 11,366,307,463 14,663,553,224 18,044,651,055
Allocation for WPPF & WF -518,342,840 -541,252,736 -698,264,439 -859,269,098
PROFIT BEFORE TAX 10,366,856,810 10,825,054,727 13,965,288,785 17,185,381,957
Income Tax Expenses-Current -2,514,480,767 -2,534,562,419 -3,356,746,041 -4,251,005,177
Income Tax Expenses-Deferred -59,878,530 -70,966,504 -45,679,213 12 21,596,852
PROFIT AFTER TAX 7,792,497,513 8,219,525,804 10,562,863,531 12,955,973,632
Other Comprehensive Income:
Gain/(Loss) on Marketable Securities (Unrealized) 306,747,891 -357,803,537 -26,427,408 -598,212,229
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 8,099,245,404 7,861,722,267 10,536,436,123 12,357,761,403
Earnings Per Share (EPS) 10.57 11.15 12.51 15.35
SQUARE PHARMACEUTICALS LTD.
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
2017 2018 2019 2020
GROSS REVENUE 33,299,672,121 34,573,390,809 44,595,486,334 52,926,218,655
Less: Value Added Tax 4,413,733,070 4,568,415,918 5,909,830,520 7,049,769,814
NET REVENUE 28,885,939,051 30,004,974,891 38,685,655,814 45,876,448,841
COST OF GOODS SOLD -14,824,352,515 -15,598,608,803 -19,711,065,988 -22,536,669,960
GROSS PROFIT 14,061,586,536 14,406,366,088 18,974,589,826 23,339,778,881
OPERATING EXPENSES: -5,892,241,850 -6,684,319,753 -7,749,309,449 -8,602,829,820
Selling & Distribution Expenses -4,978,783,909 -5,661,467,912 -6,559,717,827 -7,382,790,764
Administrative Expenses -913,309,549 -1,022,766,391 -1,189,514,648 -1,219,931,966
Finance Cost -148,392 -85,450 -76,974 -107,090
PROFIT FROM OPERATIONS 8,169,344,686 7,722,046,335 11,225,280,377 14,736,949,061
Other Income 2,715,854,964 3,644,261,128 3,438,272,847 3,307,701,994
PROFIT BEFORE WPPF & WF 10,885,199,650 11,366,307,463 14,663,553,224 18,044,651,055
Allocation for WPPF & WF -518,342,840 -541,252,736 -698,264,439 -859,269,098
PROFIT BEFORE TAX 10,366,856,810 10,825,054,727 13,965,288,785 17,185,381,957
Income Tax Expenses-Current -2,514,480,767 -2,534,562,419 -3,356,746,041 -4,251,005,177
Income Tax Expenses-Deferred -59,878,530 -70,966,504 -45,679,213 12 21,596,852
PROFIT AFTER TAX 7,792,497,513 8,219,525,804 10,562,863,531 12,955,973,632
Other Comprehensive Income:
Gain/(Loss) on Marketable Securities (Unrealized) 306,747,891 -357,803,537 -26,427,408 -598,212,229
TOTAL COMPREHENSIVE INCOME FOR THE YEAR 8,099,245,404 7,861,722,267 10,536,436,123 12,357,761,403
Earnings Per Share (EPS) 10.57 11.15 12.51 15.35
RAK Ceramics (Bangladesh) Ltd.
(For the year ended 31 December xxx)
Sales Revenue 5,233,144,472 6,408,004,827 6,830,783,735 6,956,185,329
Net Income 329,485,359 793,650,022 890,625,185 1,018,012,122

Cash flows from operating activities Dec-20 Dec-19 Dec-18 Dec-27

Cash receipts from customers 5,047,314,151 6,397,938,990 6,525,977,881 7,141,620,481
Cash payments to suppliers and employees (3,775,409,759) (4,660,207,012) (5,670,580,547) (4,968,700,705)
Cash generated from operating activities 1,271,904,392 1,737,731,978 855,397,334 2,172,919,776
Interest received from bank deposit 9,646,592 5,904,922 5,915,987 8,791,396
Income tax paid (135,128,287) (265,344,903) (293,693,008) (345,782,243)
Net cash (used in)/from operating activities 1,146,422,697 1,478,291,997 567,620,313 1,835,928,929
Cash flows from investing activities
Acquisition of property, plant and equipment (178,260,840) (276,441,901) (307,844,206) (329,063,241)
Sale of property, plant and equipment 2,323,500 179,500 145,690 -
Disposal proceeds of associate - - 74,025,000 74,025,000
Interest received from FDR 36,949,445 19,500,669 29,837,100 9,429,742
Income from rental 14,912,609 23,109,211 4,605,000 10,557,999
Intangible assets (492,890) (771,526) (11,950,323) (6,925,458)
Insurance claim received 38,287,131 56,976,731 - -
Dividend received 45,949,800 86,949,600 200 200
Net cash (used in)/from investing activities (40,331,245) (90,497,716) (211,181,539) (241,975,758)
Cash flows from financing activities
Finance charges (17,702,836) (18,627,853) (48,091,939) (41,426,174)
Avail/(repayment) of term loan - (88,203,349) (270,959,943) (267,565,020)
Avail/(repayment) of short-term loan 30,707,987 (220,419,498) (238,509,621) (35,815,064)
Payment of lease liability (8,674,627) (9,736,019)
Dividend paid (634,047,427) (386,966,131) (351,973,215) (669,736,148)
Unclaimed share application refund (8,160) (19,200)
Adjustment related with non-controlling interest (400) (400)
Net cash (used in)/from financing activities (629,716,903) (723,961,010) (909,554,318) (1,014,542,806)
Effect of exchange rate changes in cash and cash equivalents 198,021 (204,349) 563,565 305,362
Net increase/(decrease) in cash and cash equivalents 476,572,570 663,628,922 (552,551,979) 579,715,727
Cash and cash equivalents as at 01 January 1,427,796,668 764,167,746 1,382,359,206 802,643,479
Cash and cash equivalents as at 31 December 1,904,369,238 1,427,796,668 829,807,227 1,382,359,206