Principles of Finance Individual Assignment (Case Study)

CBS1443

MINI PROJECT

Principle Of Finance ( CBS1443 )

Lecture Name: Mr. Beddan Veerasamy

Student name: Tamilarasaan A/L Adaikalam

Student ID: CCCB CIB 0323-0173

Due date: 04th January 2024

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Principles of Finance Individual Assignment (Case Study)
CBS1443

Case No:1: Topic 4

Dreamfood Sdn Bhd
Salmah binti Anwar, a 2016 graduate of the University of Cyberjaya, with 4 years of banking
experience, was recently brought in as assistant to the chairperson of the board of Dreamfood
Sdn Bhd a small food producer that operates in north Kuala Lumpur and whose specialty is
high-quality pecan and other nut products sold in the snack foods market. Dreamfood’s
president, Al Khalifa, decided in 2017 to undertake a major expansion and to “go national” in
competition with Frito-Lay, Eagle, and other major snack foods companies. Khalifa believed
that Dreamfood’s products were of higher quality than the competition’s that this quality
differential would enable it to charge a premium price, and that the end result would be greatly
increased sales, profits, and stock price.
The company doubled its plant capacity, opened new sales offices outside its home
territory, and launched an expensive advertising campaign. Dreamfood’s results were not
satisfactory, to put it mildly. Its board of directors, which consisted of its president, vice
president, and major stockholders (all of whom were local businesspeople), was most upset
when directors learned how the expansion was going. Unhappy suppliers were being paid
late, and the bank was complaining about the deteriorating situation and threatening to cut off
credit. As a result, Khalifa was informed that changes would have to be made and quickly;
otherwise, he would be fired. Also, at the board’s insistence, Salmah was brought in and given
the job of assistant to Daim Mustafa, a retired banker who was Dreamfood’s chairperson and
largest stockholder. Daim agreed to give up a few of his golfing days and help nurse the
company back to health, with Salmah’s help.
Salmah began by gathering the financial statements and other data given in Table 1.
Assume that you are Salmah’s assistant. You must help her answer the following questions
for Daim.

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Principles of Finance Individual Assignment (Case Study)
CBS1443

Table 1:
Key Financial Data
Ratio Dreamfood Sdn Bhd for the Industry Average for the Year
(% of Sales) Ended December 31, 2020 Ended December 31,2020
Cost of goods sold 74.5% 70.0%
Gross Profit 25.5 30.0
Selling Expenses 8.0 7.0
Gen.& admin. expenses 5.1 4.9
Depreciation Expenses 2.4 2.0
Total Operating Expenses 15.5 13.9
Operating Profits 10.0 16.1
Interest Expenses 1.4 1.0
Net Profit before Taxes 8.6 15.1
Taxes 2.4 6.0
Net Profit after taxes 5.2 9.1

Income Statement, Dreamfood Sdn Bhd..

For the Year Ended December 31, 2021
Sales Revenue $1,000,000
Less: Cost of goods sold $(750,000)
Gross profits $250,000
Less: Operating Expenses
Selling Expenses $70,000
Gen.& admin. expenses $48,000
Depreciation Expenses $20,000
Total Operating Expenses $(138,000)
Operating Profits $112,000
Less: Interest Expenses $(20,000)
Net Profit before Taxes $92,000
Less: Taxes $(36,800)
Net Profit after taxes $55,200

QUESTION 1
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Principles of Finance Individual Assignment (Case Study)
CBS1443

Ratio (% 0f Sales) DreamFood Sdn Bhd

Ended December 31,2021
Sales Revenue $1,000,000 100%
Less: Cost of goods sold $(750,000) 75.0%
Gross profits $250,000 25.0%
Less: Operating Expenses
Selling Expenses $70,000 7.0%
Gen. & admin. Expenses $48,000 4.8%
Depreciation Expenses $20,000 2.0%
Total Operating Expenses $(138,000) 13.8%
Operating Expenses $112.000 11.2%
Less: Interest Expenses $(20,000) 2.0%
Net Profit before Taxes $92,000 9.2%
Less: Taxes $(36,800) 3.68%
Net Profit after Taxes $55,200 5.52%
a) Prepare a common-size income statement for Dreamfood Sdn Bhd. for the year ended
December 31, 2021. (12 marks)

Income Statement Of Dreamfood Sdn Bhd For December 31, 2021

b) Evaluate the company's performance against industry average ratios and against 2021

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Principles of Finance Individual Assignment (Case Study)
CBS1443

year's results. (8 marks)

Ratio (% of Sales) DreamFood Sdn DreamFood Sdn Industry Average for the
Bhd for the Year Bhd For the Year Year Ended December
Ended December Ended 31,2021
31,2020 December
31,2021
Cost of goods 74.5% 75.0% 70.0%
sold
Gross Profit 25.5% 25.0% 30.0%
Selling Expenses 8.0% 7.0% 7.0%
Gen.& Admin. 5.1% 4.8% 4.9%
expenses
Depreciation 2.4% 2.0% 2.0%
Expenses
Total Operating 15.5% 13.8% 13.9%
Expenses
Operating Profits 10.0% 11.2% 16.1%
Interest Expenses 1.4% 2.0% 1.0%
Net Profit before 8.6% 9.2% 15.1%
Taxes
Taxes 2.4% 3.68% 6.0%
Net Profit after 5.2% 5.52% 9.1%
Taxes

=DreamFood Sdn Bhd For Year Ended December 31,2021 has a higher percentage than
the Industry Average in Its Cost of goods Sold and Interest Expenses.

Case 2: Topic 5
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Principles of Finance Individual Assignment (Case Study)
CBS1443

Time value of Money

Madam Susah ,56 just retired after 31 years of teaching. She is a wife and mother of two children
who are still dependent. She received a $150,000 lump sum retirement bonus and will receive $2,000
per month from her retirement annuity. Her wishes are to invest her money in appropriate manner
so as to earn income to support her family. Madam Susah has asked your advice in deciding where to
invest her lump-sum money which she received as bonus.

Question 2(a)

Madam Susah has deposited RM1,000. today and the bank offers a 7% interest rate per annum. If she
plans to save her money for three years, determine the future value in years 1,2 and 3. Show your
calculation in time-lines, step-by-step and formula approach. (10 marks)

Formula

Future Value = Present Value (1 + interest rate) ^number of years

Future Value = ? Present Value = RM 1,000 interest Rate = 7% Number of Years = 3

Year 0 Year 1 Year 2 Year 3

1000 1070 1144.90 1225.04

Question 2(b)

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Principles of Finance Individual Assignment (Case Study)
CBS1443

Madam Susah, wishes to accumulate $10,000 in her account in three years’ time. She decides to
invest her money in a three-year deposit account which pays an annual compounded rate of 6%.
Calculate how much must she put into his account now to achieve her goal? (4 marks)

=the future value is $10,000, the interest rate is 6%, and the number of years is 3.
Present Value = 10000 / (1 + 0.06)^3

=Madam Susah must put $8,396.19 in her account now to achieve her target $10,000 by
three years.

Formula:

Question 2(c)

Assume Madam Susah receives $5,000 per year for 3 years, beginning one year from today. She
wants to know the present value of the sum using a discount rate of 7%. Calculate the present value.
(6 marks)

=The payment is $5,000 per year, the interest rate is 7%, and the number of years is 3.

=Present Value = 5000 [(1 - (1 + 0.07)^(-3)) / 0.07]

= $13,543.81

The present value of the $5,000 per year for 3years with 7% discount is $13,543.81

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