UNIVERSITI TUNKU ABDUL RAHMAN FACULTY OF BUSINESS AND FINANCE ACADEMIC YEAR 2012

BACHELOR OF BUSINESS ADMINISTRATION (HONS) BACHELOR OF BUSINESS ADMINISTRATION (HONS) ENTREPRENEURSHIP BACHELOR OF ECONOMICS (HONS) FINANCIAL ECONOMICS

UBAF 1173 BUSINESS ACCOUNTING 2

TUTORIAL 1 1. List and briefly explain the use of each of the five categories financial ratios. 2. What is the purpose and use of each of the following ratios? a. Current ratio b. Net profit after tax: sales c. Asset turnover 3. A company has capital of 1 million ordinary shares of RM1 each. It pays a dividend of 6% out of its profits after tax of RM480, 000 on sales of RM4 million. The market price of the shares is RM2.40. Based on the information given, calculate the following ratios: a. Net profit after tax to sales b. Earnings per share c. Price earnings ratio 4. Jan 07 Main: The following summarized financial statements relate to Alpha Berhad for 2006 and 2007: Balance Sheet as at 31 March 2007 2006 RM000,000 RM000,000 Non-current assets (at NBV) Land 63 43 Building 79 40 Plant and equipment _86 _56 228 139 Current assets Inventory 65 55 Trade receivables 50 40 Bank ___3 115 98

Total assets Equity Ordinary shares of RM1 each Share premium Asset revaluation reserve Retained profit Non-current liability 10% debentures Current liabilities Trade payables Bank overdraft Total equity and liabilities

343 50 14 20 _25 109 150 80 _4 84 343

237 40 12 25 77 100 60 _60 237

Note: 1) No depreciation is provided on land. 2) Assume that debentures are issued at the beginning of each year. Income Statements for the year ended 31 March Sales Cost of sales Gross profit Expenses Net profit Taxation Interim dividend Retained profit for the year Retained profit b/f Retained profit c/f 2007 2006 RM000,000 RM000,000 220 200 (120) (100) 100 100 (70) (60) 30 40 (10) (12) 20 28 (20) (20) 8 25 17 25 25

Required: (a) Calculate the following financial ratios of Alpha Berhad for the financial years 2006 and 2007: (1) Return on capital employed (2) Fixed assets turnover (3) Inventory turnover (4) Debtors days (5) Current ratio (6) Quick ratio (7) Gross profit margin (in percentage) (8) Net profit margin (in percentage) (9) Debt to equity ratio

(b)

Briefly comment on the financial performance and financial position of Alpha Berhad for the two consecutive years in the context of: (1) (2) Profitability Liquidity

(c) State five (5) additional information that will further enhance the interpretation of financial ratios.