Return on ordinary shareholders' equity 20.0% 18,750 Profit margin ratio 4.0% (850) Dividend yield 5.0% Current ratio Acid-test ratio Days' sales uncollected ) Inventory turnover Equity ratio Times interest earned 2.5:1 1.3.1 28.1 days 6 60.0% 6 Adjustments to reconcile profit to net cash provided by operating activities: Depreciation expense Increase in accounts receivable Increase in inventory (140) Decrease in accounts payable (420) Net cash provided by operating activities 26,064 Cash flows from investing activities Cash paid for equipment (22,470) Net cash used in investing activities (22,470) Cash flows from financing activities Cash paid for dividends (5,504) Cash received from interest-bearing loan 980 Net cash used in financing activities (4,524) Net decrease in cash (930) Cash balance at beginning of 20x3 4,220 3,290 Cash balance at the end of 20X3 Note: All income tax payable was settled in the year when it was incurred. Additional information Market prices of issued shares at year end (20×3): Ordinary. $60.00 Using the above industry averages, comment on the company's profitability, liquidity, efficiency, and solvency ratios. Calculate the following ratios for 2003. The industry average for similar businesses is also provided. Describe a key precaution that needs to be taken when making comparison with the industrial average. Return on total assets Industry average 12.0% Financial statements for Sengkang Ltd are presented below: Sengkang Ltd Comparative Statements of Financial Position As at 20X3 and 20X2 Revenue (net sales) Less: Cost of sales Gross profit ($'000) 110,000 70,200 39,800 Less: Expenses Selling and distribution expenses 14,200 (S'000) ($'000) 20X3 20X2 Administrative expenses 9,940 Finance costs 3,120 Total expenses 27,260 Profit before income tax 12,540 3,290 4,220 Income tax expense 3,816 8,200 7,350 Profit 8,724 14,000 13,860 25,490 25,430 Current assets Cash and cash equivalents Accounts receivable Inventories Total current assets Non-current assets Property, plant and equipment 34,380 30,660 Total non-current assets 34,380 30,660 Total assets 59,870 56,090 Current liabilities Additional information The total depreciation expense charged in the Income Statement for 20X3 was $18,750,000 and the total income tax paid was $3,816,000. Statement of Changes in Equity For the year ended 31 December 20X3 Account payable 11,560 11,980 ($'000) Total current liabilities 11,560 11,980 Share capital Non-current liabilities Ordinary (15,400,000 shares) Interest-bearing liabilities 19,880 18,900 Total share capital 15,400 Total non-current liabilities 19.880 18,900 Retained earnings Total liabilities Balance at the start of the period 9.810 31,440 30,880 Total comprehensive income for the period 8.724 Equity Dividend paid - ordinary (5.504) Share capital 15,400 15,400 Balance at the end of the period 13,030 Retained earnings 13,030 9,810 Total equity 28,430 25,210 Statement of Cash Flows Income Statement For the year ended 31 December 20X3 For the year ended 31 December 20X3 Cash flows from operating activities ($'000) Net profit/(loss) 8,724

Return on ordinary shareholders' equity 20.0% 18,750 Profit margin ratio 4.0% (850) Dividend yield 5.0% Current ratio Acid-test ratio Days' sales uncollected ) Inventory turnover Equity ratio Times interest earned 2.5:1 1.3.1 28.1 days 6 60.0% 6 Adjustments to reconcile profit to net cash provided by operating activities: Depreciation expense Increase in accounts receivable Increase in inventory (140) Decrease in accounts payable (420) Net cash provided by operating activities 26,064 Cash flows from investing activities Cash paid for equipment (22,470) Net cash used in investing activities (22,470) Cash flows from financing activities Cash paid for dividends (5,504) Cash received from interest-bearing loan 980 Net cash used in financing activities (4,524) Net decrease in cash (930) Cash balance at beginning of 20x3 4,220 3,290 Cash balance at the end of 20X3 Note: All income tax payable was settled in the year when it was incurred. Additional information Market prices of issued shares at year end (20×3): Ordinary. $60.00 Using the above industry averages, comment on the company's profitability, liquidity, efficiency, and solvency ratios. Calculate the following ratios for 2003. The industry average for similar businesses is also provided. Describe a key precaution that needs to be taken when making comparison with the industrial average. Return on total assets Industry average 12.0% Financial statements for Sengkang Ltd are presented below: Sengkang Ltd Comparative Statements of Financial Position As at 20X3 and 20X2 Revenue (net sales) Less: Cost of sales Gross profit ($'000) 110,000 70,200 39,800 Less: Expenses Selling and distribution expenses 14,200 (S'000) ($'000) 20X3 20X2 Administrative expenses 9,940 Finance costs 3,120 Total expenses 27,260 Profit before income tax 12,540 3,290 4,220 Income tax expense 3,816 8,200 7,350 Profit 8,724 14,000 13,860 25,490 25,430 Current assets Cash and cash equivalents Accounts receivable Inventories Total current assets Non-current assets Property, plant and equipment 34,380 30,660 Total non-current assets 34,380 30,660 Total assets 59,870 56,090 Current liabilities Additional information The total depreciation expense charged in the Income Statement for 20X3 was $18,750,000 and the total income tax paid was $3,816,000. Statement of Changes in Equity For the year ended 31 December 20X3 Account payable 11,560 11,980 ($'000) Total current liabilities 11,560 11,980 Share capital Non-current liabilities Ordinary (15,400,000 shares) Interest-bearing liabilities 19,880 18,900 Total share capital 15,400 Total non-current liabilities 19.880 18,900 Retained earnings Total liabilities Balance at the start of the period 9.810 31,440 30,880 Total comprehensive income for the period 8.724 Equity Dividend paid - ordinary (5.504) Share capital 15,400 15,400 Balance at the end of the period 13,030 Retained earnings 13,030 9,810 Total equity 28,430 25,210 Statement of Cash Flows Income Statement For the year ended 31 December 20X3 For the year ended 31 December 20X3 Cash flows from operating activities ($'000) Net profit/(loss) 8,724

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.5.3MBA

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