1129 Financial Accounting Problem Set 12 Posted: Thu., Nov. 26, 2020- Due: Midnight, Wed., Dec. 9, 2020- Yuehua Telecom Inc. and Guangxin Technology Ltd. are two competing ICT corporations based in Shenzhen Special Economic Zone, China. Both companies' stocks are traded at Shenzhen Stock Exchange. The comparative financial statements of Yuehua and Guangxin for the last four years (2016 - 2019) are shown in the Attachments 1 and 2:4 Instructions: 1. A. Calculate the following ratios for each corporation for 2017, 2018, and 2019. (30%) Current ratio Sales to total assets ratio Return on total assets ratio Return on shareholders' equity ratio- Gross profit ratio Net profit ratio Debt to equity ratio- Earnings per share Pricelearnings ratio B. Evaluate each company's trends for sales, gross profit, and net income as disclosed on the comparative income statement. (10%) 2. What is your evaluation of the following? A. The liquidity of each corporation (10%) B. Profitability (10%) C. The financial structure of each corporation (10%) D. The stock market's perceptions of these companies (10%) 3. Which corporation do you think would be a better investment if you were planning to purchase common shares? Why? (20%) Attachment 1: Comparative Statement of Financial Position Comparative Statement of Financial Position Yuehua Telecom Inc. and Guangxin Technology Ltd. At December 31 of the Years 2016, 2017, 2018, and 2019 (Currency Unit in Million Chinese Yuan, #1,000,000) Yuehua Telecom Inc. Guangxin Technology Ltd. 2019 2018 2017 2016 2019 2018 2017 2016 1 Assets Current Assets Non-current Assets, at Carrying Amount Total Assets 1852 5352 720 165 397 562 155 392 547 140 378 518 480 599 1,079 450 603 1.053 410 572- 982 43815 60166 982 160 135 130 110 272 2516 1704 180- Liabilities Current Liabilities Bonds Payable 12% Due in 10 Years 15% Due in 7 Yearse Total Liabilities 120 0 0 0 400 400- 651 400 672 400 570 2804 1354 130 110 5804 1 2004 200 200 200- 200 200 200 2004 Shareholders' Equity Share Capital Preferred: 200,000 shares each Common Yuehua: 100,000 shares Guangxin: 50,000 shares Retained Earnings Total Equity Total Liabilities and Equity 100 100+ 100- 100 1. 1402 4402 720 127 427 562 117 417 547 108 408 518 50 157 407 1.079 50 152 402 1.053 50 162 412 982 ES 50 152 402 982 Attachment 2: Comparative Income Statement Comparative Income Statement Yuehua Telecom Inc. and Guangxin Technology Ltd. For the Years anded atDecember 31: 2016, 2017, 2018, 2019 (currency unit in Million chinese Yuan, 1,000,000) Yuehua Telecom Inc. ] Guangxin Technology Ltd. 20197 20187 2017 2016 1 2018-7 20171 2016/7 20197 * 330 105 330 320- 225/ Sales Cost of Goods Sold Gross Profit Operating Expenses Income from Operations Interest Expense Income (Loss) before Income Taxes Income Taxes [(Recovered)]*,7 Net Income (Loss) 600 460- 1407 56/1 847 14:2 70 351 357 540 430/ 110 50+ 60- 0 60 30+ 30 528 420- 108 50 58 0 58- 29 29 516/ 410- 106 50+ 56 0 56- 28 28+ 85- 140- 60 80 40+ 40 75 145 105 40- 60- (20) [(10)le (10)
