Answer all correctly.

BBF201/03 INTRODUCTION TO FINANCIAL MANAGEMENT JULY 2020 ASSIGNMENT 1 SECTION B: ANALYTICAL QUESTIONS (50 MARKS) Instruction to candidate: Answer ALL questions. Full marks are not necessarily awarded for a correct answer with no working. Answers must be supported by working and/or explanations. QUESTION 3 (50 MARKS) You have been hired as a financial analyst by Maybank Berhad. Your task is to analyse the present financial condition of Petrox Berhad. You are provided with the following 2018 Statement of Financial Position and Statement of Profit or Loss information for Petrox Berhad. In addition, you are told that Petrox Berhad has 12,500,000 shares of ordinary shares outstanding, currently trading at RM11.25 per share, and has made annual purchases of RM262,500,000. PETROX BERHAD STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 31 December 2018 RM Net Sales (all credit) 375,000,000.00 Less: Cost of Goods Sold 312,500,000.00 Earnings Before Interest and Taxed 62,500,000.00 Less: Interest Expense 50,000,000.00 Earnings before taxes 12,500,000.00 Less: Taxes 40% 5,000,000.00 Net Income 7,500,000.00PETROX BERHAD STATEMENT OF FINANCIAL POSITION as at 31 December 2018 (RM) RM RM Cash 6,250,000.00 Account payable 18,750,000.00 Account Receivable 25,000,000.00 Notes Payable 25,000,000.00 Inventory 50,000,000,00 Total Current Liabilities 43,750,000.00 Total Current Asset 81,250,000.00 Long Term Debt 125,000,000.00 Net Fixed Asset 168,750,000.00 Shareholder's Equity 81,250,000.00 Total Assets 250,000,000.00 Total Liabilities and Equity 250,000,000.00 Industry averages for key ratios Net Profit Margin 6.40% Average Collection period (365 days) 30 days Debt Ratio 50% P/E Ratio 23 Inventory Turnover ratio 12 Return on Equity 18% Average Payment Period (365 days) 20 days Times interest earned ratio 8.50 Total Asset Turnover 1.40 Current Ratio 1.50 Asset to Equity Ratio 2.00 ROA 9.00% Quick Ratio 1.25 Fixed Asset Turnover Ratio 1.50 oYou are required to calculate 5 blocks of financial ratios and to compare these calculated ratios with the industry average ratios that are provided. Your analysis is based on five categories of ratios: (a) liquidity ratios; (b) activity ratios; (c) debt ratios; (d) profitability ratios; and (e) market ratios. Besides, you have to determine the financial position for Petrox as a stand-alone company, you are also required to compare these ratios to the industry average ratios provided in the problem. Requirement: a) Based on the provided industry-average information, discuss Petrox Berhad's liquidity position by comparing with the overall industry performance. (10 marks) bj Referring to data provided for industry-average information, analyse Petrox's activity ratios and the overall industry. (10 marks) c) Discuss debt and market position for Petrox Berhad's and industry-average. (10 marks) d) As part of this investigation, you are required to include profitability ratios and DuPont analysis in examining the profitability of Petrox Berhad and overall industry. (10 marks) e) One of the main conditions for loan approval is company should be in a better- than-average financial position. Recommend your decision whether to approve or deny the loan application from Petrox Berhad by looking at overall financial performance. Explain the Petrox's strong and weak points. (10 marks) eno2 0000000-9. (8 marks] You have information on several possible investments as laid out in the table below. A, B, and Care individual risky securities. IF is the risk free asset. M Is the market portfolio. All expected excess returns given below are based on current market prices and are not based on CAPM, Assume you can take a short position in all assets, including the risk-free asset Correlation Matrix Investment DIAJ- Sid Dev A M A 0.35 0.25 79 103 2.0% 154 5.5 C 70405 Answer the following questions with respect to this investment information: al [1 mark) Compute the beta of asset F. R. O b) (1 mark) Compute the expected excess return of asset F. c) (1 mark] Compute the covariance of asset A with asset MP (rv[ Fa. Y. ): 0 1505)0 d) (1 mark) According to the CAPM, is security A priced correctly, undervalued or 10. 2 overvalued? he el (1 mark) You would like to find a combination of all the securities in the market and F to obtain a standard deviation of 10%% on your overall portfolio. Suppose you have $100 to invest, how much [in dollars] do you need to buy/sell in asset F if you choose the most efficient portfolio possible? 1) [1 mark] You would like to find a combination of all the securities in the market and F to obtain an expected excess return of 7.5% on your overall portfolio. Suppose you have $100 to invest, how much (in dollars) do you need to Invest in asset F if you choose the most efficient portfolio possible? gl (1 mark) A new security has expected excess return equal to -2.5%. What must its beta be for it to lie on the security market Ine? hj (1 mark] What is the value of the Sharpe ratio of asset C? 10. (3 marks] State the 3 forms of the efficient market hypothesis and explain the difference between the three forms