BBFA 2024 ADVANCED FINANCIAL ACCOUNTING Question 2 Statements of financial position as at 31 August Health is Wealth Berhad (HW) is a public listed company domiciled in Malaysia and closes its' account on 31 August annually. 2020 RM'000 2019 RM'000 HW is principally engaged in investment holding activities, whilst the principal activities of the subsidiaries are manufacturing, distribution, importing and exporting of pharmaceutical products and medicines, trading and distribution of pharmaceutical products, as well as research and development of pharmaceutical products. Non-current assets Property, plant and equipment Intangible assets 441,789 137,574 579,363 412,248 28,113 440,361 Below are the consolidated financial statements of HW: 151,266 144,003 8,217 6,595 Current assets Inventories Current tax assets Trade and other receivables Cash and cash equivalents 142,181 145,938 158,029 459,693 1,039,056 120.669 417,205 857,566 Total assets Statements of profit and loss for the financial year ending 31 August 2020 2019 RM'000 RM'000 Revenue 569,902 576,462 Cost of sales (336,701) (344,395) Gross profit 233,201 232,067 Other income 648 1,242 Distribution and marketing expenses (81,159) (85,818) Administrative expenses (69,655) (69,534) Other expenses (1,999) (724) Profit before interest and tax 81,036 77,233 Finance income 1,510 1,463 Finance costs (7,209) (8,299) Tax payable (17,547) (15,536) Profit for the year 57,790 54,861 Equity and liabilities Equity Share capital Retained earnings 404,922 374,404 220,182 625,104 182,946 557,350 Non-current liabilities Loans and borrowings Deferred tax liabilities 253,281 109,738 10,350 263,631 10,053 149,791 BBFA 2024 ADVANCED FINANCIAL ACCOUNTING 2 Required: 48,793 115,646 Current liabilities Loans and borrowings Trade and other payables Current tax liabilities 100,784 114,127 Using the above financial statements, calculate the following ratios of Health is Wealth Berhad for both financial years ended 31 August 2019 and 31 August 2020 and comment on the comparative performance: a. Return on capital employed (ROCE) b. Net asset turnover Gross profit margin d. Operating profit margin Interest cover 744 652 230,425 150,321 c. Total equity and liabilities 1,039,056 937,566 e. Additional information is provided and are relevant: a) The Government of Malaysia had on 18 March 2020 imposed a movement control order (MCO) in order to curb covid-19 disease. The Government of Malaysia has further stated that only essential services are allowed to operate during this MCO period. b) HW is allowed to operate during MCO period as pharmaceutical companies are considered as essential services provider. c) During MCO period, HW are facing with the disruption in supply of certain raw materials, causing customer's demands on certain medications are unable to be fulfilled. d) HW'S controllable fixed costs are reduced by 15% during the year 2020 due to various team's efforts in minimising the costs for the company. e) HW reports on two (2) segments based on geographical sales, domestic and export. In 2020, domestic sales contributed at least 92%, which is roughly on par with its contribution in 2019 (94%). f) HW refinanced a couple of loans with a facility from Bank Rakyat Malaysia Berhad. With the assistance of the facility, it enhances HW cash flow
