CONFIDENTIAL AC/JUNE2023/TEST/MAF503 UNIVERSITI TEKNOLOGI MARA TEST COURSE FINANCIAL MANAGEMENT COURSE CODE MAF503 EXAMINATION TEST TIME : 1 HOUR AND 30 MINUTES INSTRUCTIONS TO CANDIDATES 1. This question paper consists of two (2) questions. 2. Do not bring any material into the examination room unless permission is given by the invigilator. 3. Answer ALL questions in English. DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of 4 printed pages @ Hak Cipta Universiti Teknologi MARA CONFIDENTIALCONFIDENTIAL 2 ACIJUNE2023ITESTJ'MAF503 QUESTION 1 You are required to make an analysis of Maxi Bhd. Financial position. The financial statements for the company are given below: Maxi Bhd Statement of Profit or Loss for the Year Ended 31 May 2023 RM Sales 5,000,000 Less: Cost of sales (1,500,000) Gross profit 3,500,000 Less: Operating expenses (2,100,000) Profit before interest and tax 1,400,000 Less: Interest {120,000} Profit before tax 1,280,000 Less: Taxes 25% {320,000} Net profit after tax 960,000 Maxi Bhd Statement of Financial Position as at 31 May 2023 RM RM Non-Current Assets Property, Plant and Equipment (net) 3,600,000 Current Assets Cash and cash equivalent 443,000 Marketable securities 200,000 Accounts receivable 500,000 Inventories 170,000 1,313,000 4,913,000 Financed by: Share capital (RM1 each) 2,000,000 Retained eamings 1,320,000 3,320,000 Non-Current Liabilities Bonds 1,100,000 Current Liabilities Accounts payable 273,000 Notes payable 170,000 Accruals 50,000 493,000 4,913,000 Additional information: 1. The market pn'ce of the company's ordinary shares as at 31 May 2023 was RM4.50 per share. 2. Credit sales is 80% of total sales. Hal: Cipta Universili Teknologi MARA CONFIDENTIAL CONFIDENTIAL 3 ACI'JUNE2023ITESTI'MAF503 3. Assume 360 days in a year. 4. The industry averages obtained showed the following: Current ratio 2.5 times Debt ratio 38% Quick ratio 2.0 times Times interest earned 6.7 times Inventory tumover 10 times Net profit margin 20% Average collection period 35 days Gross profit margin 62% Total assets turnover 1.02 times Retum on assets 25% Required: a. Calculate; i. the above ratios for Maxi Bhd for the year ended 31 May 2023. ii. the ROE for Maxi Bhd. and the industry based on Du Pont Analysis method. (12 marks) b. Discuss two (2) weaknesses of the company's asset management ratios and profitability ratios respectively. (4 marks) c. Based on your answer in a. ii, explain Maxi Bhd.'s ROE. (4 marks) (Total: 20 marks) QUESTION 2 A. The following financial information is extracted from Maju Terus Sdn Bhd: RM RM Non-Current Assets 938,000 Shareholders' Equity 1,452,400 Inventory 585,000 Non-Current Liabilities 350,000 Accounts Receivable 465,000 Accounts Payable 345,000 Cash 250,000 Accrued expenses 108,000 Prepaid expenses 17,400 The company maintains minimum level of inventory of 25% of its total inventory. In addition, the company also maintains minimum cash balance of RM50,000. Required: a. Determine the amount of permanent assets, temporary assets, permanent financing sources and temporary financing sources. (Show all your workings). b. Explain with reasons the working capital policy adopted by the company. c. Explain the risk and return trade-off for the working capital policy adopted by the company. (10 marks) Hak Cipta Universili Teknologi MARA CONFIDENTIAL CONFIDENTIAL 4 ACIJUNE2023ITESTJ'MAF503 B. Seri lndah Perrnai Sdn Bhd recorded sales of RM13,000,000 in its Statement of Profit or Loss for the year ended 31 December 2022. The cost of sales is 65% of the sales of the company and 75% of the sales are on credit. On the other hand, the Statement of Financial Position as at 31 December 2022 reported an average inventory, accounts receivable, and accounts payable of RM2,250,000, RM1,750,000 and RM750,000 respectively. The current annual expenditure is RM7,500,000 for one investment cycle and the company pays 9% for its negotiated financing. (Note: use 360 days) Required: a. Calculate the cash conversion cycle of the company. b. Calculate the interest saving if the company can increase the average accounts payable by RM250,000. c. Explain three (3) motives for a company holding sufficient cash balances. (10 marks) C. Terbilang Sdn Bhd currently pays its suppliers within 30 days. Its annual operating expenses is RM5,940,000. Now the firm is facing a dilemma. The supplier is offering the rm a new credit term of 2H5, net 30. If the rm takes up the cash discount, the firm will need to borrow the additional fund for 30 days. The required amount if rm accepted the cash discount is RM742,500. The firm's Chief Financial Ofcer has put forward two borrowing altematives that the firm can choose. Alternative 1 Bank Taqwa offers bank credit with discount interest of 15%. The bank also requires compensating balance of 20%. Alternative 2 Bank Usaha offers line of credit of RM1,000,000. The line of credit charges interest of 12% and commitment fee of 2%. (Note: use 360 days) Required: a. Calculate the cost of foregoing the cash discount. b. Suggest with reasons the best attemative of finance for Terbilang Sdn Bhd. (Support your answer with relevant computation). (10 marks) (Total: 30 marks) (TOTAL: 50 MARKS) END OF QUESTION PAPER Hal: Cipta Universili Teknologi MARA CONFIDENTIAL