How to do question c? And for the formula b, do I need to calculate for 2017 or just 2018?

Digital Bhd is a large manufacturer and distributor of electronic components in Penang, Malaysia. Due to aggressive marketing strategies, the company has recently undergone a period of explosive growth, more than double its sales turnover during its last two years. However, growth has beenaccompanied by a marked decline in profitability. and a continuous decline in the company's share price. The following are the industry average ratio, income statement and balance sheet. Industry Average 4.5 3.2 Current ratio Quick ratico Accounts receivable collection period 42 days Inventory turnover Fixed asset turnover Total asset turnover Debt ratio (total debts / total assets) Debt to equity ratio (total debt to equity) Times interest earned (TIE) Return on sales (ROS) Return on total assets (ROA) Return on equity (ROE) Equity multiplier (ROE /ROA) ROE Net Income /shareholders' equity ROE Return on Equity ( Net Income / Equity ) * ROA = Return on Total Asset ( Net Income / Total Assets ) 48.7 days 1.6 1.2 53% 4.5 9.0% 10.8% 22.8% 2.1 Equity Multiplier deals with the idea of leverage - using borrowed money instead of your own to work for you. Digital Bhod Income Statement for the year ended 31 December 2018 2017 2016 (RM 'million) 1,578 631 947 (RM 'million) (RM 'million) 3,265 1,502 1,763 2,106 906 1,200 Sales Cost of sales Gross profit Expenses 882 327 294 1503 495 211 179 885 316 158 126 600 Marketing Research and development Administration Total expenses 315 95 220 75 260 347 63 284 97 187 Operating profit Interest expense Profit before taxes Income taxes Profit after taxes (net income) 143 40 145 ovide yu wrking to the problems as part of the rprt appendix b) Construct statements of cash flows for 2017 and 2018. Where is the company's money going to and coming from? Make a comment about Digital's free cash flows during the period. Is it likely to have positive or negative free cash flows in the future? Digital Bhod Balance Sheet as at 31 December 2016 (RM 2017 (RM million) 'million) million) Current assets Cash Accounts receivable Inventory 62 590 300 952 30 175 90 295 40 351 151 542 Fixed assets ong-tem) Fixed assets at cost 2,373 2,718 1,565 (610) 1,250 Accumulated depreciation (860) (1,135) 2,055 Total Assets 2,535 Current liabilities Accounts payable Other accruals Long-term Liabilities 10% Debentures due 2030 Total Liabilities 56 15 81 20 134 30 630 701 1,260 1,600 1 1,361 1,764 Shareholders' Equity Common stock, RM1 par, 100,000,000 100 100 100 shares issued and outstandin 105 344 1,250 105 489 2,055 105 566 2,535 Share Premium Balopa shil Retained earnings Total Liabilities & shareholders' equity Additional information: 1) Depreciation for 2016, 2017 and 2018 was RM200 million, RM250 million, and RM275 million respectively 2) No stock was sold or repurchased and like many fast growing companies, Digital Bhd paid no dividends for the last.5 years Corporate tax rate is a flat 34% and Digital pays 10% interest on its debentures. (3) (4) Market share price. of Digital Bhd in 2016, 2017 and 2018 was RM 39.27, RM 26.10 and RM 11.55, respectively dunig tuhd, TSTTGly tu lave pusitive dr Hegative tree cash flows in the future? c) Based on your findings, would you recommend Digital stock as an investment? Why might it be a very bad investment in the near future? Why might it be a very good one? Explain. (Provide the ratio calculation as part of your appendix) Formula B Cash Flow to Creditors (CF/CR) - interest paid - net new borrowing -net new equity raised-o end common sroct Cash Flow to Stockholders (CF/SH) - dividends paid - net new equity raised-end to , paid-in Analyze trends in each ratio and compare i su/PMS (C-i) Calculate the indicated ratios for all three (3) years. each with the industry average. For convenience, use only the ending balance sheet figures to calculate the ratios. What can you infer from this information? Do certain specific problems tend t affect more than one ratio? Which ones? (Hints: Make specific comments about liquidity, assets management, especialily receivable and inventories, debt management and profitability. DO NOT simply say that ratios are higher or lower than the average or that they are going up or down Think about they are.) what might be going on in the company and propose reasons why the ratios are acting as (c-ii) Calculate the company's earnings per share (EPS), priceleamings ratio (P/E) and dividend payout ratio. These are the three ratios that are most interested to the common stockholders and potential shareholders. What is happening to these ratios over the years? To what things are investors likely to be reacting? How would a slowdown in personal computer sales affect your argument/reasoning? Explain. Digital Bhd is a large manufacturer and distributor of electronic components in Penang, Malaysia. Due to aggressive marketing strategies, the company has recently undergone a period of explosive growth, more than double its sales turnover during its last two years. However, growth has beenaccompanied by a marked decline in profitability. and a continuous decline in the company's share price. The following are the industry average ratio, income statement and balance sheet. Industry Average 4.5 3.2 Current ratio Quick ratico Accounts receivable collection period 42 days Inventory turnover Fixed asset turnover Total asset turnover Debt ratio (total debts / total assets) Debt to equity ratio (total debt to equity) Times interest earned (TIE) Return on sales (ROS) Return on total assets (ROA) Return on equity (ROE) Equity multiplier (ROE /ROA) ROE Net Income /shareholders' equity ROE Return on Equity ( Net Income / Equity ) * ROA = Return on Total Asset ( Net Income / Total Assets ) 48.7 days 1.6 1.2 53% 4.5 9.0% 10.8% 22.8% 2.1 Equity Multiplier deals with the idea of leverage - using borrowed money instead of your own to work for you. Digital Bhod Income Statement for the year ended 31 December 2018 2017 2016 (RM 'million) 1,578 631 947 (RM 'million) (RM 'million) 3,265 1,502 1,763 2,106 906 1,200 Sales Cost of sales Gross profit Expenses 882 327 294 1503 495 211 179 885 316 158 126 600 Marketing Research and development Administration Total expenses 315 95 220 75 260 347 63 284 97 187 Operating profit Interest expense Profit before taxes Income taxes Profit after taxes (net income) 143 40 145 ovide yu wrking to the problems as part of the rprt appendix b) Construct statements of cash flows for 2017 and 2018. Where is the company's money going to and coming from? Make a comment about Digital's free cash flows during the period. Is it likely to have positive or negative free cash flows in the future? Digital Bhod Balance Sheet as at 31 December 2016 (RM 2017 (RM million) 'million) million) Current assets Cash Accounts receivable Inventory 62 590 300 952 30 175 90 295 40 351 151 542 Fixed assets ong-tem) Fixed assets at cost 2,373 2,718 1,565 (610) 1,250 Accumulated depreciation (860) (1,135) 2,055 Total Assets 2,535 Current liabilities Accounts payable Other accruals Long-term Liabilities 10% Debentures due 2030 Total Liabilities 56 15 81 20 134 30 630 701 1,260 1,600 1 1,361 1,764 Shareholders' Equity Common stock, RM1 par, 100,000,000 100 100 100 shares issued and outstandin 105 344 1,250 105 489 2,055 105 566 2,535 Share Premium Balopa shil Retained earnings Total Liabilities & shareholders' equity Additional information: 1) Depreciation for 2016, 2017 and 2018 was RM200 million, RM250 million, and RM275 million respectively 2) No stock was sold or repurchased and like many fast growing companies, Digital Bhd paid no dividends for the last.5 years Corporate tax rate is a flat 34% and Digital pays 10% interest on its debentures. (3) (4) Market share price. of Digital Bhd in 2016, 2017 and 2018 was RM 39.27, RM 26.10 and RM 11.55, respectively dunig tuhd, TSTTGly tu lave pusitive dr Hegative tree cash flows in the future? c) Based on your findings, would you recommend Digital stock as an investment? Why might it be a very bad investment in the near future? Why might it be a very good one? Explain. (Provide the ratio calculation as part of your appendix) Formula B Cash Flow to Creditors (CF/CR) - interest paid - net new borrowing -net new equity raised-o end common sroct Cash Flow to Stockholders (CF/SH) - dividends paid - net new equity raised-end to , paid-in Analyze trends in each ratio and compare i su/PMS (C-i) Calculate the indicated ratios for all three (3) years. each with the industry average. For convenience, use only the ending balance sheet figures to calculate the ratios. What can you infer from this information? Do certain specific problems tend t affect more than one ratio? Which ones? (Hints: Make specific comments about liquidity, assets management, especialily receivable and inventories, debt management and profitability. DO NOT simply say that ratios are higher or lower than the average or that they are going up or down Think about they are.) what might be going on in the company and propose reasons why the ratios are acting as (c-ii) Calculate the company's earnings per share (EPS), priceleamings ratio (P/E) and dividend payout ratio. These are the three ratios that are most interested to the common stockholders and potential shareholders. What is happening to these ratios over the years? To what things are investors likely to be reacting? How would a slowdown in personal computer sales affect your argument/reasoning? Explain