Question
On july 5th, 2020, Norman, a chief financial officer for pearl berhad, contacted the firms bank regarding a loan. The loan was to be used
On july 5th, 2020, Norman, a chief financial officer for pearl berhad, contacted the firms bank regarding a loan. The loan was to be used to repay notes payble and to finance current assets. En Norman wanted to repay the loan plus interest in on one year. Upon receiving the loan request, the bank asked the firm to submit its complete financial statements for the past two years. The statement are presented below:
balance sheet as at 30 June
Asset 2020(RM) 2019(RM)
Cash and marketable securities 171,264 115,200
Accounts receivable 1,756,000 702,400
Inventories 3,432,960 1,430,400
Total Current Assets 5,360,224 2,248,000
less: Accumulated Depreciation 760,240 292,400
Net Fixed assets 1,634,080 689,600
Total Assets 6,994,304 2,937,600
Liabilities and equity
Accounts payable 873,600 291,200
Notes payable 600,000 400,000
Accruals 816,000 272,000
Total current liabilities 2,289,600 963,200
Long Term bonds 800,000 646,864
Total debt 3,089,600 1,610,064
Common Stock (100,000 shares) 3,442,352 920,000
Retained Earning 462,352 407,536
Total Common equity 3,904,704 1,327,536
Total liabilities and equity 6,994,304 2,937,600
Pearl Berhad : Income statements for the year ended
2020 (RM) 2019(RM)
Net Sales 35,178,000 17,160,000
cost of goods sold 29,379,960 4,320,000
other expenses 2,750,000 1,793,360
total operating expenses excluding depreciation 32,129,960 16,113,360
Earning before interest, taxes, depreciation &
amortization 3,048,040 1,046,640
Depreciation 584,800 94,500
Earning before interest and taxes (EBIT) 2,463,240 952,140
Less interest 350,040 219,140
Earning before taxes (EBT) 2,113,200 733,000
Taxes (40%) 845,280 293,200
Net Income 1,267,920 439,800
a) Compute the following financial ratio for the past two years
1) calculate ratio
2) Quick ratio
3) Total debt ratio
4) Debt to equity ratio
5) Time interest earned
6) Inventory Turnover
7) Receivable turnover
8) Return on Asset
9) Return on equity
10) Earning per share
b) Discuss the performance for 2020 as compared to 2019
c) Comment on Pearl's strength and weaknesses by ratio categories
d) Based on the bank officer finding in (a) would he grant the loan to Pearl Berhad? Why or why not?
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College Accounting Chapters 1-12
Authors: Douglas McQuaig
10th Edition
1439038783, 978-1439038789
