Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

College Accounting Chapters 1-12

Authors: Douglas McQuaig

10th Edition

1439038783, 978-1439038789

More Books

Students also viewed these Accounting questions

Question

QQ Explain how to analyze the economic viability of an online firm.

Answered: 1 week ago

Question

13. Give four examples of psychological Maginot lines.

Answered: 1 week ago