Question 1

The financial statements for year 2020 for Huru Hara Berhad are provided below:

Statement of Financial Position		Income Statement
	RM		RM
Cash	200,000	Sales (all credit)	368,000
Accounts receivable	140,000	Cost of goods sold	120,000
Inventory	220,000	Operating expenses	140,000
Total non-current assets	490,000	Interest expenses	8,000
Total assets	1,050,000	Income taxes	32,000
		Net income	68,000
Accounts payable	180,000
Accrued expenses	126,000
Total non-current liabilities	240,000
Total shareholders equities	504,000
Total liabilities and equities	1,050,000

From the information given, you are required to answer the following questions.

a. Calculate the financial ratios for year 2020 corresponding to the industry average ratios provided below: (6 marks)

i.	Time interest earned	16.30 times
ii.	Total debt ratio	60.00%
'i.	Return on assets	3.50%
iV.	Return on equity	10.10%
v.	Operating profit margin	20.20%
vi.	Net profit margin	11.80%

b. Based on your calculation in part (a), interpret the performance of Huru Hara Berhad compared to the industry average for debt management and profitability ratios. (4 Marks)