QUESTION 2

Below are the financial statements for DEL Bhd. for year of 2018.

DEL Bhd.

Balance Sheet As At 31 December 2018 (RM'000)

Cash

2,400 Account payable

6,000

Marketable securities

600 Notes payable

6,800

Account receivables

20,000 Accrued expenses

7,200

Inventories

24,000

Prepaid expenses

Mortgage

12,600

Term Loan

8,800

Plant and equipment

29,000

Accumulated depreciation

(14.600)

Common shares

4,200

Retained earnings

16,400

TOTAL ASSETS

62,000

TOTAL LIABILITIES

& EQUITY

62,000

DEL Bhd.

Income Statement

For The Year Ended 31 December 2018 (RM'000)

Net Sales

102,000

Cost of goods sold

(76.000)

Gross profit

26,000

Operating expenses

(18.000)

Net operating income

8,000

Interest expenses

(2.000)

Earnings before taxes

6,000

Income taxes

(2.400)

EARNINGS AFTER TAXES

3,600

Industry Average Ratios

Current ratio

2.55 x Inventory turnover

3.6x

Quick ratio

1.70 x Average collection period

63 days

Debt ratio

76% Net profit margin

4.5%

Time interest earned

2.5 x Return on equity

19.5%

a) Compute the above indicated ratios for DEL Bhd.

(12 marks)

b) Evaluate the overall performance of the company as compared to the industry average

ratios.

(8 marks)