Question 2 The financial statements for Tampines Ltd are presented below: Tampines Ltd Comparative Statements of Financial Position As at 31 December 2017 and 31 December 2016 2017 $000 2016 $000 Current assets Cash and cash equivalents 6,580 8,440 Receivables (all trade) 16,400 14,700 Inventories 28,000 27,720 Total current assets 50,980 50,860 Non-current assets Property, plant and equipment 68,760 61,320 Total non-current assets 68,760 61,320 Total assets 119,740 112,180 Current liabilities Payables 23,120 23,960 Total current liabilities 23,120 23,960 Non-current liabilities Interest-bearing liabilities 39,760 37,800 Total non-current liabilities 39,760 37,800 Total liabilities 62,880 61,760 Equity Share capital: Preference, 1,000,000 shares issued and outstanding 2,000 2,000 Ordinary, 28,800,000 shares issued and outstanding 28,800 28,800 Retained earnings 26,060 19,620 Total equity 56,860 50,420 Total liabilities and equity 119,740 112,180 ACC202 Copyright 2018 Singapore University of Social Sciences (SUSS) Page 4 of 10 Examination July Semester 2018 Income Statement For the year ended 31 December 2017 $000 Revenue (net sales) 220,000 Less: Cost of sales 140,400 Gross profit 79,600 Less: Expenses Selling and distribution expenses 28,400 Administrative expenses 19,880 Finance costs 6,240 Total expenses 54,520 Profit before income tax 25,080 Less: Income tax expense 7,632 Profit 17,448 Additional information: (i) Market price of ordinary share at year end (2017): $24 per share. (ii) Total cash dividends paid during the year (2017): Preference shares, $200,000 and Ordinary shares, $10,808,000. Required: (a) Compute the following ratios for 2017. The industry average for similar businesses is also provided. Industry average (i) Return on total assets 12% (ii) Return on ordinary shareholders equity 20% (iii) Profit margin ratio 4% (iv) Dividend yield 5% (v) Current ratio 2.5 : 1 (vi) Acid-test ratio 1.3 : 1 (vii) Days' sales uncollected 28.1 days (viii) Inventory turnover 6 (ix) Equity ratio 60% (x) Times interest earned 6 (13 marks) ACC202 Copyright 2018 Singapore University of Social Sciences (SUSS) Page 5 of 10 Examination July Semester 2018 (b) Using the above industry averages, analyse and comment on the companys profitability, liquidity and use of financial gearing for 2017. (12 marks) (c) Describe a key precaution that needs to be taken when making comparison with the industrial average. (3 marks)

Question 2 The financial statements for Tampines Ltd are presented below: Tampines Ltd Comparative Statements of Financial Position As at 31 December 2017 and 31 December 2016 2016 2017 '000 S'000 Current assets Cash and cash equivalents 8,440 6,580 Receivables (all trade) 16,400 14,700 28,000 27,720 Inventories Total current assets 50,980 50,860 Non-current assets 68,760 68,760 Property, plant and equipment 61,320 61,320 Total non-current assets Total assets 119,740112,180 Current liabilities Payables 23,120 23,960 23,960 23,120 Total current liabilities Non-current liabilities Interest-bearing liabilities 39,76037,800 Total non-current liabilities 39,760 37,800 61,760 Total liabilities 62,880 Equity Share capital: Preference, 1,000,000 shares issued and outstanding Ordinary, 28,800,000 shares issued and outstandin;g Retained earnings Total equity 2,000 28,800 2,000 28,800 26,060 19,620 56,860 50,420 Total liabilities and equity 119,740112,180 Income Statement year ended 31 December 2017 For the S'000 220,000 Revenue (net sales) Less: Cost of sales 140,400 Gross profit Less: Expenses Selling and distribution expenses Administrative expenses 79,600 28,400 19,880 Finance costs 6,240 Total expenses 54,520 25,080 7,632 17,448 Profit before income tax Less: Income tax expense Profit Additional information: (i)Market price of ordinary share at year end (2017): $24 per share (ii) Total cash dividends paid during the year (2017): Preference shares, S200,000 and Ordinary shares, $10,808,000 Required: (a) Compute the following ratios for 2017. The industry average for similar businesses is also provided Industry average 12% (i) Return on total assets (ii) Return on ordinary shareholders' equity (iii) Profit margin ratio (iv) Dividend yield (v)Current ratio 20% 4% 5% 2.5: 1 (vi) Acid-test ratio (vii) Days' sales uncollected (viii) Inventory turnover (ix) Equity ratio (x) Times interest earned 28.1 days 60% (13 marks)