QUESTION 3 (20 MARKS) Abad Budi Bhd. is a listed company on Bursa Malaysia and involved with food and beverage industry since 2001. The company is located in Selangor and supplies its products throughout Malaysia. The extracted financial statements of the company for the year 2020 and 2019 are presented below. Abad Budi Bhd. Statements of Financial Position as at 31 December 2020 2019 RM(000) RM(000) Assets Property, Plant and Equipment 694.2 647.0 Intangible Assets 876.7 849.3 Investments (Long Term) 12.3 12.6 Inventory 768.3 653.5 Account Receivable 776.6 664.9 Cash 553.3 611.6 Prepaid Expenses 204.4 269.2 3,885.8 3,708.1 Equity and Liabilities Ordinary Shareholders 1,708.6 1,749.0 Non-Current Liabilities 679.5 637.1 Current Liabilities 1,497.7 1,322.0 3,885.8 3,708.1 Abad Budi Bhd. Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 31 December 2020 2019 RM(000) RM(000) Sales Revenue 6,336.3 5,790.4 Cost of Goods Sold 1,617.4 1,476.3 Selling and Administration Expenses 4,007.6 3,679.0 Interest Expense 13.9 27.1 Income before Income Taxes 697.4 608.0 Income Tax Expense 291.3 232.6 Net Income 406.1 375.4 5 REQUIRED: (a) Compute the following ratios for the year 2020 and 2019 as well as analyse the ratios based on your results. i. Current ratio ii. Inventory turnover ratio (Inventory on 31 December 2018 was RM599) iii. Profit margin ratio iv. Return on assets ratio (Assets on 31 December 2018 were RM3,349.90) v. Return on ordinary shareholders equity ratio (Equity on 31 December 2018 was RM1,795.90) vi. Debt to total assets ratio vii. Times interest earned ratio (14 Marks) (b) Vertical analysis and horizontal analysis are the basic analysis for comparative analysis or analytical procedure. Briefly explain THREE (3) ways of comparative analysis. (3 Marks) (c) Current ratio is one of the ratios in assessing the companys solvency. Briefly explain THREE (3) ways or approaches that management of Abad Budi Bhd might influence a companys current ratio. (3 Marks)