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 RM(000)		2019 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

REQUIRED:

1. Compute the following ratios for the year 2020 and 2019 as well as analyse the ratios based on your results.

1. Current ratio
2. Inventory turnover ratio (Inventory on 31 December 2018 was RM599)
3. Profit margin ratio
4. Return on assets ratio (Assets on 31 December 2018 were RM3,349.90)
5. Return on ordinary shareholders equity ratio (Equity on 31 December 2018 was RM1,795.90)
6. Debt to total assets ratio
7. Times interest earned ratio

(14 Marks)

2. 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)

3. Current ratio is one of the ratios in assessing the companys solvency. Briefly explain THREE (3) ways orapproaches that management of Abad Budi Bhd might influence a companys current ratio.

(3 Marks)