QUESTION 4(a)

Before Neo Goh Hian Distributors approaches the bank for a loan the company has asked their internal credit department to see if the firm can generate any internal funds.

Hints:

• Calculate the omitted values in the table below.
• For calculations use 365 days in a year.

What conclusions can you draw from your analysis?

What supplementary quantitative information is necessary to increase your confidence in your analysis?

Note: You are not expected to conduct horizontal and vertical analysis nor derive cash flow statements when answering this question.

Neo Goh Hian Distributors
Profit and Loss Statement
	31-Dec-17	31-Dec-18	31-Dec-19
Net Sales		390		420		480
Cost of Goods Sold (COGS)		328		353		400
Gross Profit		62		67		80
Selling, General & Admin Expenses		39.8		43.7		48
Depreciation Expense		5		5		8
Operating Profit		17.2		18.3		24
Extraordinary Expenses
EBIT		17.2		18.3		24
Net Interest Expense		5.5		5		7
EBT		11.7		13.3		17
Income Tax Expense		4.7		5.3		6.8
EAT		7		8		10.2
Dividends		2		2		3.2
Retained Earnings		5		6		7

QUESTION 4 (a)(continued)

Neo Goh Hian Distributors
Balance Sheet
as at
	31-Dec-17	31-Dec-18	31-Dec-19
Assets
Current Assets
Cash		6		12		8
Accounts receivables		44		48		56
Inventories		52		57		72
Prepaid expenses		2		2		1
Total Current Assets		104		119		137
Non-current Assets
Property, Land & Equipment	90		90		93
Less Accumulated Depreciation	34		39		40
Total Non-current Assets		56		51		53
Total Assets		160		170		190
Liabilities and Owners' Equity
Current Liabilities
Short-term debt		15		22		23
Bank	7		14		15
Current portion of Long-term Debt	8		8		8
Accounts payable		37		40		48
Accrued expenses		2		4		4
Total Current Liabilities		54		66		75
Non-current Liabilities
Long-term debt		42		34		38
Total non- current liabilities		42		34		38
Owners' Equity		64		70		77
Total Liabilities and Owners' Equity		160		170		190

QUESTION 4 (b)[ 5 marks] (continued)

How would your focus change if we were considering the COVID-19 crisis period?