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Raya Bhd is a holding company with subsidiaries that have diversified interests. Raya Bhd's board of directors is interested in the group acquiring a subsidiary

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Raya Bhd is a holding company with subsidiaries that have diversified interests. Raya Bhd's board of directors is interested in the group acquiring a subsidiary in the machine tool manufacturing sector. Two companies have been identified as potential acquisitions, Alpha Bhd and Beta Bhd. Summarises of both these companies' accounts are shown below: Statements of Financial Position as at 31 October 2021 Alpha Bhd Beta Bhd RM 000 RM'000 Assets Non-current assets Property, plant and equipment 765 410 Current Assets Inventory 140 Receivables 170 395 Cash and cash equivalents 50 45 Total Assets 1,140 990 155 Equity and liabilities Equity Equity shares Retained earnings 450 105 440 55 495 555 220 70 Non-current liabilities 6% Loan notes Current liabilities Payables Others Total equity and liabilities 235 130 1,140 300 125 990 2020 RM 000 560 150 Statements of profit or loss for the year ended 31 October 2021 2021 RM 000 Revenue 985 Cost of sales Opening inventories Materials 255 Labour 160 Factory overheads 205 Depreciation 35 Closing inventories (155) Gross profit 335 145 136 125 111 20 (140) 163 Selling and administration expenses Interest Profit before taxation Taxation Profit for the year (124) (35) 176 (65) 111 (75) (10) 78 (25) 53 Required: (a) Calculate the following ratios for both Alpha Bhd and Beta Bhd: (i) Profit margin (ii) Asset turnover (1) Return on capital employed (iv) Current ratio (v) Quick ratio (vi) Receivables collection period (vii) Inventory turnover (viii) Gearing ratio (9 marks) (b) You need to assess the financial performance and position of Alpha Bhd and Beta Bhd. Your comment should be based on Raya Bhd's interests in these two companies and should be illustrated with financial ratios where appropriate. (11 marks) 120 Marks

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