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someone help me with the question. thanks in advance (b) Ali Bhd and Bakar Bhd are competitors in the same industry. Selected financial data from
someone help me with the question. thanks in advance
(b) Ali Bhd and Bakar Bhd are competitors in the same industry. Selected financial data from their 2019 statement follow: Cash Accounts receivable Inventory Investments Intangibles Property, plant and equipment Total assets Balance sheet December 31, 2019 Ali Bhd (RM) 10,000 45,000 70,000 40.000 11,000 180,000 356,000 Bakar Bhd (RM) 35,000 120,000 190,000 100,000 20,000 520,000 985,000 Accounts payable Bonds payable Preferred stock, RMI par Common stock, RM10 par Retained earnings Total liabilities and equities 60,000 100,000 50,000 100,000 46,000 356.000 165,000 410,000 30,000 280,000 100,000 985.000 Income statement for the year ended 31 December 2019 Sales Cost of goods sold Selling and administrative expense Interest expense Income taxes Net income Ali Bhd 1.050.000 725,000 230,000 10.000 42,000 43.000 Bakar Bhd 2,800,000 2,050.000 580,000 32,000 65,000 73.000 Industry averages: Times interest earned 7.2 times Debt ratio 40.3% Debt/equity 66.6% Debt to tangible net worth 72.7% Required: Compute the following ratios for each company Times interest earned Debt ratio Debt/equity ratio Debt to tangible net worth (11) Does Bakar Bhd in a position to take on additional long-term debt? Discuss. _(8 marks) (5 marks) (11)Which company has the better long-term debt position? Explain (2 marks) (iv)Why is it important to compare long-term debt ratios of a given firm with industry averages? (2 marks)Step by Step Solution
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