You are the finance manager of RotiTalk, a company running a fairly profitable chain of bakery businesses in Singapore. Your boss, Mr Rok, a typical Chinese businessman who co-owns the company with his homemaker wife for the last 20 years, has always harboured the thought of listing the company one day. He claimed that he will be super-rich and will not need to work anymore if he can publicly list RotiTalk in the stock exchange.

With the IPO goal in mind, he works very hard and for very long hours to make sure the company grows over the years and most importantly, makes profits. For the financial year ending in 2019, the company has finally crossed the one-million-dollar profit goal that Mr Rok have set his sight when he started the company. The following is the latest audited financial highlights of RotiTalk.

Question 3:

Taking into account the advantages & challenges of being a public listed company, the listing requirements, as well as your understanding of the financial profile of RotiTalk and Mr Roks IPO dream, determine your recommendations to Mr Rok with respect to seeking IPO for RotiTalk? (30 marks)

RotiTalk Pte Ltd Statement of Comprehensive Income for the year FY 2019 FY 2018 FY 2017 S$ S$ S$ Sales Revenue 25,730,406 24,377,283 20,041,434 Cost of sales (20,824,325) (19,701,826). (16,833,147) Gross Profit 4,906,081 4,675,457 3,208,287 Other income 48,141 51,223 83,395 Depreciation of plant and equipment (390,225) (307,083) (369,406) Employee benefit expenses (2.177,141) (2,136,082) (1,380,463) Other operating expenses (1,250,453) (1,326,843) (881,967) Net Profit & (Loss) before Income Tax 1.136,403 956,672 659,846 FY 2017 S$ RotiTalk Pte Ltd Statement of Financial Position For Year Ending FY 2019 FY 2018 S$ S$ Assets Non-Current assets Plant and equipment 2,564,327 2.261,076 Total non-current assets 2,564,327 2,261,076 2,277,141 2,277,141 Current assets Trade and other receivables Fixed deposits Cash and cash equivalents Total current assets Total Assets 236,466 529,448 765,952 1,531,866 4,096,193 263,058 503,850 563.146 1,330,054 3,591,130 497,886 400,030 563,872 1,461,788 3,738,929 Equity and Liabilities Equity attributable to owners of the company Share capital 200,000 Retained earnings 1,890,700 Dividends (1,000,000) Total Equity 1,090,700 200,000 1,504,296 (750,000) 954,296 200,000 1,047,625 (500,000) 747,625 Current liabilities Trade and other payables Provision for taxation Total current liabilities Total Equity and Liabilities 2,721,392 284,101 3,005,493 4,096,193 2,397,666 239,168 2,636,834 3,591,130 2,826,343 164,961 2,991,305 3,738,929