You must answer ALL questions. (Total 100 marks) Question 1 At a recent board meeting of Bedok Limited, the CEO made the following remark 'When it comes to making financial decisions, our primary goal is to increase our market share.' (a) Discuss, in a balanced manner, your views regarding the CEO's remark. (6 marks) Bedok Limited is one of the major supermarket chains in Singapore and is listed on SGX Mainboard. Pioneer Pte. Ltd. is Bedok's competitor, but it is a private company that is closely owned by the Tan family. (b) Examine which company will suffer from the agency problem, and the costs associated. (8 marks) The Statement of Profit or Loss and Statement of Financial Position of Bedok for FY 2020 and 2019 are shown below. An extract of the Statement of Cash Flows is also included. FIN203 Statement of Profit or Loss 2020 2019 $'000 $'000 Revenue 1,393,998 991,284 Cost of sales (1,012,140) (724,426) Gross profit 381,858 266,858 Other income 41,243 8,933 Selling and distribution expenses (7,222) (7,669) Administrative expenses (245,159) (172,787) Other expenses (4,580) (2,752) Operating profit 166,140 92,583 Finance expense (2,016) (2,014) Finance income 984 1,338 Profit before tax 165,108 91,907 Tax expense (25,975) (16,152) Profit for the year 139,133 75,755 Tutor-Marked Assignment Statement of Financial Position 2020 2019 $'000 $'000 Property, plant and equipment 340,299 356,189 Inventories 77,911 82,166 Trade and other receivables 19,949 17,981 Cash and cash equivalents 253,901 76,419 Total assets 692,060 532,755 Share capital 235,373 235,373 Reserves (65,522) (66,298) Accumulated profits 205,248 146,285 Equity 375,099 315,360 Deferred tax liabilities 3,615 3,042 Term loan 15,000 0 Lease liabilities 23,129 30,239 Non-current liabilities 41,744 33,281 Trade and other payables 208,089 140,766 Current tax payable 29,754 16,605 Term loan 15,000 0 Lease liabilities 22,374 26,743 Current liabilities 275,217 184,114 Total equity & liabilities 692,060 532,755 Statement of Cash Flows (Extract) 2020 2019 $'000 $'000 Cash flows from opearting activities 274,148 117,322 Cash flows used in investing activities (16,117) (52,182) Cash flows used in financing activities (80,549) (75,906) Net increase/(decrease) in cash 177,482 (10,766) Cash at the beginning of the year 76,419 87,185 Cash at the end of the year 253,901 76,419 (c) (d) (e) Compose a memorandum to the Board analyzing Bedok's liquidity, leverage and asset management ratios for FY 2020 and 2019. In doing so, you should at least include the following ratios: (i) Current ratio (ii) Quick ratio (iii) Debt-equity ratio (iv) Times interest earned (v) Inventory days (vi) Receivable days (22 marks) Hypothesize the reason(s) why Bedok's FY 2020 operating profit of $166M is significantly different from cash flows from operating activities of $274M. (Note: Cash flows from operating activities is not in our lecture notes. You might rely on online resource to understand the concept.) (6 marks) Decompose Bedok's FY2020 and 2019 return on equity using the DuPont equation and discuss your observations.