Group Formation and Financial Analysis

Students are required to form sub-groups within their respective tutorial groups (i.e., all group members must belong to the same tutorial). Each group must have a maximum of 4 members. You are allowed to determine your group members. However, you must ensure that the group is diversified enough to ensure balanced distribution across nationality, gender and ethnic. This is to provide opportunity for you to expand your connections and understand others outside your current networks. The lecturer and tutors are responsible to ensure this is achieved when finalizing members for group assignment.

 

Part A

 

Question 1

a) What is a bad debt? How businesses can prevent bad debts? Is the impact of bad debts harmful? Discuss how businesses can use the annual reports to minimize the bad debts?                      

 

b) When a company report a net loss, can the company still pay dividends to its shareholders? Discuss how the company can still pay dividends and the implications towards that company.                    
 

 

 

 

 

Part B

 

Question 1

Cash flow problems are a major cause of insolvency and it is often created by delay in payments by customers. Cash flow planning involves making sure that a business generates enough cash at the right time to meet pressing liabilities.

For example, many manufacturing businesses have a cash cycle. They buy raw materials (parts) on credit and then manufacture goods, which they store as Inventory (stock). They then sell these goods on credit (funds, which may be due for payment from 1-3 months’ time). In the meantime, they have overheads and a workforce to pay. A problem for traders is that they expect credit customers to pay on time. This provides the cash to continue the credit cycle and to pay wages and other outstanding bills. Unfortunately, the cycle often breaks down because creditors are slow to pay. This leaves the firm with a cash flow problem.

a) Based on the information above, it has always been companies’ aim to have a favourable receivables turnover ratio. Discuss six strategies that can be implemented to reduce its receivable turnover in days.   

Question 2

b) You are a junior accountant in a Commercial Bank. Your senior accountant has asked you to prepare a report whether to approve a loan of a well-established SME. Discuss five (5) factors you will be examining about the SME before you decide whether to approve/decline a loan.      
 

 

Part D

You are in last semester of your studies. After the graduation, you are determined to join one of the best companies of Malaysia. Now you have decided to do financial analysis before you start sending your job applications.

 

Requirement:

Choose one industry, then select two companies of your choice. You are required to do financial statement analysis, which focuses on specific aspects of financial performance and financial position of both (selected) companies. Your analysis should contain the following:

 

(a) Prepare the following ratio calculations (choose 8 ratios) based on the 2019 financial statements.

1. Gross profit, 2. Net profit margin, 3. Return on Equity, 4. Current ratio, 5. Trade receivables collection period, 6. Trade payables payment period, 7. Debt to assets ratio, 8. Interest coverage, 9. Return on Assets.   

 

(b) Analyze, interpret and compare the financial statements of both companies.