Financial Statements and Cash Budget Analysis

Syafiq Kylex started HealthPro Pte Ltd on 1 January 2021. The shop sells a wide range of health supplements and also conducts short classes on nutrition.

Syafiq prepared the following Profit and Loss Statement and Balance Sheet for the business after 6 months of operations and thinks that there are errors in the statements. He needs your assistance to check and prepare the corrected classified Profit and Loss Statement and Balance Sheet.

Syafiq Kylex
Profit and Loss Statement as at 30 June 2021
	$	$	$
Course Fee Revenue		54,760
Accrued Revenue		5,800
Sales Revenue		90,500	151,060
Less: Cost of Goods Sold			60,400
Gross Profit			90,660
Less: Operating Expense
Selling Expense
Office Salaries Expense	27,600
Advertising Expense	3,000
Accrued Expense	800	31,400
General and Administrative Expense
Salesmen Salaries Expense	7,800
Interest Expense	480
Depreciation – Delivery Van	16,500
Delivery Van Expense	2,300	27,080
Financial Expense
Prepaid Expense	6,500
Bank Charges	300
Rent Expense (refer to Note 1)	8,800	15,600	74,080
Net Profit			16,580

Syafiq Kylex
Balance Sheet for the year ended 30 June 2021
Equity	$	$	$
Capital			65,000
Add: Net Profit			16,580
Less: Drawings			7,000
Represented by:
Current Assets
Cash at Bank		35,280
Inventories		34,000
Accounts Payable		3,400
Delivery Van	26,500
Add: Accumulated Depreciation – Delivery Van	3,300	29,800	102,480
Less: Current Liabilities
Loan from DBS (refer to Note 2)			19,500
Working Capital			82,980
Non-Current Assets
Unearned Revenue			5,000
Total Assets			87,980

Rent expense is allocated based on floor areas. A0% (Ais the 4^th digit of your admin number) of the floor area is used for the shop and the remaining floor area is for the office.

e.g. if your admin number is 2012345J, then the figure is 20%

if your admin number is 2003202J, then the figure is 30%

if the 4^th digit of your admin number is 0 (e.g. 2000002J), then use 40%.

Bank loan of $B,000 (Bis the 5^th digit of your admin number) is due on 31 December 2021. The balance is due on 31 December 2023.

e.g. if your admin number is 2012435J, then the figure is $4,000

if your admin number is 2002532J, then the figure is $5,000

if the 5^th digit of your admin number is 0 (e.g. 2011000J), then use $5,000.

Kimly Limited are public companies limited by shares.

Kimly Limited is principally engaged in operating the Sheng Siong groceries chain. Its stores are primarily located in retail locations in the heartlands of Singapore.

a) Refer to the company’sfinancial statements and compute the following financial ratios. Show your workings and round your figures to 2 decimal places.

Ratio	2020	2019
Net Profit Margin (%) (use Profit for the Year)
Current Ratio (use Group figures)
Debt Ratio (%) (use Group figures)

b) Based on the ratios calculated in part (a), evaluate the company’s financial performance and position in 2020 as compared to 2019.

Evaluation

c) Identify and briefly explain twonon-current liabilities of the company (use group figures) in 2020. You can also find the information in the “Notes to the Financial Statements”.

d) Read the article on the company’s initial public offering (IPO) that is assigned to you and answer questions (i) to (v):

i) Which stock exchange is the company listed? (1m)

ii) When were the company’s shares first publicly traded on the stock exchange? (1m)

iii) What is the IPO issue price? (1m)

iv) How much net proceeds was raised from this IPO? (1m)

v) How does the company plan to use the proceeds? (1m)

vi) Assume that the company is planning for a rights issue to raise S$20 million at the beginning of 2021. Research and give a detailed recommendation (e.g. rights issue price) on a rights issue for the company. Show relevant workings.

You may use the company’s annual report, website, etc., to support your recommendation. Attach your research in Appendix A (page 11). (8m)

Powerhouse Fitness Pte Ltd is a retailer of gym equipment with a retail shop at Velocity Novena Square. As at 1 October 2021, the cash at bank balance is $300,000. The company’s policy is to maintain a minimum cash balance of $150,000.

Powerhouse Fitness Pte Ltd is developing a cash budget for October, November and December 2021, and the following information was gathered:

Cash Receipts
1	Sales revenue for August and September 2021 are $150,000 and $200,000 respectively. The forecasted sales revenue for October, November and December 2021 are $190,000, $280,000 and $300,000 respectively. Historically, 70% of the firm’s sales are in cash, 20% are collected in the next month, and the remaining 10% are collected in the second month following the sale.
2	Monthly commission income is received from the wholesaler based on C% of the current month’s sale (C is the 6^th digit of your admin number). (Use 6% if the 6^th digit of your admin number is 0)
3	Dividend income of $15,000 will be received in December 2021.
Cash Disbursements
4	The expected purchases are $120,000, $150,000 and $170,000 for the months of October, November and December 2021 respectively. The company pays all its purchases in the month of purchase.
5	Salaries paid monthly is $D0,000. (D is the 7^th digit of your admin number) (Use $70,000 if the 7^th digit of your admin number is 0)
6	Rental of $10,000 is paid monthly.
7	Investment in a joint venture amounting to $500,000 is scheduled in December 2021.

Use the following templates to prepare the cash budget for October, November and December 2021:

a) Projected Cash Receipts

Receipts	Aug $	Sep $	Oct $	Nov $	Dec $
Sales	150,000	200,000	190,000	280,000	300,000
Cash sales (70%)
Lag 1 month (20%)
Lag 2 months (10%)
Commission income (C%)
Dividend income
Total Cash Receipts

b) Projected Cash Disbursements

Disbursements	Oct $	Nov $	Dec $
Cash purchase
Salaries ($D0,000)
Rental payment
Investment
Total Cash Disbursements

c) Cash Budget

	Oct $	Nov $	Dec $
Total cash receipts
Less: Total cash disbursements
Net cash flow
Add: Beginning cash
Ending cash
Minimum cash
Required Financing
Excess Cash Balance