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Morgan Phrasaddha Naidu A/L Puspakaran

255843
Group S
TUTORIAL 4
TOPIC 6 & 7: COMPANIES ANNUAL REPORT & FINANCIAL
STATEMENT ANALYSIS
DUE DATE: 22 APRIL 2018

PART A: 20 MULTIPLE CHOICE QUESTIONS

1. The main objective of financial reporting is:

A. To provide a process of identifying, recording and communicating financial


information
B. To provide an assurance to users that the financial information is free from any
material misstatements
C. To provide information on financial position, financial performance and cash flow of
an entity for economic decision making and also considering stewardship and
financial forecasting
D. To provide an audit report to users

2. The followings are the regulatory and disclosure requirements of financial reporting for
Fifi Corporation Bhd, a property investment company listed on Main Market of Bursa
Malaysia EXCEPT for:

A. Security Commision
B. Bank Negara Malaysia
C. Main Market Listing Requirements
D. Companies Act 2016

3. The following items are disclosed voluntarily by companies EXCEPT:

A. Chairman’s statement.
B. Corporate information.
C. Notice of audit committee meeting.
D. Important events calendar and corporate activities.

4. Nunu Corporation Berhad are required to have statement on corporate governance in their
annual report dor 2018. What does the statement is about?

A. A notice of annual general meeting


B. A statement on following the proper principles and practices as outlined by referred
governance code
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C. A statement disclose members in the board of directors and respective posts
D. None from the above

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5. A company is considered as a legal entity. The followings are characteristics of a legal
entity EXCEPT for:

A. An entity which is separate from owners


B. It can sue or to be sued, acquire, own, hold, develop or dispose of property and enter into
transactions
C. Companies are required to account and report based on acquisition costs rather than
fair market value for most assets and liabilities
D. It is necessary to record the business's transactions separately, to distinguish them
from the owners' personal transactions

6. The followings are the contents of a Meri Cekap Berhad annual report EXCEPT for:

A. Auditor’s Engagement Letter


B. Chairman's report
C. CEO's report
D. Profile of Board of Directors

7. A financial Statement for Bibi Berhad includes the following EXCEPT for:

A. Statement of Financial Position


B. Auditor’s Report
C. Statement of Changes in Equity
D. Notes to the Financial Statements

8. Information about the accounting policies adopted in preparing the financial statements
are explained in the:

A. statement of changes in equity


B. notes to the financial statements
C. statement of cash flows
D. corporate governance statement

9. According to the Financial Reporting Standard 101 (FRS 101): Presentation of Financial
statement, a complete set of financial statements must consist of the following EXCEPT:

A. statement of comprehensive income


B. statement of changes in equity
C. statement of financial position
D. statement of internal control

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10. Meri is a public accountant for Fifi Berhad. His opinion given on the sufficiency of
financial records kept by the company in accordance to the stated act and compliance
with the approved accounting standards can be found in which of the following report for
his client?

A. Director’s report
B. Audit committee’s report
C. Chairman’s statement
D. Auditor’s report

11. Which of the following is NOT the purpose of financial statement analysis?

A. To evaluate the company’s non-financial measures effectiveness.


B. To evaluate the current performance of a company with an ideas toward
correcting problem areas.
C. To use the past performance of a company to predict how it will do in the future.
D. To compare the performance of the company with other competitors within the
same industry.

12. The following are the main ways to analyze financial statements EXCEPT for:

A. Horizontal analysis
B. SWOT analysis
C. Vertical analysis
D. Ratio analysis

13. Return on total assets is a function of:

A. interest rates and pre-tax profits


B. the debt-equity ratio
C. the after-tax profit margin and the asset turnover ratio
D. sales and fixed assets

14. Which of the following ratios gives information on the amount of profits reinvested in the
firm over the years?

A. Sales/Total assets
B. Debt/Total assets
C. Debt/Equity
D. Rretained earnings/Total assets

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Use the following information for questions 15 to 17.

The Naqiu Sdn Bhd had sales of RM10 million; operating income of RM3 million; after tax
income of RM1 million; assets of RM8 million; owner’s equity of RM5 million; and a total debt
of RM3 million.

15. What is Naqiu's return on assets?

A. 37.5%
B. 12.5%
C. 30.0%
D. 25.0%

16. What is Naqiu's return on equity?

A. 37.5%
B. 10.0%
C. 20.0%
D. 60.0%

17. What is Naqiu's profit margin?

A. 10.0%
B. 20.0%
C. 30.0%
D. 33.0%

The following ratios were given for two similar business:

Sin Trading Tok Trading


Stock turnover 6 times 8 times
Current ratio 2 times 3 times
Gross profit margin 30% 40%
Net profit margin 15% 10%

18. Refer to the above. The following statements are true EXCEPT for:

A. The sales of Tok Trading is increasing much faster than that of Sin Trading
B. The financial condition of Sin Trading is much stronger than Tok Trading
C. Tok Trading has more ability to repay its current liabilities when they become due
D. The gross profit margin of Tok Trading is 10 cents more than that of Sin Trading to
cover the operating and non-operating expenses for a particular accounting period

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19. Companies that consistently earn rates of return above the competitive floor in the
industry are considered to possess a:

A. dominant market share


B. niche market
C. competitive advantage
D. monopolistic advantage

20. A measure useful in evaluating efficiency in the management of inventories is the:

A. quick ratio
B. ratio of fixed assets to long-term liabilities
C. working capital ratio
D. number of days’ sales in inventory

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PART B: STRUCTURED QUESTION
.

QUESTION 1

Butik Bibi Sdn Bhd, sell professional women’s apparel through company-own online stores.
Recent financial information for Butik Bibi is provided below :

2018 2017 2016

RM RM RM

Net Income 81,872 63,276

Interest Income 2,083 3,641

Total assets 1,492,906 1,327,338 1,256,397

Total shareholders’ equity 1,034,482 926,744 818,856

Assume the appareal industry average rate earned on total assets is 8.2%, and the average rate
earned on shareholders’ equity is 16.7% for fiscal year 2017.

(a) Determine the rate earned on total assets for Butik Bibi for year 2018 and 2017.

(b) Determine the rate earned on shareholders’ equity for for Butik Bibi for year 2018 and
2017.

(c) Evaluate the two year trend for profitability ratios determined in (a) and (b).

(d) Evaluate Butik Bibi profit performance in relate to the industry.

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Answers for Question 1

a) Rate Earned of on Total Assets

2018

= (Net Profit + Interest Expense) ÷ Average Total Assets

= (81872 + 2083) ÷ (1492906÷2)

= 11.25%

2017

= 63276 + 3641 ÷ (1327338 ÷2)

= 10.08%

b) Rate earned on Shareholders Equity

2018

= Net Income ÷ Total Asset

= 81872 ÷ (1492906 ÷2)

= 15.83%

2017

= 63276 + 3641 ÷ (1327338÷2)



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c) Evaluate the two year trend for profitability ratios determined in (a) and (b).

(a) Rate Earned of on Total Assets

2018 2017 Increase(decrease) Percentage%

Rate Earned of 11.25% 10.08% 1.17% (increase) 11.6%


on Total Assets

(b) Rate earned on Shareholders Equity

2018 2017 Increase(decrease) Percentage%

Rate earned on 15.83%  5.75% (increase) 57.04%


Shareholders
Equity

d) Evaluate Butik Bibi profit performance in relate to the industry.

Appareal industry average rate earned on total assets on 2017 = 8.2%

Butik Bibi rate earned on total assets on 2018 = 11.25%

Increase (profit) = 3.05%

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Appareal industry average rate earned on shareholders’ equity on 2017 = 16.7%

Butik Bibi rate earned on Shareholders Equity on 2018 = 15.83%

Decrease (lower) = 0.87%

QUESTION 2

Income statement data for Atif Creative Sdn Bhd for the years ended 31 December 2017 and
2016, are as follows:

2017 (RM) 2016 (RM)

Sales 117,000 150,000

Cost of goods sold 56,000 70,000

Gross profit 61,000 80,000

Selling expenses 36,000 37,500

Administrative expenses 12,500 10,000

Total operating expenses 48,500 47,500

Income before tax 12,500 32,500

Taxation 2,000 10,000

Net income after tax 10,500 22,500

REQUIRED:

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(a) Prepare a comparative income statement with horizontal analysis, indicating the increase
(decrease) for 2017 when compared with 2016.

2017 2016 Amount Increase / Percentages


Different Decreases (%)

Sales 117000 150000 (33000) (0.22) 22

Cost of Goods 56000 70000 (14000) (0.2) 20


Sold

Gross Profit 61000 80000 (19000) (0.24) 24

Selling 36000 37500 (1500) (0.04) 4


Expenses

Administrative 12500 10000 2500 0.25 25


Expenses

Total 48500 47500 1000 0.02 2


Operating
Expenses

Income Before 12500 32500 (20000) (0.62) 62


Tax

Taxation 2000 10000 (8000) (0.8) 80

Net Income 10500 22500 (12000) (0.53) 53


After Tax

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(b) What conclusion can be drawn from the above horizontal analysis?

Based on horizontal analysis above, we can conclude that Atif Creative Sdn Bhd
experiences loss in 2017 compared to 2016.

End of Questions

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