BBMF2013 Tutorial Answers Chapter 3 Tools of Financial Analysis and Planning
BBMF2013 Tutorial Answers Chapter 3 Tools of Financial Analysis and Planning
1. Alpha, Beta and Chi are companies in the furniture industry in Bandar Seroja. The table below shows the
income statement and balance sheet for the companies.
RM240,000
Current ROE = = 16%. Step 2: Find Current ROE
RM1,500,000
Method 1 Sales/Inventory
Quick Ratio = (Current Assets - Inventory)/Current Liabilities
1.2 = (CA - I)/RM1,000,000
CA - I = RM1,200,000. Step 1: Find inventory
CA I I
Current Ratio = (Current Assets - Inventory + Inventory)/Current Liabilities
1.6 = (RM1,200,000 + Inventory)/RM1,000,000
RM1,600,000 = RM1,200,000 + Inventory
Inventory = RM400,000.
Step 2: Find inventory turnover
Inventory Turnover = Sales/Inventory
Inventory Turnover = RM2,000,000/RM400,000
Inventory Turnover = 5x
Method 2
Current Ratio = Current Asset / Current Liabilities
1.6 = Current Asset /RM1,000,000
Current Asset = RM1,600,000
5. Rizhaida Sdn Bhd has a total debt ratio of 0.70, total debt of RM265,000 net income of RM24,850. What
is the company’s return on equity (ROE)? The average return on equity (ROE) for the industry is 15%.
Does the Rizhaida Sdn Bhd performance appear too high or too low? Explain.
Total debt
Debt ratio = ROE = Net Income/Total Equity
Total assets
Step 1: We should find Total Equity
0.70 = 265,000/Total assets
Step 2: We know Total asset = Total debt +
Total assets = RM378,571.43 Total Equity
x 0.3
Total liabilities and equity is equal to total assets. Using this relationship, we find:
Total assets = Step 3: We can find total assets from
Total liabilities and equity = Total debt + Total equity
debt ratio given
378,571.43 = 265,000 + Total equity
Total equity = RM113,571.43
Step 4: We can find total equity
from Step 4
Net Income
Return on equity (ROE) = = 24,850 /113,571.43 = 0.2188 @ 21.88%
Total equity
High and satisfactory. Step 5: Find ROE
Higher than market: Good