Question

(a) Prepare free cash flow statement that shows Operating Cash Flows (OCF), Net Fixed Asset Investment (NFAI) and Net Current Asset Investment (NCAI) (7 marks)

Kunci Kira-Kiral Balance Sheet (RM"000) Penyata Untung Rugil Income Statement (RM000) Untuk Tarikh Tamat / For The Period Ended 12/3/2019 Jualan / Sales 10,000 Kos Barang Dijual / Cost of Goods Sold 6,000 Margin Kasar / Gross Margin 4,000 Aset / Assets Aset Semasa / Current Assets 31/12/2018 31/12/2019 Tunai / Cash 1,000 1,800 Akaun Belum Terimal Accounts Receivable 3,000 2,900 Inventori / Inventory 2,000 2,800 Jumlah kecil Sub-total 6,000 7,500 Aset Jangka Panjang / Long-Term Asset Aset Tetap Kasar / Gross Fix Asset 4,000 6,000 Susut Nilai Terkumpul / Accumulated Depreciation 1,000 1,500 Nilai Bersih Aset Tetap / Net Fix Asset 3,000 4,500 JUMLAH ASET / TOTAL ASSETS 9,000 12,000) Perbelanjaan Operasi / Operating Expenses Susut Nilai / Depreciation Pendapatan Sebelum Faedah dan Cukai/ Earning Before Interest and Tax 1 Faedah / Interest Pendapatan Sebelumn Cukai / Protax Income Cukai / Tax Pendapatan Bersih / Net Income 1.600 500 1,900 400 1,500 500 1,000 Liabiliti dan Ekuiti Liabilities and Equities Akaun Belum Bayar / Accounts Payable 500 Akrual / Accruals Jumlah kecilSub-Total Hutang Jangka Panjang / Long-Term Debt ,000 Ekuiti / Equity 2,000 Jumlah kecilSub-Total 7,000 2,100 400 2,500 6,200 3,300 9,500 JUMLAH LIABILITI & EKUITI/ TOTAL LIABILITIES AND EQUITY 9,000 12,000

(b) Sekinchan Metal Berhad has assembled 2019 income statement to be used in preparing 2020 proforma income statement.

Information related to financial projections for the year 2020 as follows:

- Projected sales are RM550,000.

- Cost of Goods sold in 2019, includes RM85,000 in fixed cosf.

- Operating expense in 2019, includes RM35,000 in fixed cost.

- Interest expense in 2019, includes RM13,000 in fixed cost.

- Tax rate will remain at 25%.

i) Prepare a pro forma income statement based on percent-of-sales for 2020. (6 marks)

ii) Prepare a proforma income statement based on fixed-variable cost. (7 marks)

Answer 1

a..Free cash flow statement
Operating cash flows:
(EBIT-Tax)+Depreciation
1900-500+500=	1900
Net fixed asset investment
(6000-4000)	-2000
Net current assets investment
ie. Changes to net working capital
(2019C/A-C/L)-(2018C/A-C/L)
(7500-2500)-(6000-2000)	-1000
Free cash flow	-1100

b.
i) Pro forma income statement based on percent-of-sales for 2020.		Proforma
(Fig. in RM)	Dec-19	% of sales(400000)	% *550000
Sales	400000	100.00%	550000
COGS	192500	48.13%	264688
Gross profit	207500	51.88%	285313
Operating expenses	65000	16.25%	89375
EBIT	142500	35.63%	195938
Interest	19000	4.75%	26125
EBT	123500	30.88%	169813
Tax at 25%	30875	7.72%	42453
Profit after taxes	92625	23.16%	127359

ii) Proforma income statement based on fixed-variable cost.
(Fig. in RM)	Dec-19	Proforma
Sales	400000	550000
COGS:
Fixed cost	85000	85000
Variable cost(192500-85000)	107500	147812.5	107500/400000*550000
Gross profit	207500	317187.5
Operating expenses:
Fixed cost	35000	35000
Variable cost(65000-35000)	30000	41250	30000/400000*550000
EBIT	142500	240937.5
Interest:
Fixed cost	13000	13000
Variable cost(19000-13000)	6000	8250	6000/400000*550000
EBT	123500	219687.5
Tax at 25%	30875	54921.88
Profit after taxes	92625	164765.6