Question

Question 2 Two companies Samsong Sdn Bhd and Huaway Sdn Bhd trade in the same market. Their financial statements for the year ended 30 September 2019 are summarised below: Statements of Comprehensive Income for the year ended 30 September 2019: Samsong Huaway RM'000 RM'000 Revenue 284 405 (155) (251) 129 154 Cost of sales Gross profit Administrative Distribution Depreciation Interest on loan (24) (35) (37) (53) (12) (9) Nil (5) Profit before tax 61 47 Income tax expense (10) (4) 51 43 Profit for the year Note: dividends paid during the year 8

Answer 1

a)

Particulars Samsong Huaway

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i) Gross profit percentage 45.42 % 38.02 %

   ( Gross profit / Revenue ) * 100 ( 129 / 284 ) *100 (154/405)*100

ii) Net profit percentage 17.95 % 10.61 %

( Profit after tax / Revenue )* 100 (51/284) * 100 ( 43 / 405 ) * 100

iii)Assets turnover 0.64 times 0.5 times

(Revenue / Total assets ) *100 ( 284 /446) (405 /802)

iv) Current Ratio 1.07 times 1.18 times

( Current assets /Current liabilities ) ( 201 / 188) ( 383 / 325)

v) Quick ratio 0.58 times 0.28 times

( Cash+Trade receivables )/ current liabilities ( 110 / 188) (90 / 325)

vi) Receivables collection period 59 days 68 days

(365 * Average trade receivables )/ Revenue ( 365 * 46) / 284 (365 * 75) / 405

2)

i)Gross profit represents, how well a company is managing it's resources in the operations ,it considers only variable costs  and so it is not the actual profit.

   For Samsong , 45.42 % of the sales represents profit and Huaway 38.02 % of the sales is gross profit.

We can say that both the companies are managing their resources efficiently but Samsong is more effective in managing the opertions.

   ii)Net profit margin represents , how well a company operates as a whole in the financial year,it considers fixed costs and provides the actual profit

As a whole , Samsong's actual profit interms of their % is more than that of Huaway.

iii)Assets turnover ratio represents how much sale is made for every RM of assets employed.The higher the turnover represents good performance in employing the assets.

Samsong is managing its assets more than than Huaway .

iv)Current ratio represents the ability of the company to pay it's current liabilities with it's current assets.

Huaway has higher current ratio indicating that it's ability to pay the current liability out of it's current assets is more than that of Samsong

v) Quick ratio represents how well a company a company can pay it's current liabilities out of it 's    available liquid assets .Liquid assets are that, which can be easily converted into money .

Samsong has more liquid assets than Huaway , to pay their current liabilities.

vi)Receivables collection period represents the number of days between a credit sale is made and receives payment for that sale.

Samsong receives payments for it's credit sale in 59 days while for Huaway it is 68 days .So, the funds locked in receivables is more for Huaway than Samsong. A low collection period is ideal.