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UNIVERSITY OF NAIROBI SCHOOL OF BUSINESS MASTER OF SCIENCE IN FINANCE DAC 511: CORPORATE FINANCIAL REPORTING AND ANALYSIS JAN-APRIL 2013 GROUP ASSIGNMENTS DUE DATE 8TH MARCH 2013 INSTRUCTIONS 1. The assignments should be done in groups assigned in class . 2. The assignments must be handed in typed 3. The assignment are due latest by Saturday 8th March 2013 Question One Dix year end statements of financial position and statement of incone are shown below (amounts in sh’000): 2012 2011 2010 Cash 30,000 35,625 36,800 Accounts recievables, net 88,500 62,500 49,200 111,500 82,500 53,000 9,700 9,375 4,000 277,500 255,000 229,500 518,000 445,000 372,500 128,900 75,250 49,250 97,500 102,500 82,500 Comon stock ,sh10 par value 162,500 162,500 162,500 Retained earnings 129,100 104,750 78,250 518,000 445,000 372,500 2012 2011 672,500 530000 Merchandie inventory Prepaid expenses Non current assets, net Total assets Accounts payable Long term notes payable Total liabilities and equity Statement of income Sales Cost of goods sold (410,225) (344,500) Other operating expenses (208,550) (133,900) Interest expense (11,100 (12,300) (8,525 (7,845) 638,400 498,625 Net income 34,100 31,375 Earnings per share Sh.2.1 Sh.1.93 Income taxes Total costs and expenses Additional information 2012 2011 Common stock price December 31 Sh.15 Sh.14 Annual dividend per share Sh.0.60 Sh.0.30 Required: a) Compare the year end liquidity position of the company using the following ratios: Current ratio, Acid test ratio Comment on the ratio results (4 marks) b) Assumming all the sales were on credit compute the following ratios for 2012 and 2011 : Average collection period, Accounts recievable turnover, Inventory turnover, Average sale period Comment on the changes in the ratios from 2011 to 2012 (5 marks) c) Compare the long term risk and capital structure position as at the end of 2012 and 2011 by computing the following ratios: Total debt ratio, Times interest earned ratio Comment on these results (4 marks) d) Evaluate the efficiency and profitability of the company for the years ended 2012 and 2011 by computing the following ratios: Net profit margin, Total assets turnover, Return on total assets Comment on the results (6 marks) e) Evaluate on the value and quallity of the company’s equity by computing the following ratios: Return on common equity, Price earnings ratio, Dividend yield Comment on the results (6 marks) Total 25 marks Question Two You are planning to analyze Wenwa Company’s December 31 2012 statement of financial position. the folowing information is available: 1. Beginning and ending balances are identical for both accouts recievable and inventory 2. Net income is sh.1,300,000 3. Times interest earned is 5 (income taxes are zero). company has 5% bonds outstanding issued at par 4. Net profit margin is 10%. Gross profit margin 30%. Inventory turnover is 5 5. Average collection period is 72 days 6. Sales to end of year working capital is 4. Current ratio is 1.5 7. Acid test ratio is 1.0 (excludes prepaid expenses) 8. Plant and equipment is sh.6,000,000. It is one-third depreciated 9. Dividend paid on 8% non participating prefered are sh40,000. Thereis no change in common shares. The prefered shares were isssued two years ago at par. 10. Earnings per share are sh.3.75 11. Common stock has a sh.5 par value and was issued at par. 12. Retained earnings at January 1, 2011 are sh.350,000 Required: a) Given the information available , prepare the company’ statement of financial position at December 31, 2012 (include the following account classifications: cash, inventory, prepaid expenses,plant and equipment(net), current liabilities and shareholder’s equity (20 marks) b) Determine the amount of dividend paid on the common stock in year 2012 (5 marks) (Total 25 marks)