Kopi Ltd and Teh Ltd are two companies competing in the same industry. Below are
ID: 2341610 • Letter: K
Question
Kopi Ltd and Teh Ltd are two companies competing in the same industry. Below are the summarized financial statements of the two companies for the year ended 31 December 20X7. Statement of financial position as at 31 December 20X7 Kopi Ltd Teh Ltd Property, plant and equipment, net $22,000 47.92 Additional information for the year ended 31 December 20X6 Cash Accounts receivable, net Current notes receivable (trade) Merchandise inventory Prepaid expenses Total assets 35,100 61,200 67.320 103.320 16,38012,960 151,992 238,500 9.0002510 Accounts receivable, net Kopi Ltd Teh Ltd 3,640 97,560 501.79976410 Current notes receivable (trade) 100,080 193,320 716400 688,500 324,000 370,800 176940 168,480 Merchandise inventory Liabilities and Equity Current liabilitics Long-term notes payable Share capital Retained earmings Total liabilities and equity 110,412 167940 Total assets 145,440 181,800 324,000 370,800 Share capital 221,940 255,870 801,792 carnings 976.410 Statements of Comprehensive Income (extract) for the year ended 31 December 20X7 Kopi Ltd Teh Ltd 1,386,000 1,584360 955,998 1,027.746 556,614 48,438 62,316 Both companies paid cash dividends of $3.04 per share in 20X7 and each company's share can be purchased at $60 per share currently. Cost of goods sold Gross profit Distribution expenses Administrative expenses Financial expenses Income tax expenses Net profit Basic eanings per 430,002 41.220 62.316 55,96223400 14,220 26,640 43,740 78,720 $4.09 291,960 3.60 For both companies, compute: Required: (a) For both companies, compute: (x) The current ration (xi) Days' sales in inventory (xil) Days' sales uncollected (i) Not profit margin. i Return on total asset (i) Return on ordinary shareholders' equity. (iv) Price-earnings ratios. (v) (v) Dividend yieldExplanation / Answer
Answer of Part i:
For Kopi Ltd
Net Profit Margin = Net Profit / Sales *100
Net Profit Margin = $291,960 / $1,386,000 *100
Net Profit Margin = 21.06%
For teh Ltd
Net Profit Margin = Net Profit / Sales *100
Net Profit Margin = $378,720 / $1,584,360 *100
Net Profit Margin = 23.90%
Answer of Part ii:
For Kopi Ltd:
Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2
Average Total Assets = ($716,400 + $801,792) / 2
Average Total Assets = $759,096 / 2
Average Total Assets = $379,548
Return on Total Assets = Net Profit / Average Total Assets
Return on Total Assets = $291,960 / 2
Return on Total Assets = $145,980
For Teh Ltd:
Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2
Average Total Assets = ($688,500 + $976,410) / 2
Average Total Assets = $832,455
Return on Total Assets = Net Profit / Average Total Assets
Return on Total Assets = $378,720 / 2
Return on Total Assets = $189,360
Answer of Part iii:
For Kopi Ltd:
Beginning Shareholder Equity = Share Capital + Retained Earning
Beginning Shareholder Equity = $324,000 + $176,940
Beginning Shareholders Equity = $500,940
Ending Shareholder Equity = Share Capital + Retained Earning
Ending Shareholder Equity = $324,000 + $221,940
Ending Shareholder Equity = $545,940
Average Shareholders Equity = (Beginning Shareholders Equity + Ending Shareholders Equity) /2
Average Shareholders Equity = ($500,940 + $545,940) / 2
Average Shareholders Equity = $523,440
Return on ordinary Shareholders Equity = Net Profit / Average Shareholders Equity
Return on Ordinary Shareholders Equity = $291,960 / $523,440
Return on Ordinary Shareholders Equity = 55.78%
For teh ltd:
Beginning Shareholder Equity = Share Capital + Retained Earning
Beginning Shareholder Equity = $370,800 + $168,480
Beginning Shareholders Equity = $539,280
Ending Shareholder Equity = Share Capital + Retained Earning
Ending Shareholder Equity = $370,800 + $255,870
Ending Shareholder Equity = $626,670
Average Shareholders Equity = (Beginning Shareholders Equity + Ending Shareholders Equity) /2
Average Shareholders Equity = ($539,280 + $626,670) / 2
Average Shareholders Equity = $582,975
Return on ordinary Shareholders Equity = Net Profit / Average Shareholders Equity
Return on Ordinary Shareholders Equity = $378,720 / $582,975
Return on Ordinary Shareholders Equity = 64.96%
Answer of Part iv:
For Kopi Ltd:
Price-Earnings Ratio = Market Value of Share / Earning per Share
Price-Earnings Ratio = $60 / $3.60
Price-Earnings Ratio = 16.67
For teh ltd:
Price-Earnings Ratio = Market Value of Share / Earnings per Share
Price-Earnings Ratio = $60 / 4.09
Price-Earnings Ratio = 14.67
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