FIN702: Corporate Financial Management 1

Tutorial 2 : Financial Statement Analysis

UMI-TECHNOLOGY Ltd
Income Statement for 2019 and 2020
  2020 2019
Net Sales 850,000.00 1,200,000.00
Cost of Goods Sold - -
Opening Inventory 60,000.00 70,000.00
+Net purchases 550,000.00 650,000.00
  610,000.00 720,000.00
-closing inventory 100,000.00 60,000.00
Cost of Goods Sold 510,000.00 660,000.00
Gross Profit (Loss) 340,000.00 540,000.00
  - -
Less Operating Expenses - -
Variable Overhead - -
Advertisement 10,000.00 12,000.00
Legal fees 10,000.00 12,000.00
Depreciation 20,000.00 19,000.00
Office Supplies 15,000.00 13,500.00
Communications 12,000.00 10,800.00
Store wages 50,000.00 36,000.00
Total Variable Overhead 117,000.00 103,300.00
Fixed Overhead - -
Office Salaries 50,000.00 60,000.00
Rent 60,000.00 60,000.00
Insurance 25,000.00 22,500.00
Utilities 24,000.00 26,000.00
Travel & Entertainment 20,000.00 35,000.00
Total Fixed overhead 179,000.00 203,500.00
Total Overhead 296,000.00 306,800.00
  - -
Operating Profit 44,000.00 233,200.00
Interest expense 20,000.00 29,150.00
Net Profit Before Tax 24,000.00 204,050.00
Tax 7,200.00 61,215.00
Net Profit After Tax 16,800.00 142,835.00

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 UMI-TECHNOLOGY LTD
BALANCE SHEET AS AT END OF YEAR
ASSETS 2020 2019
CURRENT ASSETS      
Cash 17,000.00   97,200.00  
124,000.0
Net Accounts Receivable 0   62,000.00  
100,000.0
Inventory 0   60,000.00  
Prepaid Expenses 16,500.00   15,000.00  
Other current assets 15,000.00   10,000.00  
272,500.0
Total Current Assets   0   244,200.00
         
FIXED ASSETS        
488,635.0
Total Fixed Assets 0   462,800.00  
Less Accum Depreciation 84,000.00   64,000.00  
404,635.0
Net Fixed Assets   0   398,800.00
         
677,135.0 643,000.0
TOTAL ASSETS   0   0
LESS LIABILITIES        
CURRENT LIABILITIES        
150,000.0
Accounts payable 0   75,000.00  
Accrued expenses 44,000.00   22,000.00  
Short-term debt 16,000.00   8,000.00  
210,000.0
Total Current Liabilities   0   105,000.00
         
Long Term Liabilities        
176,950.0
Mortgages 0   194,615.00  
Other Long term Liabilities 40,550.00   50,550.00  
         
217,500.0
Total Long Term Liabilities   0   245,165.00
427,500.0 350,165.0
TOTAL LIABILITIES   0   0
       
292,835.0
NET ASSETS   249,635.00 0

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 Represented by:      
OWNERS EQUITY      
Share Capital        

100,000 ordinary shares, fully paid 100,000.00 100,000.00 100,000.00 100,000.00

Retained Profits   149,635.00   192,835.00

Other Information
1. Credit Sales was 60% in 2019 and 80% in 2020
2. Opening Balance in 2019 for Accounts Receivables was 60,000 and for Accounts Payable was
74,000
3. Dividend payout is 100,000 in 2019 and 60,000 in 2020

Required:
(a) Assess and comment on the liquidity of Umi Limited
(b) Assess and comment on the solvency of Umi Limited
(c) Assess and comment on the Profitability of Umi Limited
(d) Assess and comment on the Working Capital of Umi Ltd
(e) Assess and comment on the Cash Management of Umi Ltd
(f) What is your general view on the financial position of Umi Ltd?