FINA 331: FINANCIAL STATEMENT ANALYSIS 2st TRIMESTER

FINA 331: FINANCIAL STATEMENT ANALYSIS
2st TRIMESTER 2015
DLM ASSIGNMENT
26TH June 2015
Instructions: Answer ALL Questions
Question 1
a) Firms have to balance their liquidity portfolio. Discuss.
(10marks)
b) Prepare a Common Size Income Statement.
(10 marks)
Income
Statement
Revenue
Cost of Goods Sold
Gross Profit
SG&A Expense
Operating Income
Interest Expense
Provision for Taxes
Net Income
70,134
44,221
25,913
13,531
12,382
2,862
3,766
5,754
c) Prepare a Common Size Balance Sheet
Balance Sheet
ASSETS
Cash & Marketable Securities
Accounts Receivable
Inventory
Total Current Assets
6,029
14,378
17,136
37,543
(10 marks)
Property, Plant, & Equipment
Total Assets
2,442
39,985
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
14,251
Long-Term Debt
12,624
Total Liabilities
26,875
Shareholders' Equity
13,110
Total Liabilities & Equity
39,985
d) Discuss indicators of a financial distressed in a firm
(10 marks)
Question 2
a) Prepare a Common Size Income Statement.
(10 marks)
Income
Statement
Revenue
Cost of Goods Sold
Gross Profit
SG&A Expense
Operating Income
Interest Expense
Provision for Taxes
Net Income
70,134
44,221
25,913
13,531
12,382
2,862
3,766
5,754
b) Prepare a Common Size Balance Sheet
Balance Sheet
ASSETS
Cash & Marketable Securities
Accounts Receivable
Inventory
Total Current Assets
Property, Plant, & Equipment
6,029
14,378
17,136
37,543
2,442
(10 marks)
Total Assets
39,985
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
14,251
Long-Term Debt
12,624
Total Liabilities
26,875
Shareholders' Equity
13,110
Total Liabilities & Equity
39,985
Question 3: (20 marks)
WaSmart Ltd. has been publishing average financial results for the last THREE (3) years and is
looking at ensuring that this performance improves, however the management is aware that they
need to do a distress analysis of their financial statements to ensure all is on track. You have
been appointed as the new finance manager with the following assignment:
a) Explain to the management the need for such an analysis and especially at least FIVE (5)
parties to whom such information would be important to.
b) Discuss at least FIVE (5) symptoms they can look out for when predicting financial
distress.
Question Three: (10 marks)
Citing relevant examples, describe the importance of Trend analysis as a tool of financial
statement analysis.