Shamal Plastics Industries Sohar, is one of the leading plastic sheets manufacturing companies in Sultanate of Oman. While preparing the financial statement for the year 2020, some of the earnings reported in the year 2021 has been shifted to 2020. This denotes that Shamal Plastics Industries management might have followed O a. The political cost hypothesis Ob. The debt covenant hypothesis or political cost hypothesis. Oc The bonus plan hypothesis or political cost hypothesis. Od The bonus plan hypothesis or debt covenant hypothesis.
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- based on the ratio analysis below will the company be successful after taking a 500.0 mil loan to regain the lead in the construction market and to expand its business to the sale of heavy equipment? or should the company sought other forms of financing? Analysis of Financial Data (Table with ratios) Ratio Analysis 2021 Est. 2020 2019 Industry Average Liquidity Ratios Current Ratio (times) 2.34 3.22 3.68 4.2 Quick Ratio (times) 0.91 1.24 1.79 2.1 Asset Management Ratios Average sales/day 10.96 8.22 7.81 9 Inventory Turnover Ratio (times) 6.08 5.83 5.06 9 Days Sales Outstanding (days) 38.32 45.62 40.34 36 Fixed Assets Turnover Ratio (times) 2.12 2.52 3.27 3 Total Asset Turnover Ratio 1.32 1.37 1.69 1.8 Debt Management Ratios Total Debt to Total Assets (%) 59.09…ABC Inc. is a Corporation with a focus on Garment and textile manufacturing in the UAE. They are now looking to finance their new project, are looking for a bank to give them a loan. Calculate the following ratios for both 2018 and 2019, interpret and analyze them: Debt Ratio Accounts Receivable Turnover Inventory TurnoverReferring to the following data of the Omani Company, answer A and B: (Note; Write all related Equations regarding the questions) The company manager targets to increase the current ratio in the year (2021) by 30% out of the previous year (2020), this requiring to increase the amount of the total current asset. To what level can the manager increase the total current asset to achieve this target (30%) at (2021)? The manager put a plan to increase the Time interest Earns (TIE) in the (2021) by (17%) out of the previous year (2020) to increase sales. How much will this plan to add amount to the accounts receivable (Suppose the other things are fixe) Data of 2020 Total Asset Turnover 2.5 Times Net Fixed Asset 600 (OMR) Total Liabilities 500 (OMR) Sales 2000 (OMR) Quick Ratio 1.5 Times Accounts Receivable 150 (OMR) Long-term Liabilities 200 (Thousand OMR)
- You have been hired as a financial analyst of a firm and your team is working on an independent assessment of XYZ Inc. Your assistant has provided you with the following data for XYZ Inc. and their industry. Ratio Inventory Turnover Receivables in days Debt to Equity 2020 2019 2018 2020- Industry Average R r 62.65 42.42 32.25 94 63 50 115 d 53.25 0.75 0.85 0.90 0.88 Quick Ratio Curr:ent Ratio 1.028 1.03 1.029 1.33 1.21 1.15 1.25 1.031 Required: a) In annual report of firm CEO wrote, we had higher liquidity largely due to an increase in highly liquid current assets (cash, account receivables and short- term marketable securities).” Is the CEO correct? b) What can you say about the firm's collection period and inventory turnover?You have been hired as a financial analyst of a firm and your team is working on an independent assessment of XYZ Inc. Your assistant has provided you with the following data for XYZ Inc. and their industry. R r e d : Ratio 2020 2019 2018 2020- Industry Average Inventory Turnover 62.65 42.42 32.25 53.25 Receivables in days 94 63 50 115 Debt to Equity 0.75 0.85 0.90 0.88 Quick Ratio 1.028 1.03 1.029 1.031 Current Ratio 1.33 1.21 1.15 1.25 Required: a) In annual report of firm CEO wrote, we had higher liquidity largely due to an increase in highly liquid current assets (cash, account receivable and short-term marketable securities). Is the CEO correct? b) what can you say about the firm's collection period and inventory turnover?If given the opportunity, in which of the firms would you invest based on the result of your analysis of both companies and the comparison with the industry? If you would not invest, explain your reasons according to the results obtained. Company Name: Year 2018 Chemicals and Allied Products Industry Ratios ………….. Solvency or Debt Ratios Merck J&J 2018 Debt ratio 0.67 0.61 0.47 Debt-to-equity ratio 0.93 0.51 0.38 Interest coverage ratio 12.27 18.91 -9.43 Liquidity Ratios Current ratio 1.17 1.47 3.47 Quick ratio 0.92 1.16 2.12 Cash ratio 0.40 0.63 2.24 Profitability Ratios Profit margin 14.64% 18.75% -93.4% ROE (Return on equity), after tax 23.03% 25.60% -248.5 ROA (Return on assets) 7.49% 10.00% -146.5 Gross margin 68.06% 66.79% 55.3% Operating margin (Return on sales) 19.62% 24.27%…
- Referring to the following data of the Omani Company, that extracted from the balance sheet at 31\12\2019, answer the following questions: - (Note; Write all Equations regarding the questions) The company manager targets to reduce the current ratio in the year (2020) by 33% from the previous year (2019), this requiring to downsize the amount of the total current asset. To what level can the manager reduce the total current asset to achieve this target at (2020)? (Suppose the other things are fixed) The manager put a plan to reduce the selling period in the (2020) by (16.7%) from the previous year (2019). Calculate the new inventory turnover. (Suppose the other things are fixed) Data of 2019 Total Asset Turnover 2 Times Net Fixed Asset 400 (Thousand OMR) Total Liabilities 400 (Thousand OMR) Sales 2000 (Thousand OMR) Quick Ratio 1.5 Times Accounts Receivable 150 (Thousand OMR) Long-term Liabilities 200 (Thousand OMR)Using the financial statements provided below for ABC Manufacturing Company, calculate all the ratios listed below for both 2020 and2021. Assume that all sales are credit sales. (a) Calculate the ratios forABC Manufacturing Company for2020 and 2021. (b)Put an“I/D” beside the Year 2021 ratio calculation if the ratio has Improved/Deteriorated. Putan“S”/“W” beside the Year 2021 ratio if ABC Manufacturing Company’s ratio is Stronger/Weake rthan its competitorsYou have been hired as an analyst for MBJ & Co and your team is working on an independent assessment of Anak Bumi Sdn. Bhd (ABSB). ABSB is a company that specializes in the plantation. Your assistant has provided you with the following data for ABSB and their industry. Ratio 2019 2020 2021 2020- Industry Average Long-term debt 0.45 0.40 0.35 0.35 Inventory Turnover 62.65 42.42 32.25 53.25 Depreciation/Total Assets 0.25 0.02 0.02 0.02 Days’ sales in receivables 113 98 94 130 Debt to Equity 0.75 0.85 0.90 0.88 Profit Margin 0.08 0.07 0.06 0.08 Total Asset Turnover 0.54 0.65 0.70 0.40 Quick Ratio 1.03 1.03 1.03 1.03 Current Ratio 1.33 1.21 1.15 1.25 Times Interest Earned 0.90 4.38 4.45 4.65 Equity Multiplier 1.75 1.85 1.90 1.88 Required: You are required to prepare interim audit report of ABSB for the year 2020.
- Ross Enterprises has a contract with Big Steel Company Limited in respect of Information Technology (IT) Services. The contract was signed on January 1st 2020 and will be effected on the 1st April 2020. In mid-February 2020 Big Steel’s sales plummeteddue to the Covid 19 pandemic. In addition, an already high long term debt, and operating cost, as well as Big Steel’s currentnegative cash flows situation placed the company in serious financialperil. Indeed if they cannot find a resolution soon to deal with their cash flow problems and debt, they will have to close operations permanently and send all employees home. Upon hearing this pronouncement, the Trade Union representing workers at Big Steel advised management that they will take strike action. This further affected the operations of Big Steel and resulted in a loss of production, sales and the much-needed cash flows, which is critical to pay off their debt and meet current fixed operating cost. On 3rd March 2016, Big Steel…You have the following initial information on Financeur Co. on which to base your calculationsand discussion for questions 2):• Current long-term and target debt-equity ratio (D:E) = 1:3• Corporate tax rate (TC) = 30%• Expected Inflation = 1.55%• Equity beta (E) = 1.6325• Debt beta (D) = 0.203• Expected market premium (rM – rF) = 6.00%• Risk-free rate (rF) =2.05%2) Assume now a firm that is an existing customer of Financeur Co. is considering a buyoutof Financeur Co. to allow them to integrate production activities. The potential acquiringfirm’s management has approached an investment bank for advice. The bank believesthat the firm can gear Financeur Co. to a higher level, given that its existing managementhas been highly conservative in its use of debt. It also notes that the customer’s firm hasthe same cost of debt as that of Financeur Co. Thus, it has suggested use of a target debtequity ratio of 2:3 when undertaking valuation calculations.a) What would the required rate of return…You have the following initial information on Financeur Co. on which to base your calculations and discussion for question 2): • Current long-term and target debt-equity ratio (D:E) = 1:3 • Corporate tax rate (TC) = 30% • Expected Inflation = 1.55% • Equity beta (E) = 1.6325 • Debt beta (D) = 0.203 • Expected market premium (rM – rF) = 6.00% • Risk-free rate (rF) =2.05% 2) Assume now a firm that is an existing customer of Financeur Co. is considering a buyout of Financeur Co. to allow them to integrate production activities. The potential acquiring firm’s management has approached an investment bank for advice. The bank believes that the firm can gear Financeur Co. to a higher level, given that its existing management has been highly conservative in its use of debt. It also notes that the customer’s firm has the same cost of debt as that of Financeur Co. Thus, it has suggested use of a target debtequity ratio of 2:3 when undertaking valuation calculations. a) What would the required…