100000 55000 Inventory Equipment nct Accumulated depreciatio

100,000 55,000 Inventory Equipment (nct) Accumulated depreciation Total assets 115,000 30,000 1,500)_ (14,000) RM 228,500 RM 192,000 Liabilities and stockholders\' cquity Accounts payable Long-term dcbt Common stock Retained earnings Total liabilitics and stockholders\' equity RM 52,500 RM 46,000 50,000 60,000 36,000 RM 192,000 70,000 60,000 46,000 RM 228,500 Additional information: 1. Net income for the year 2015 (as rcported on the income statemcnt) was RM50,000 2. Dividends of RM40,000 were declared and paid 3. Equipment that cost RM8,000 and had a book value of RM1,000 was sold during the year for RM2,500 Rcquired: Based on thc information provided, calculate thc following: (5 marks) (i) Cash provided by operations. (ii) Cash provided by investing activity (ii) Cash provided by financing activity (iv) Total changc in cash for 201.5 (2 marks) (2 marks) (1 mark) [Total 20 marks] (a) An extract from a financial forecast of XYZ Corporation is as follows Beginning Book Value Net Incomc Year 1 RM5,308 RM1,034 Year2 Year3 5,834 1,218 5,292 1,130 XYZ Corporation\'s cost of equity capital is at 13%. Usc the following PV factors: Year Year 2 Year 3 PV factor at 13% 0.885 0783 0.693 6

Solution

SOLUTION B:- (1) LIQUIDITY RISK

liquidity of a company is given by liquidity ratio/ acid-test / quick ratio, it states the amount of liquid funds the company has in its hands to meet the current obligations .

the ideal acid test ratio is 1:1 i.e $1 of liquid cash is available to pay off the $1 current liabilities .

as per the records of a company, in 2012 acid test ratio of a company is 1.01 which is a good sign for the organisation concerned.afterwards it starts declining till 2015 and stood at 0.82 which is not so good ratio for the company as it doent have enough liquid funds in its hands to meet the current liabilities.

(2) SOLVENCY RISK:-

solvency ratio states the amount of cash company has in its hands to meet the both curent and long term liabilities.

it is given by following formulae:-net income before depreciation/ total liabilities

higher the ratio better it is for the company.

total liabilities/ total assets is also a indicator to judge whether the company has enough assets in hands to cover all the obligations .

lower the ratio better it is for the company.

as per the records of the company, this ratio is little higher in 2012 but declined in coming years indicating better solvency ratio for the company.