Zarelo Holdings Ltd Financial Performance Analysis and Cash Flow Statement

Zarelo Holdings Ltd Financial Performance Analysis and Cash Flow Statement

Question

Company Background
Part A (50 points)

Bursa (Kuala Lumpur Stock Exchange) Choose your favorite top ranked listed company. Critically assess your financial performance over the past two years (e.g. 2019 and 2020). ). In this assignment, students are required to write a report analyzing a company’s financial statements using the following subheadings. Be sure to cite the literature in your discussions.
a) Company background. (5 points)

b) Financial performance of the company using relevant indicators. (10 points)

Examples:

• Profitability
• Efficiency
• Liquidity
• Leverage Ratio

Students should: There is:

• displays the formula for the corresponding ratio.
• Demonstrate the calculation

c) Critically evaluate the reasons behind the trends – what have the management done for the two years. (20 marks)

d) Suggest practical improvements that would assist in attracting more investments from external stakeholders into the company. (15 marks)

PART B (50 marks)

The following information are extracted from the financial statements of Zarelo Holdings Ltd, a player in the manufacturing sector. Specifically, Zarelo manufactures Secure Digital (SD) card for computers of different brands.

Zarelo Holdings
Income Statement for the year ended 31 December 2020 and 2021

2020 2021
RM’ mil RM ‘mil
Revenue 207 153
Cost of sales (101) (76)
Gross profit 106 77
Distribution expenses (22) (20)
Administrative expenses (20) (28)
Operating profit 64 29
Interest payable (4) (4)
Profit before taxation 60 25
Taxation (16) (6)
Profit for the year 44 19

Statement of financial position as at 31 December 2021
2020 2021
RM’mil RM’mil
Non-current Assets
Property, plant and equipment
Land and buildings 110 130
Plant and machinery 62 56
172 186

Current assets
Inventory 24 25
Trade receivables 26 25
Cash at bank 19 – 69 50
Total Assets 241 236

Non-current liabilities
Borrowings- loan note (10%) 40 40

Current liabilities
Borrowings (all bank overdraft) – 2
Trade payables 37 34
Taxation 8 3 45 39

Owners’ Equities
Called-up ordinary share capital 100 100
Retained earnings 56 57 156 157
Total equities and liabilities 241 236

Additional information

• Depreciation for Land and buildings and Plant and machinery in 2017 is RM11 mil and RM14 mil respectively
• There were no non-current asset disposals in either year.
• The amount of cash paid as interest equals the annual expense.
• A total dividend of RM21 million was paid annually.

Required:
Question 1
Use Use the indirect method to prepare Zarelo Holdings’ cash flow statement for the year ending December 31, 2021. View all works. (10 points)

Question 2
Carefully assess Zalero Holdings’ current cash flow situation and offer practical suggestions for improving the situation. See IAS 7 Statement of Cash Flows and related literature. (15 points)

Question 3
“The Sustainability Accounting Standards Board (SASB) standards provide investors with an understanding of sustainability issues that can affect a company’s ability to create value over the long term.” It is intended to communicate with Use of the SASB standard is optional. Companies consider relevant legal requirements to determine which standards are relevant to them, which disclosure topics are financially material to their business, and which relevant metrics to report.

1 Legal Notice: SASB standards are not compliant. It is not intended to, nor does it replace, any legal or regulatory requirements that may apply to the reporting company’s business.
Source: Sustainability Accounting Standards Board. (2018). Technology and Communications Division: Hardware. Industry Standard Version 2018-

Important advice to the board of directors of Zarelo Holdings on concerning sustainability issues related to technology products. Assess the role of corporate and professional accountants in relation to SASB standards. (25 points)