Using the financial statements below,please calculate the following The current
ID: 2397890 • Letter: U
Question
Using the financial statements below,please calculate the following
The current position of each company,
The market value of each company,
The amount of profit generated by each dollar of assets or equity,
How much debt is involved in each company compared to equity, and
How solvent each business is.
THE PEOPLES’ CREDIT UNION LIMITED
Financial statements for THE PEOPLES’ CREDIT UNION LIMITD) for the year ended December 31, 2017.
Each share costs $5.00
The dividend paid was 3.75%
December 31, 2017
Cash Resources:
Cash in hand and at bank
11,961,005
Short-term investments
71,000,511
Total cash resources
82,691,516
Other Assets:
Accounts receivable and prepayments
2,738,666
Net loans to members
343,075,646
Long-term investments
71,513,400
Fixed assets
29,202,515
Total Assets
529,221,743
Liabilities:
Accounts payable and accruals
7,800,932
Members’ deposit savings
34,623,468
Members’ time deposits (fixed deposits)
90,629,600
Provision for terminal benefits
5,303,180
Retirement benefit obligations
638,200
Members’ share savings
324,230,903
Total liabilities
463,226,283
Institutional Capital:
Reserve fund
22,992,421
Education fund
1,446,107
Loan protection fund
836,726
Building fund
12,250,000
Investment re-measurement reserve
15,266,397
Undivided earnings
13,203,809
Total institutional capital
65,995,460
Total Liabilities and Institutional Capital
529,221,743
For the year ended December 31 2017
Income:
Interest on loans
37,358,266
Investment income (net)
2,020,571
Other income
1,262,899
Total Income
40,671,736
Expenditure:
Administrative expenses
7,956,429
Board and committees’ expenses
1,072,631
Life saving insurance
866,002
Loan protection expense
1,716,236
Loan loss expense
129,286
Interest on members’ expense
2,170,128
Members education, training and development expenses
1,636,889
Personnel costs
10,635,898
Total expenditure
26,183,499
Net surplus for the year
14,458,237
Other comprehensive income
Items that may be re-classified later as profit or loss
Unrealised (loss)/gain on available-for-sale financial assets
974,380
Items that may be re-classified later as profit or loss
Net actuarial (loss)/gain on retirement benefit obligations
(294,500)
679,880
Total Comprehensive Income for the year
15,138,117
Reserve fund
Education fund
Loan protection fund
Building fund
Investment re-measurement fund
Undivided earnings
Balance as at January 1, 2017
21,523,987
1,170,891
711,676
11,500,000
14,292,017
11,819,316
Total comprehensive income for the year
974,380
14,163,737
Appropriation of net surplus for the year:
10 % to the Reserve Fund
1,416,374
(1,416,374)
13.5% to the Education Fund
1,912,105
(1,912,105)
13% to the Loan Protection Fund
1,841,286
(1,841,286)
22,940,361
3,082,996
2,552,962
11,500,000
15,266,397
20,813,288
Add/(less) adjustments as follows:
Dividends (2016)
(10,160,544)
Entrance fees
52,060
(52,060)
Member education, training and development expenses
(1,636,889)
1,636,889
Transfer to Building Fund
750,000
(750,000)
Loan protection expense
(1,716,236)
1,716,236
Balance as at December 31, 2017
22,992,421
1,446,107
836,726
12,250,000
15,266,397
13,203,809
December 31, 2017
Cash Resources:
Cash in hand and at bank
11,961,005
Short-term investments
71,000,511
Total cash resources
82,691,516
Other Assets:
Accounts receivable and prepayments
2,738,666
Net loans to members
343,075,646
Long-term investments
71,513,400
Fixed assets
29,202,515
Total Assets
529,221,743
Liabilities:
Accounts payable and accruals
7,800,932
Members’ deposit savings
34,623,468
Members’ time deposits (fixed deposits)
90,629,600
Provision for terminal benefits
5,303,180
Retirement benefit obligations
638,200
Members’ share savings
324,230,903
Total liabilities
463,226,283
Institutional Capital:
Reserve fund
22,992,421
Education fund
1,446,107
Loan protection fund
836,726
Building fund
12,250,000
Investment re-measurement reserve
15,266,397
Undivided earnings
13,203,809
Total institutional capital
65,995,460
Total Liabilities and Institutional Capital
529,221,743
Explanation / Answer
1. Financial Condition of Company
From equation of accounting
Capital = Assets - liabilities
65,995,460 = 529,221,743 - 463,226,283
65,995,460 = 65,995,460
Accounting equation is satisfied with balance sheet balances. Assets balance is 529221743 which is more than liabilities, so company's financial condition is good fron balance sheet.
From income statement
Company has more income than expenditures. So it generates profits.
On the other hand, company has various reserve funds allocated for reserve fund, education fund, loan protection fund, building fund, Investment Re-measurement Fund, undivided earnings are increased from jan1,2017 to dec31,2017.
Increase in Reserved Fund = 22,992,421 - 21,523,987 = 1468434
Increase in Education Fund = 1,446,107 - 1,170,891 = 275216
Increase in loan Protection Fund = 836,726 - 711,676 = 125050
Increase in Building Fund = 12,250,000 - 11,500,000 = 750000
Increase in Investment Re-measurement Fund = 15,266,397 - 14,292,017 = 974380
increase in undivided earnings = 13,203,809 - 11,819,316 = 1384493
From balance sheet, assets are more than liabilities, From income statement Incomes are more than expenditure, so there is profit generation by company, From fund flow statement company has increase in all categories of funds, so from above data, company's financial condition is good.
2. Market value of company
Total investments = no. of short term investments + no. of long term investments
71,000,511 + 71,513,400 = 142513911
Each share cost $5
no.of shares outstanding = 142513911/5 = 28502782.2 == 28502782
market value = no.of shares outstanding * share price = 142513910
divided paid = 28502782.2 * 3.75 = 106885433.25
3. Profit
profit = income - expenditure
profit = 40,671,736 - 26,183,499 = 14488237
4. Debt Obligations of company
Debt is related with liabilibities and dividends which a company has to pay to its investers. dividends are already paid by organisation shows from above data given.undivided earnings may also have a part of debt.
5. Solvancy condition of company
Solvancy condition is arise when a company has poor financial condition, more liabilities and debt are pending. From above THE PEOPLES’ CREDIT UNION LTD. Company has better financial condition, there is no need of solvancy of company into another.
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