Part 1: Pearl Company has prepared the following financial statements:
Income Statement (AED in millions)
Cost of Sale
Selling and Administrative expenses
Gain on sale of equipment
Income before taxes
Comparative Balance Sheet (AED in millions)
December 31, 2015
December 31, 2014
Cash & Cash Equivalent
Total Current Assets
Property, Plant & Equipment
Less: Accumulated depreciation
Net Property, Plant & Equipment
Liabilities & Shareholders’ Equity
Income Taxes Payable
Total Current Liabilities
Long-term Bank Loans
Total Liabilities & Shareholders’ Equity
The Company also released the following information for 2015:
a. The Company sold some equipment for 8 million dirham. The original cost of the equipment was 12 million dirham and accumulated depreciation for this equipment was 7 million dirham. The gain on sale was 3 million dirham.
b. The Company has paid cash dividends during the year.
1. Prepare a statement of cash flows (10 marks)
2. How much free cash does the company have at the end of 2015? (2 marks)
Part 2: (8 marks)
A. Visit the webpage of Dubai Financial market (www.dfm.ae) and download the financial
statements of Gulfa Mineral Water Co for the year 2014 (alternatively, you can visit the
Company’s web page and download the financial statements of the company).
B. Read the financial statements and answer each of the following Questions. Show all your
1. What is the percentage change in net income for 2014 in comparison to 2013? What does this change
2. What is the percentage of cost of sales for 2014?
3. What is the rate of return on average assets?
4. Calculate the rate of return on average shareholders’ equity
5. Calculate the current ratio, quick ratio, and times interest coverage for 2014
6 What is the debt ratio for 2014? How does it differ from 2013?
7. Assume the company is seeking financing from a bank. Would you recommend the bank to lend the
company the money it is asking for based on the ratios you calculated above? Explain your
8. Assume you have some money to invest in shares. Would you seek to become a shareholder of this
company? Explain your decision.
GGoo tthhrroouugghh tthhee attached Financial Statement of Gulfa Mineral Water Co for the Year 2014.