ACC 6110 Case Report

Tobryan Ltd & Case 13-4 (Identify Industry)

Date: 18 October 2011

Group Members: Che Ku Sarah Nur Akmal Mareena Chealee Norly Marlia Kamaruddin Nur Hasyimah Ibrahim Siti Aishah Hussin G1112646 G1116908 G1116066 G1115972 G1115148

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Table of Contents: Introduction..........................................................................................................................2 Analysis: 1) SOCF for Tobryans Ltd.................................................................................................2 2) Case 13-4 i. Basic Chemical Company............................................................................................4 ii. Maker of name-brand, quality mens apparel..........................................................5 iii. Meat packer................................................................................................................6 iv. Retail Jewelry Chain..................................................................................................7 v. Coal-carrying railroad................................................................................................8 vi. Automobile manufacturer.........................................................................................9 v. Advertising agency....................................................................................................10 References...........................................................................................................................12

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Introduction For our case assignment, we were given two different cases: 1) Tobryan Ltd. 2) Case 13-4: Supplement to Identify the Industries For the first case, we have to prepare the Statement of Cash Flow (SOCF) and briefly comment on what does the statement of cash flow that we have prepared tells us about Tobryan Ltd during the year. For the second case, we were given balance sheets, in percentage form, and selected ratios drawn from the balance sheets and operating statements of seven different industries (A-G). We have to recognize the fact of certain differences between firms in the same industry. We have to identify the industries, namely: 1. 2. 3. 4. 5. 6. 7. Basic chemical company Maker of name-brand, qualitys men apparel Meat packer Retail jewellery chain (which leased its store properties Coal-carrying railroad Automobile manufacturer Advertising agency

Analysis
Tobryans Ltd Statement of Cash Flow for Tobryan Ltd is presented below: TOBRYAN LTD Statement of Cash Flow 31 December, 2006 RM (Mill) Cash Flow from Operating Activities Net income before tax Adjustment for non-cash items:Depreciation* Patents and trademarks (Amortization) Adjustment for changes in Current Assets & Current Liabilities items:Decrease in inventories Increase in trade debtors
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RM (Mill)

170 73 5 6 -9

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Decrease in prepayment Increase in bank overdraft Decrease in trade creditors Decrease in accrued expenses Income tax paid** Net cash provided by Operating Activities Cash Flow from Investing Activity Purchase of Fixtures, fittings, tools and equipment Net cash used by Investing Activities Cash Flow from Financing Activities Paid Debenture payable Paid Dividend*** Net cash used by Financing Activities Net decrease in cash during the year Add: Cash balance 1 January, 2006 Cash balance 31 December, 2006

3 16 -9 -4 -46 205

-67 -67

-100 -50 -150 -12 17 5

Depreciation :Fixtures, fittings, tools and equipment (ending balance) Less: Purchase of Fixtures, etc Ending balance (old) Fixtures, fittings, tools and equipment (begining balance) Ending balance (old) Depreciation (Fixtures, fittings, tools and equipment) Add: Depreciation (Plant and machinery) Depreciation

180 -67 113 163 -113 50 23 73

**

Income tax paid :46 35 81

Income tax payable paid 46 bal. (b/d) bal (c/d) 35 Income tax expense 81 bal. (b/d) + Income tax expense -bal (c/d) = Income tax paid
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***

dividend paid :50 60 110

Dividend payable paid 50 bal. (b/d) bal (c/d) 60 Dividend expense 110 bal. (b/d) + Dividend expense -bal (c/d) = Dividend paid

Comment on statement of cash flow

The statement of cash flow of Tobryan Ltd. tells that there are net cash provided by operating activities of 205 after the adjustment of non-cash items and the changes in current assets and current liabilities items from the net income before tax. However, the net cash used by investing and financing activities is greater that net cash provided. The net cash used by both activities are 217 had given the net decrease in cash during the year which is 12. Finally, to ensure the correct changes, we will get the ending balance of cash which is 5 after adding the net decrease of cash with the beginning balance of cash. Thus, although the company reported the profit after taxation of 135 but the companys cash is actually decreased during the year that can affect investor decision.

CASE 13-4
i. Basic chemical company From our calculations, we have identified that company D represents a basic chemical industry. We used two companies for comparison: - ExxonMobil: a global industry leader in almost every aspect of the energy and petrochemical business - Eastman: manufactures and markets chemicals, fibers and plastics worldwide. It is headquartered in Kingsport, Tennessee, USA. D Cash and marketable securities Receivables Inventories Other current assets Plant and equipment Other assets Total assets Notes Payables Accounts Payable Accrued taxes Other current liabilities 15.7 26.8 23.2 1.2 33.4 .7 100.0 29.3 1.4 5

ExxonMobil 14.3 54.7 22.0 8.93 100.0 0.09 16.5 3.2 -

Eastman 25.2 33.0 30.2 11.5 100.0 16.9 4.7 0.08

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Long-term debt Other liabilities Preferred stock Capital stock Retained Earning Selected Ratios Current assets/current liabilities Cash, marketable securities, and receivables/current liabilities Inventory turnover (X) Receivables collection period (days) Total debt/total assets Long-term debt/capitalization Net sales/total assets Net profits/total assets Net profits/total net worth Net profits/net sales Comments:

1.7 1.6 9.4 56.6 2.06 1.32 23X 18 0.339 0.025 5.4 0.080 0.121 0.015

4.0 25 3.1 47.4 2.01 0.4

26.7 23.5 13.3 48.1 1.9 0.94

29 0.049 0.073 1.2 0.1 0.14 0.056

26 0.73 0.073 1.1 0.073 0.2 0.074

- No note payable, other current liabilities and preferred stock. - High retained earnings. - Net profit/total assets ratio almost the same with D. These are all the characteristics of a basic chemical company. ii. Maker of name-brand, quality mens apparel From our calculations, we have identified that company E represents a basic mens apparel maker industry. We used two companies for comparison: - Padini - Padini is a chain of apparel stores that provides wardrobe for the working lifestyle of modern men and women. Their collection is clean, timeless and modern. - Guess Guess have the wide collection of men apparel such as jeans, shirts and jackets. Cash and marketable securities Receivables Inventories Other current assets Plant and equipment Other assets Total assets Notes Payables Accounts Payable E 4.1 21.5 61.0 .2 10.9 2.3 100.0 5.1 12.6
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Padini 37.9 9.2 21.5 5.6 22.4 3.4 100 7.3 20.5

Guess 32.8 18.5 16.5 5.6 16.7 9.9 100 12.7

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Accrued taxes Other current liabilities Long-term debt Other liabilities Preferred stock Capital stock Retained Earning Selected Ratios Current assets/current liabilities Cash, marketable securities, and receivables/ current liabilities Inventory turnover (X) Receivables collection period (days) Total debt/total assets Long-term debt/capitalization Net sales/total assets Net profits/total assets Net profits/total net worth Net profits/net sales Comments:

6.6 1.2 5.8 1.0 2.2 31.0 34.5 3.41 1.62 2.1X 64 0.313 0.078 1.30 0.085 0.124 0.065

1.9 1.0 2.8 0.2 18.5 47.3 2.37 1.68 3.1X 23 0.343 1.461 0.171 0.260 0.117

9.6 0.09 10.0 20.1 60 3.28 2.54 4.8X 47 33.4 1.39 0.236 0.355 0.170

- High inventories because they have to keep inventories before selling. - Not much long-term debt because less sophisticated and less expensive machineries - High capital stock. iii. Meat packer From our calculations, we have identified that company B represents a meat packer industry. We used two companies for comparison:
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PokPhand: transnational multinational that consists of three core businesses: agribusiness and food, retail and distribution, and the telecommunications industries with investment in 15 countries AFFCO: New Zealand's leading meat companies. It specializes in converting the superior quality of livestock grazed on New Zealands lush pastures into prime meat products for over 74 countries B 7.6 8.6 24.9 3.5 44.6 10.8
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Cash and marketable securities Receivables Inventories Other current assets Plant and equipment Other assets

PokPhand 12.7 9 22 2.9 24.3 28.9

AFFGO 4.2 10.8 15.5 1.5 51.1 16.8

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Total assets Notes Payables Accounts Payable Accrued taxes Other current liabilities Long-term debt Other liabilities Preferred stock Capital stock Retained Earning Selected Ratios Current assets/current liabilities Cash, marketable securities, and receivables/current liabilities Inventory turnover (X) Receivables collection period (days) Total debt/total assets Long-term debt/capitalization Net sales/total assets Net profits/total assets Net profits/total net worth Net profits/net sales Comments:

100.0 23.9 3.6 4.9 3.4 6.4 6.8 50.0 1.38 0.50 6.4X 19 0.356 0.055 1.61 0.059 0.105 0.037

100.0 22.1 1.6 8.2 1.1 1.4 14.8 52.2 1.02 0.47 13X 10 0.486 1.80 0.141 0.260 0.078

100.0 6.9 9.6 1.4 3.7 49.6 1.93 0.25 14X 15 0.209 2.505 0.058 0.073 0.023

- No notes payable and preferred stock. - High retained earnings. - Current ratio, acid-test ratio and debt ratio almost the same with B. iv. Retails jewellery stores (which lease its store properties) From our calculations, we have identified that company F represents a retail jewellery stores. We used two companies for comparison: - Tiffany & Co.: The world's premier jeweler and America's house of design. It is a specialty retailer, offering a selection of jewelry, timepieces, sterling silverware, china, crystal, stationery, fragrances & accessories. - Tomei: An investment holding company, engages in the design, manufacture, wholesale, and retail of gold and jewelry primarily in the Peoples Republic of China. Cash and marketable securities Receivables Inventories Other current assets F 3.2 27.6 49.2 1.6
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Tiffany 19.8 4.9 42.3 4.9

Tomei 1.5 6.0 85.6 2.3

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Plant and equipment Other assets Total assets Notes Payables Accounts Payable Accrued taxes Other current liabilities Long-term debt Other liabilities Preferred stock Capital stock Retained Earning Selected Ratios Current assets/current liabilities Cash, marketable securities, and receivables/current liabilities Inventory turnover (X) Receivables collection period (days) Total debt/total assets Long-term debt/capitalization Net sales/total assets Net profits/total assets Net profits/total net worth Net profits/net sales Comments:

17.1 1.3 100.0 2.0 10.5 3.1 5.8 20.6 .1 17.4 40.5 3.81 1.44 3.1X 66 0.420 0.262 1.51 0.065 0.112 0.043

17.8 10.3 100.0 16.5 14.2 37.7 31 23.1 35.5 5.6

4.4 0.2 100.0 8.7 2 22 16.6 0.002 42 25 2.1 0.8

66 0.42 0.82 0.098 0.098 0.11 0.52 0.1 0.019 0.04 0.057

- A lot of inventories because its a retail store so it has to keep stock - long term debt and retained earnings. - Total debt/total assets ratio almost the same with F. v. Coal-carrying railroad From our calculations, we have identified that company A represents a coal-carrying railroad industry. We used two companies for comparison:
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Union Pacific: Union Pacific Corporation (NYSE:UNP) is one of America's leading transportation companies. Its principal operating company, Union Pacific Railroad, is North America's premier railroad franchise, covering 23 states across the western twothirds of the United States. Norfolk Southern: Norfolk Southern Corporation is one of the nations premier transportation companies. Its Norfolk Southern Railway subsidiary operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to

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other rail carriers. Norfolk Southern operates the most extensive intermodal network in the East and is a major transporter of coal and industrial products. Cash and marketable securities Receivables Inventories Other current assets Plant and equipment Other assets Total assets Notes Payables Accounts Payable Accrued taxes Other current liabilities Long-term debt Other liabilities Preferred stock Capital stock Retained Earning Selected Ratios Current assets/current liabilities Cash, marketable securities, and receivables/current liabilitie Inventory turnover (X) Receivables collection period (days) Total debt/total assets Long-term debt/capitalization Net sales/total assets Net profits/total assets Net profits/total net worth Net profits/net sales Comments: - No inventories because its a company that provides services. - High in plant and equipment and long-term debt mostly for the highways and trains. - Small accounts payable because its not a manufacturing company. vi. Automobile manufacturer From our calculations, we have identified that company C represents an automobile industry. We used two companies for comparison: A 4.0 3.9 -0.9 78.7 12.5 100.0 -2.9 2.6 .6 35.2 3.8 -16.7 38.2 1.45 0.96 -20 0.412 0.403 0.32 0.052 0.102 0.167 UP 2.3 1.7 -0.8 89.4 5.8 100.0 -1.9 NS 3.9 2.9 -0.9 82.4 10 100.0 -4.2

21.2

23.3 6.4

32.7 0.85 0.8 -15 0.590 0.43 0.049 0.119 0.114 1.19 0.92 -30 0.622 0.397 0.34 0.053 0.17 0.157

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BMW: With BMW, MINI and Rolls-Royce Motor Cars, the BMW Group is the world's only car maker to pursue a purely premium strategy for all market sectors covered by its brands, from exclusive smaller cars to top-of-the-range luxury limousines. Honda

The automobile manufacturer usually designs, develops, manufactures, markets, and sells motor vehicles. About 250 million vehicles are in use in the United States. Around the world, there were about 806 million cars and light trucks on the road in 2007. Cash and marketable securities Receivables Inventories Other current assets Plant and equipment Other assets Total assets Notes Payables Accounts Payable Accrued taxes Other current liabilities Long-term debt Other liabilities Preferred stock Capital stock Retained Earning Selected Ratios Current assets/current liabilities Cash, marketable securities, and receivables/current liabilities Inventory turnover (X) Receivables collection period (days) Total debt/total assets Long-term debt/capitalization Net sales/total assets Net profits/total assets Net profits/total net worth Net profits/net sales Comments: - Small inventories and retained earnings. - High notes payable because its manufacturing company. - Most of the selected ratio almost the same with C.
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C 5.1 16.4 11.0 49.5 18.0 100.0 12.8 5.3 1.9 5.7 30.4 27.8 16.1 1.25 1.20 6X 64 0.565 0.425 0.69 0.057 0.137 0.083

BMW 6.8 18.9 7.1 6.8 10.5 49.9 100.0 24.4 4.0 1.1 7.4 32.9 9.0 -2.4 21.5 1.08 2.53 7X 108 0.788 0.56 0.030 0.14 0.053

Honda 18.8 17.0 8.0 3.4 18.0 34.8 100.0 0.2 6.9 1.5 2.0 20 12.4 11.4 45.6 1.35 0.64 7.5X 85 0.616 0.73 0.024 0.063 0.032

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vii. Advertising agency From our calculations, we have identified that company G represents an advertising industry. We used two companies for comparison:
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Dentsu Inc: DENTSU INC. maintains the top share in the Japanese advertising market, which accounts for 10.1% of the global market. In terms of net sales, Dentsu is the No.1 advertising company in the domestic market. Omnicom

An advertising agency is a service business dedicated to creating, planning and handling advertising for its clients. An advertising agency is independent from the client and provides an outside point of view to the effort of selling the client's products or services. Cash and marketable securities Receivables Inventories Other current assets Plant and equipment Other assets Total assets Notes Payables Accounts Payable Accrued taxes Other current liabilities Long-term debt Other liabilities Preferred stock Capital stock Retained Earning Selected Ratios Current assets/current liabilities Cash, marketable securities, and receivables/current liabilities Inventory turnover (X) Receivables collection period (days) Total debt/total assets Long-term debt/capitalization Net sales/total assets Net profits/total assets Net profits/total net worth Net profits/net sales Comments:
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G 17.0 72.1 .8 7.4 2.7 100.0 50.3 2.6 3.3 1.0 6.8 36.0 1.44 1.24 42 0.663 0.090 5.33 0.081 0.112 0.043

Dentsu 14.8 36.0 0.01 39.5 7.8 1.9 100.0 0.01 31.2 4.1 8.91

Omnicom 8.98 31.1 9.0 3.8 47.1 100.0 39.8 16.4 8.3 0.3

5.2 40.6 1.23 1.11

36.0 0.87 0.71 --

89 0.548 0.062 1.5 0.028 0.109 0.751 0.7 0.049 0.196 0.074

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- High in cash, receivables and accounts payable. - No inventories because it provides services. - Small capital stock, plant and equipment because advertising company does not use a lot of equipment.

References
1. ExxonMobil 2010 Summary Annual Report Website: (http://mytexpp.com/lubes/about_profile.aspx) 2. Eastman Chemical Company, 2010 Annual Report Website: (http://www.eastman.com/Pages/Home.aspx) 3. Padini. (2010). Annual report 4. Guess. (2010). Income Statement for 2010. Website: http://moneycentral.msn.com/investor/invsub 5. CP PokPhand Co. Ltd, Interim Report 2010 Website: http://www.cpp.hk/en/corporate_profile.jsp 6. AFFCO Annual Report 2009 7. Tiffany & Co. Year End Report 2010 8. Tomei Consolidated Berhad, Quarterly Report on Consolidated Results for the Second Quarter ended 31st June 2011. Website: http://announcements.bursamalaysia.com/EDMS/subweb.nsf/ 9. Union Pacific Corporation 2007 Annual Report Website: www.up.com/investors/annuals/index.shtml 10. Norfolk Southern 2010 Annual Report. Website: www.nscorp.com/nscportal/nscorp/Investors/Financial_Reports/Annual%20Report/ 11. BMW Group Annual Report 2010. Website: www.geschaeftsbericht.bmwgroup.com/2010/gb/en/facts-and-figures2010/financial-statements.html 12. Honda Annual Report 2010. Website: http://world.honda.com/investors/library/annual_report/2010/honda2010ar-all-e.pdf 13. Dentsu Group Corporate, Annual Report for the year ended March 31, 2010. Website: www.dentsu.com/ir/data/statement.html 14. Omnicom Annual Report 2010: Website:http://files.omnicomgroup.com/ReportManagement/UploadedFiles/12947265399233 3334.pdf

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