ACW1020: Top Glove Corporation Berhad (TGCB) is a leading rubber glove manufacturer: Accounting in Business Assignment, MUM, Malaysia

Question 1

Top Glove Corporation Berhad (TGCB) is a leading rubber glove manufacturer. Your team is preparing TGCB’s performance report for a client interested in buying its shares. During a team discussion, your team members examined the 2021 Annual Report of TGCB and raised many random questions about its financial statements. The report is in the Supporting materials folder. They asked the following questions:
i. Peter asked if the list of assets in TGCB’s Statement of Financial Position was comprehensive. Could there be any omissions?
ii. Wendy wondered if the figure shown under equity in the Statement of Financial Position accurately reflects TGCB’s true worth.
iii. Hook wanted to know why the number of profits in the statement of profit or loss and the cash balance in the financial statement differed.
iv. Michael noticed that TGCB reported a negative net cash flow from investing (for Group). He asked if it was a regular thing.

Question 2

TASK 1

Amazon.Com and Netflix are among the most successful companies in the world. Read their profile in the “Supporting materials” folder to understand their background.

Table 1 presents the financial ratios for Amazon.Com and Netflix for the year 2021. Study and compare the ratios of both companies.

You are required to write a report comparing these companies’ profitability (8 marks), efficiency (8 marks), liquidity (4 marks), and solvency (5 marks). Using the information gathered from their profiles and other relevant sources, comment on the differences in these ratios for both companies. The report should not be more than 600 words.

TASK 2

The table below presents the operating cash cycles (OCC) for Amazon.Com and Netflix. Both companies had negative OCC in 2021.

Write a memo explaining the followings:
a. Why could companies have negative OCC?
b. Is negative OCC reflecting a good or bad working capital situation in the companies?
c. Is negative OCC sustainable?

Question 3

Spice Industries Ltd (SIL) produces a variety of spices, such as cinnamon, cumin, cardamom, and star anise. The spices are distributed to food operators around the country. Its spices are prevalent, especially as the gourmet food trend expands across the nation. There is a constant demand for quality and freshness. As a result, the demand for spices is expected to increase in the coming years.

SIL’s fixed cost is the cost of operating the plant. The plant processes the spices for a month for $4,500. Variable costs are raw spices and labor costs. Each kilogram of processed spices requires raw spices, which cost $18. Each kilogram of spices takes two hours to process and pack, and the business pays the labor $27 an hour. The laborers are all on contracts that specify that they are not paid if they do not work for any reason. The spices are sold to a wholesaler for $90 per kilogram.

SIL expects to sell 500 kilograms of spices a month. The business has the opportunity to rent a spice processor. Doing so would increase the total fixed costs of operating the plant for a month to $18,000 and reduce labor to one hour per kilogram of spices. The workers would still be paid $27 an hour.
Before deciding to rent the processor, the managing director asked you for the following information:

1. What is the break-even point for the business? Without a new processor and with a new processor. (Show working clearly)

2. How much profit would the business make each month from selling the spices when it sells 500 kg per month? (Show working clearly)
a. Assuming that the business does not rent the spice processor?
b. Assuming that it rents the processor?

3. Study and comment on the figures you calculated in (1) and (2). Relate your comment to the margin of safety and operating gearing concepts. You should also recommend to the managing director whether to rent the processor.

Question 4

Read an article on Toshiba’s accounting scandal in the Supporting Materials folder, and answer the following questions:

1. What could be the reasons for a company’s management manipulating accounting numbers? Explain 2 reasons. (Word limit: 150 words or less)

2. Describe 3 actions that can discourage accounting manipulations and fraud in a company. (Word limit: 150 words or less)

3. Is it puzzling to note that auditors for Toshiba could not detect the irregularities in its accounting practices which had taken place for 7 years. Why do you think auditors failed to uncover the problems? Explain 3 reasons.

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