ACCT 490 Assignment 4
Assignment Question(s): (20 Marks)
Q1. a) Name the stock exchange market in Riyadh, KSA and explain its operating activities. (2Marks)
Tawadul is the stock exchange market in Riyadh, Kingdom of Saudi Arabia (KSA). Tawadul, commonly referred to as the Saudi Stock Exchange, brings together members and information providers to provide reliable data and information (Tadawul, 2019). This ensures the productive flow of market data between investors, issuers, and partners who are aiming at entering the Saudi Arabia capital market.
b) Read the figure below and answer the questions given :
i. Which section of the balance sheet is the figure about?
This is the equity section of the balance sheet. It represents the owners’ equity or the capital of the business.
ii. What do you understand by par value and excess of par value? Explain.
Par value is the face value or stated value of the common stock. It is the stock value figure that appears in the organization’s corporate culture, and it means that shares cannot be issued below the stated or nominal value (Dubey, 2018). Par value can be defined as the minimum price per share. The excess of par value, on the other hand, is the amount paid by stockholders above the stated face or nominal value.
iii. What is the difference between shares authorized and shares issued and outstanding?
Shares authorized are the maximum number of shares that a company is allowed to issue. These are the number of shares that are available for shareholders or investors to purchase, and they are usually meant for raising capital (Dubey, 2018). Shares issued are the ones, which are sold to raise cash either for purchasing assets or in investing in any other valuable opportunity that will enhance the company’s growth. Outstanding shares are the ones, which has had already been sold to investors from the authorized number of shares.
Q2. The following information is related to PQR company and XYZ company for the year 2013:
| PQR Company | XYZ Company | |
| Cash dividend declared and paid during the year | $750,000 | $124,800 |
| Common stock | $25,000,000 | $12,000,000 |
| Number of shares of common stock outstanding | 50,000 | 24,000 |
| Par value of a share | $50 | $50 |
| Market value of a share | $60 | $52 |
Both the companies belong to same industry. PQR is an old and well-established company where as XYZ is a new company. The historical data shows that the PQR has a stable annual dividend distribution to stockholders.
Required:
Calculate dividend yield ratio of both the companies. Which company would you recommend for investment in shares? Explain with reasons.
Q3 Corporations must disclose their financial reports to their stakeholders which should be publish in annual reports of the corporation. Download an annual report of any corporation in KSA and study the Cash flow statement prepared by them to answer the following questions:
1. Explain in detail how the cash flow statement was prepared by the corporation.
2. Which method was used to prepare the statement? Explain the other method that can be used to prepare cash flow statement, with numerical examples.
3. Calculate the corporations cashflow on total asset ratio and explain how this ration can help the management.
Q4. Why does the management of any companies analyze financial statements? Explain by using the different tools in analyzing financial statement with proper numerical example.