INTERMEDIATE FINANCIAL ACCOUNTING
ASSIGNMENT 2: Compulsory Report
Section B (Section B is marked out of 100 and contributes 7.5 marks to Assignment 2)
Scenario
You have been hired as a financial consultant by OZ Ltd. and Mr. Phil Coulson its CEO, intends OZ Ltd. to invest in the stock market. It is considering two listed companies i.e. Summerset Group Holdings Limited and Comvita Limited as potential investment opportunity. Further, Mr. Coulson plans to expand the business overseas by the end of 2025; therefore, he plans to raise additional fund (approximately $10,000,000) from capital market in 2024.
You have been provided with the 2020 annual reports of Summerset Group Holdings Limited and Comvita Limited to compare their basic and diluted EPS results for 2019 and 2020. Relevant annual reports of Summerset Group Holdings Limited and Comvita Limited are available in Assignment 2 folder.
Mr. Coulson has sought your advice and is keen on your views regarding the following:
i. Which company appears to have the better earnings per share results and why? Also, what are the implications of the EPS figures for OZ Ltd. investment decision plans?
ii. OZ Ltd. wants to issue a new class of ordinary shares to raise the additional capital for the business expansion; however, the CEO is uncertain whether to involve underwriter(s) and want to know your view.
iii. As an alternative mode of raising additional capital, OZ Ltd. is also thinking to issue 30,000 share options which will allow the holder to buy two ‘B’ ordinary shares. What effect(s) will the options have on the basic and diluted EPS of OZ Ltd?
Required:
Write a short memorandum format report to the CEO, Phil Coulson. In this report please discuss the above three questions/issues. Note: Your discussion should include reference to relevant professional/academic authorities and accounting standards (where necessary).
Marking Guide/Schedule Marks
Totals
Report:
Presentation – Report format/neatness/abbreviations/readability 12.5 Structure – Introduction/Discussion/Conclusion 12.5 Logical communication of ideas irrespective of actual content 15.0
Content: Reasonable and critical discussion of issue (i) 35.0
Reasonable discussion of issue (ii) 10.01
Reasonable discussion of issue (iii) 15.0
Total 100