BBMF2814 FINANCIAL MANAGEMENT 2 RAC

Week 2 Tutorial Questions

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Question 1

A shareholder purchased 1,000 shares in SJG Co on 1 January 20X1 at a market price of $2.50 per share.
On 31 December 20X1 the shares had a market value of $2.82 per share. The dividend paid during 20X1
was $0.28 per share.
You are required to calculate the total shareholder return (TSR).

TSR = RM(2.82 - 2.50 + 0.28) / RM2.50 = 0.24 / 24%

Capital gain = (0.32 / 2.50) x 100% = 12.8%
Dividend yield = (0.28 / 2.50) = 11.2%

Question 2

Microsoft Corporation is now an American multinational technology company with headquarters in

Redmond, Washington. It develops, manufactures, licenses, supports, and sells computer software,
consumer electronics, personal computers, and related services. Microsoft was founded by Bill Gates and
Paul Allen on April 4, 1975, to develop and sell BASIC interpreters for the Altair 8800. When Microsoft
went public and launched its Initial Public Offering (IPO) in 1986, the opening stock price was $21; after
the trading day, the price closed at $27.75. The company began to offer a dividend on January 16, 2003,
starting at eight cents per share for the fiscal year followed by a dividend of sixteen cents per share the
subsequent year, switching from yearly to quarterly dividends in 2005 with eight cents a share per quarter
and a special one-time payout of three dollars per share for the second quarter of the fiscal year. Though
the company had subsequent increases in dividend payouts, the price of Microsoft's stock remained steady
for years. In February 2011 Microsoft released a corporate bond amounting to $2.25 billion with
relatively low borrowing rates compared to government bonds. On April 25, 2014, Microsoft acquired
Nokia Devices and Services for $7.2 billion. This new subsidiary was renamed Microsoft Mobile Oy. On
September 15, 2014, Microsoft acquired the video game development company Mojang, best known for
Minecraft, for $2.5 billion. On June 8, 2017, Microsoft acquired Hexadite, an Israeli security firm, for
$100 million. Microsoft Corporation is exposed to various risks such as foreign exchange rates, interest
rates, credit risk, and equity prices. The applied different risk management techniques to manage those
risks. For an example, it managed its credit exposures relative to broad-based indices and to facilitate
portfolio diversification. Besides, it also used derivatives instruments to manage credit risk.

Required:
Based on the above case, explain the FOUR (4) key financial activities of Microsoft Corporation. You are
also required to list down all the examples based on the above case when you are explaining the 4 key
financial activities.
1. Financing decision. When Microsoft went public and launched its Initial Public Offering (IPO) in
1986, the opening stock price was $21; after the trading day, the price closed at $27.75.
2. Dividend decision. The company began to offer a dividend on January 16, 2003, starting at eight cents
per share for the fiscal year followed by a dividend of sixteen cents per share the subsequent year,
switching from yearly to quarterly dividends in 2005 with eight cents a share per quarter and a special

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BBMF2814 FINANCIAL MANAGEMENT 2 RAC
Week 2 Tutorial Questions
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one-time payout of three dollars per share for the second quarter of the fiscal year. Though the company
had subsequent increases in dividend payouts, the price of Microsoft's stock remained steady for years.
3. Financing decision. In February 2011 Microsoft released a corporate bond amounting to $2.25 billion
with relatively low borrowing rates compared to government bonds.
4. Investment decision. On April 25, 2014, Microsoft acquired Nokia Devices and Services for $7.2
billion. This new subsidiary was renamed Microsoft Mobile Oy.
5. Investment decision. On September 15, 2014, Microsoft acquired the video game development
company Mojang, best known for Minecraft, for $2.5 billion.
6. Investment decision. On June 8, 2017, Microsoft acquired Hexadite, an Israeli security firm, for $100
million.
7. Risk management. Microsoft Corporation is exposed to various risks such as foreign exchange rates,
interest rates, credit risk, and equity prices. The applied different risk management techniques to manage
those risks.

Question 3
Serba Dinamik Holdings Berhad has experienced significant challenges in recent times, particularly in
relation to its profitability and share price. Despite a history of strong performance, its share price has
plummeted from approximately RM1.6 on May 25, 2021, to RM0.02 (suspended since January 18, 2023).
In May 2021, Serba Dinamik's external auditors, KPMG, raised concerns regarding audit issues
pertaining to sales, trade payables, and material on-site balances involving 11 parties. These irregularities
encompassed total sales transactions of RM2.32 billion, a trade receivables balance of RM652 million,
and a materials on-site balance of RM569 million. In response, Serba Dinamik appointed EY as a special
independent reviewer to investigate the identified irregularities.

Bursa Malaysia Securities Bhd granted Serba Dinamik an extension until December 15, 2022, to submit
its annual report containing audited financial statements, along with the auditors' and directors' reports.
However, the company failed to meet this extended deadline, resulting in the suspension of its shares
from the next market day, as per the listing rules. The issues between Serba Dinamik and its auditors
escalated into disputes with Bursa Malaysia, the frontline regulator, and a disagreement with EY
Consulting Sdn Bhd, the appointed independent reviewer.
Since the first quarter ended September 30, 2021 (1QFY2022), Serba Dinamik has consistently reported
net losses. In its latest 1QFY2023 results, the company recorded a wider net loss of RM104.6 million
compared to RM42.11 million in the same period the previous year, as quarterly revenue declined by 73%
to RM213.58 million from RM799.345 million.
Related links
The Edge Markets. (n.d.). Alternative Views: Has Serba Dinamik's fairytale run come to an end?
Retrieved from https://www.theedgemarkets.com/article/alternative-views-has-serba-dinamiks-fairytale-
run-come-end

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BBMF2814 FINANCIAL MANAGEMENT 2 RAC
Week 2 Tutorial Questions
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Thomas Philip Advocates & Solicitors. (n.d.). Serba Dinamik, N Auditors and Reporting Irregularities.
Retrieved from https://www.thomasphilip.com.my/articles/serba-dinamik-n-auditors-and-reporting-
irregularities/

Required:
Discuss the above statement based on the ‘maximising shareholder wealth’ concept. Besides, discuss the
effective audit function highlighted by the Malaysian Code on Corporate Governance 2021 (Please
download the MCCG 2021 pdf file from Google) .
TSR and share prices
Financial highlight is the summarization financial performance based on financial analyze.

Question 4
“Through diversification of loan risk, financial intermediaries are able to mitigate risk through pooling of
a variety of risk profiles and through creating loans of varying lengths from investor monies or demand
deposits, these intermediaries are able to convert short-term liabilities to assets of varying maturities.”.
Discuss ONE (1) real financial institution in Malaysia which is serving the function mentioned in the
above statement. You are required to list down real products offered by the selected financial institution
in your answer.
 Examples: Public Bank Berhad, Maybank Berhad (commercial bank)

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BBMF2814 FINANCIAL MANAGEMENT 2 RAC
Week 2 Tutorial Questions
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Question 5

Discuss the following types of financial market and ONE (1) real financial product (name of the real
product) in each type of financial market:
i. Money market;

ii.Capital market;
Capital markets are markets for trading in long-term finance, in the form of long-term financial
instruments such as equities and corporate bonds.

iii.Primary market;
A primary market enables organisations to raise new finance by issuing new shares or new bonds. A
company must have public company status to be allowed to raise finance from the public on a capital
market.
Examples: IPO
iv.Secondary market.
A secondary market enables investors to buy and sell existing investments to each other. The
marketability of securities is a very important feature of the capital markets, because investors are more
willing to buy stocks and shares if they know that they could sell them easily, should they wish to.
Examples: Common stock, preferred stock

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