Question shareholders’ equity Net Income Average shareholders’

Question 1       

a)     Definition of par value represents legal capital per share. Stockholders’ equity cannot be deducted below then the amount, unless the business operating losses or any special legal action. The existing of the minimum cushion is to protect the creditors. The par value of the share of Hong Leong Bank Berhad is Rm1.00. No, there is no any change in the par value.

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b)     The total amount of the authorized share capital of the company is 3, 000,000,000 @ RM1 each. The percentage of the authorized shares were issued is 72.26%

c)     The total amount of Treasury shares are 81,101,700. Treasury share is shares of own company’s capital stock that have been issued and alter reacquired by the issuing company. Treasury shares can be issued again at any time.

d)     In Hong Leong Bank Berhad, there are only ordinary shares. The total outstanding amount of ordinary shares are 21,764,746

e)     The cash dividend is when investors buy stock of the company with the expectation of getting the return of original investment and earning on the investment. The stock dividend can be described as an additional share of stock to a company’s stockholders to their present holdings. Stock dividend pay in additional shares rather than in cash. The cash dividends per share were declared a final single-tier dividend of 26sen per share.

f)       

 

2016

2015

Rate of return on common share

Net Income
Average shareholders’ equity

Net Income
Average shareholders’ equity

 

4,177,862,000
18,953,369,000 = 21.68%

4,066,948,000
15,659,885,000  =25.97%

Rate of stockholders’ equity

Net Income
Shareholders’ equity

Net Income
Shareholders’ equity

 

4,177,862,000
21,117,147,000 = 19.78%
 

4,066,948,000
16,789,592,000 = 24.22%

 

 

 

g)     Reserves of Hong Leong Bank Berhad are Retained profit, share premium, statutory reserve, share options reserve, fair value reserve, exchange fluctuation reserve, regulatory reserves and cash flow hedge reserve. Share premium is the amount that received by the company above the par value of its shares. Retained profit is the profit that keeps in the company rather than paid to the shareholder as a dividend.

h)     The three main shareholders of Hong Leong Bank Berhad are Assets Nominees (Tempatan) Sdn Bhd – Hong Leong Financial Group Berhad, 55.39%, Citigroup Nominees (Tempatan) Sdn Bhd – Employees Provident Fund Board, 12.92%, Hong Leong Financial Group Berhad, 8.20%.

i)      The three subsidiaries of the Hong Leong Bank are Hong Leong Bank Vietnam Limited, DC Tower Sdn Bhd, and HLB Trade Services (Hong Kong) Limited.  Hong Leong Bank Vietnam Limited main activity is commercial banking business, DC Tower Sdn Bhd main activity is property investment and HLB Trade Services (Hong Kong) Limited main activity is ceased operations.

j)      Right issue is an issue of rights to existing shareholders of the company that are qualified them to purchase extra shares specifically from the company to their current holdings in a settled time period. The membership cost at each share maybe will be bought at a discount price from the present market cost. Bonus Issue can be defined as scrip issue or capitalization issue. It is an offer or free extra shares to the current shareholders. When company long-standing earnings and not given the dividend to shareholders and give into free shares instead.

 

 

 

 

 

 

 

Question 2

a)     Internal Reconstruction is the enterprise took over the resource, the changes that made are only in the organization’s capital structure, without swinging to the liquidation of the current organization. The internal arrangement of the company’s financial structure continues to exist, no any new company is formed in this stage. Unlike, External Reconstruction is when one of the company financial issues are twisted up, and newly formed company will be acquired over the assets and liabilities of the current company, after and reorganization the company’s financial position with the approval of shareholders and creditors. In internal reconstruction, company’s capital is reduced, and liabilities which are debenture holders and creditors defer their cases by giving a rebate. One another hand, there is no any reduction capital of the company. When in the process of internal reconstruction, the balance sheet will be set up after the procedure and contains the terms of “and reduced”. As against, external reconstruction has no any particular terms utilized as a part of the Balance sheet. In internal reconstruction, the process is a slow and long process, and it must approve of the court because shareholders’ right maybe affects by the capital reduction. Conversely, can be done easily, and it doesn’t need any court’s approval.

 

b)     The initial public offering can be known as going public, which mean that company publicly offer their shares of its stock to the open market. Initial public offering usually is small, young companies want to expand their capital, of course, it can be large private companies seeking to “going public”. It is the major boost for the business when the company earned capital from selling its shares to the public, but for investors, the Initial public offering is higher risk due to lack of historical data to analyze the company and the limited history of the company. Transitory growth period is companies have to go thru and uncertainty future value which will make investors worry. The initial public offering is known as the public offering when in IPO process they are specific steps to go. They need to form an external IPO team which is lawyers, underwriter, certified public accountants and Securities and Exchange Commission. The financial statements need to submit to the official audit. Files of the company with Securities and Exchange Commission for prospectus and sets a date for the offering. In another hand, Private placements are capital raising but the selling of securities to a selected small number investors. Investors can be large banks, mutual funds, insurance companies and pension funds. It completely different with the Initial public offering which can issue shares to any type of investors. Private placements must have qualify requirement and standard. Investment doesn’t require any prospectus and the information is not disclosed. Accredited investors which qualify under standards, are qualified for the issuer to sell private securities to them. Private placement investment can be many uses of purpose, the company can issue private securities to raise capital for the business. The advantages of the private placement are its regulation allow the issuer to save time and cost of enlisting with SEC. The process is faster, and the issuer will receive the sale in a shorter time. When the issuer is selling the bond, it likewise needsn’t bother with the time and cost to get the assessment from the bond organization.