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corporate finance market ratio
corporate finance market ratio
corporate finance market ratio
corporate finance market ratio
corporate finance market ratio
corporate finance market ratio
corporate finance market ratio
corporate finance market ratio
corporate finance market ratio
corporate finance market ratio
corporate finance market ratio
corporate finance market ratio
corporate finance market ratio
corporate finance market ratio
corporate finance market ratio
corporate finance market ratio
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corporate finance market ratio

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market ratio, corporate finance

market ratio, corporate finance

Published in: Business, Economy & Finance
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  • 1. CORPORATE FINANCE (ADM 658) PREPARED BY: NUR AMALINA ATIQAH HAMRI 2010154417 NUR IZZAH HAZIRAH AZMAN 2010937655 FARAH AINNA SARDON 2010733719 NUR AQILAH MAHADI 2010967787
  • 2. Background  Scientex berhad was incorporated in malaysia under the companies act, 1965 as scientific textiles industries Sdn. Bhd. This company incorporated to manufacture and market polyvinylchloride (PVC) leather cloth and sheeting. This company’s core businesses are manufacturing and property development. There are eight companies under manufacturing namely Scientex Packing Film Sdn Bhd, PT. Scientex Indonesia and for property there are six companies namely Scientex Quatari Sdn Bhd, Scientex Park (M) Sdn Bhd. While, the manufacturing division consist of two business units namely packaging and polymer. One of its property development projects, launched in early 2008 is Scientex Kulai which comprises of 250 acres of residential and commercial development. this is in line with Scientex’s strategy to develop strategically located prime land within the Iskandar Malaysia growth in Johor.
  • 3. FINANCIAL RATIO
  • 4. 1. Liquidity Ratio LIQUIDITY RATIO Current Ratio (CR) CR = 2012 2011 = 295,809,775 = 281,005,821 213,093,418 182,175,435 Current Asset (CA) = 1.39 times = 1.54 times Current Liabilities (CL) Quick Ratio (QR) QR = (C.Asset – Inventory) Current Liabilities = (295,809,775 – 60,980,831) 213,093,418 = (281,005,821 – 67,763,202) 182,175,435 = 1.10 times = 1.17 times Net Working Capital (NWC) = 295,809,775 – 213,093,418 = 281,005,821 – 182,175,435 NWC = C.Asset – C.Liabilities = RM 82,716,357 = RM 98,830,386
  • 5. Comment  Current Ratio Current Ratio is the firm’s ability to meet its short-term obligations. So we could say that Scientex has $1.39 in current assets for every $1 in current liabilities, or we could say that Scientex has its current liabilities covered 1.31 times over.  Quick Ratio Quick Ratio is more conservative measure of liquidity than the current ratio as it removes inventory from the current assets used in the ratio's formula. By excluding inventory, the quick ratio focuses on the more-liquid assets of a company.  Net Working Capital Net Working Capital (NWC) is frequently viewed as the amount of short-term liquidity a firm has or the firm’s overall liquidity.
  • 6. 2.Efficiency Ratio RATIO Inventory turnover ITO = Cost of good sale 2012 2011 703 224 494 644 721 905 60 980 831 67 763 202 = 11.53 / 12 times = 9.5 / 10 times 124 053 653 105 497 383 881 024 778 x 365 804 022 790 x 365 = 51.4 / 51 days = 47.8 / 48 days 881 024 778 804 022 790 809 042 208 725 075 346 = 1.09 times =1.11 times Inventory Average collection period ACP = Acc. Receivables Sales x 365 Total Asser Turnover TATO = Sales Total asset
  • 7. Comment  Inventory turnover  Inventory turnover refers to the measures of the company‘s efficiency in turning its inventory into sales.  The firm turns over its inventory 12 times in year 2012 compare to 10 times in 2011.  Generates more sales per ringgit of inventory than the previous year and we can assume the firm uses very efficient inventory-ordering and cost-control methods.  Average collection period  Average collection period refers to the average amount of time needed to collect account receivables.  The average collection period in 2012 is 50 days compared to the year 2011 which is 48 days.  Shows the inefficiency of the company to collect its own debt and the weakness of the collecting debt policy.  Total asset turnover  Refers to the effectiveness with which a firm’s management uses its assets to generate sales.  The total asset turnover for 2011 is 1.11 times compared to 2012 which is 1.09.  Indicate that the company may have unsold inventory and may be finding it difficult to sell its products fast enough.
  • 8. 3. Debt Ratio RATIO Debt Ratio DR = Total liabilities 2012 X 100 Total Assets = 249,338,782 809,042,208 X 100 2011 = 218,953,801 X 100 725,075,346 = 30.82 % Debt to Equity Ratio DTER = Long term debt Total equity = 30.20 % = 5 000,000 = 10 000,000 559,703,426 506,121,545 = 0.00893 Time Interest Earned TIE= EBIT Annual interest expense = 0.01976 = 107,612,971 = 97,437,245 19,299,717 16,521,830 = 6 times = 6 times
  • 9. Comment  Debt Ratio The debt ratio compares a company's total debt to its total assets, which is used to gain a general idea as to the amount of leverage being used by a company. The lower the percentage, the less leverage a company is using and the stronger its equity position. In general, the higher the ratio, the more risk that company is considered to have taken on. The calculation show that debt ratio in 2012 is 30.82 % which slightly more debt compared to 2011 (30.20 %).  Debt Equity Ratio This ratio is not a pure measurement of a company's debt because it includes operational liabilities in long term debt. This easy-to-calculate ratio provides a general indication of a company's equity-liability relationship and is helpful to investors looking for a quick take on a company's leverage. The debt equity ratio in table show that the debt to equity ratio in 2011 is better than 2012 which is 0.01976 compared to 0.00893 respectively.
  • 10.  Times Interest Earned Times interest earned ratio indicates the number of times that income before interest and taxes covers the interest obligation. It is a long-term solvency ratio that measures the ability of a company to pay its interest charges as they become due. The higher the ratio, the stronger the interest paying ability of the firm. The calculation show that time interest earned in 2011 (34 times) is higher than 2012 (27 times).
  • 11. 4. Profitability Ratio RATIO 2012 2011 Gross Profit Margin GP = Gross Profit Operating Profit Margin OPM = Operating Profit Sales Net Profit Margin NPM = Net Income Total Asset 159,300,885 881,024,778 804,022,790 =20.18% Sales 177,800,284 =19.81% 107,612,971 97,437,245 881,024,778 804,022,790 =12.2% =12.12% 87,869,016 80,118,419 881,024,778 804,022,790 =9.98% =9.96%
  • 12. RATIO 2012 2011 Return on Total Asset ROA = Net income 80,118,419 809,042,208 725,075,346 =10.86% Total Asset 87,869,016 =11% 87, 869,016 80,118,419 559,703,426 506,121,545 =15.7% =15.85% Return on Equity ROE= Net income Shareholder Equity
  • 13. Comment  Gross Profit Margin For Scientex Berhad, in 2012 20.18% of the sales revenue was gross profits. This fell to 19.81% in 20011. A fall in this ratio means that for every RM1 of sales generated by the firm, less profit will be earned. It certainly does not mean that profits are falling.  Operating profit margin Operating profit margin for Scientex Berhad in 2012 is 12.2% meanwhile in 2011 is 12.12%.Thus 2012 shows a higher value of operating margin which indicates that more proportion of revenue is converted to operating income. This means that the profitability in the company is improving  Net profit margin For Scientex Berhad, the net profit margins between the two year are similar which is 9.98% in 2012 and 9.96% in 2011. This mean that, for every RM1 of sales 9.98 and 9.96 net profit was generated.
  • 14.  Return on total asset In 2012, Scientex Berhad shows 10.86% of Return on Total Asset while in 2011 is 11.05%. Thus higher values of return on assets which in in 2011 show that business is more profitable.  Return on equity For Scientex Berhad, the return on equity for 2011 is 15.7% while in 2012 is 15.8% which is a little different between the year. In general, the higher the percentage, the better, with some exceptions, as it shows that the company is doing a good job using the investors' money.
  • 15. Recommendation  Implement the tight credit policy and credit terms.  Increasing the promotion and selling of the company product.  Increase sales volume through marketing to achieve economies of scale and reduce purchase cost, or renegotiate purchase term with existing suppliers.  The company should increase their net income -this can be done by investing in heavy cost reduction throughout the company and increasing revenue or sales through marketing efforts.  To achieve the preferable debt ratio, the company must have the maximum normal value which is 60% - 70%.  When examining the health of a company, it is critical to pay attention to the debt/equity ratio.  For most companies the maximum acceptable debt-to-equity ratio is 1.5-2 and less.
  • 16. Conclusion  We can conclude that ratio analysis allows the analyst to compare a company’s performance to that of others in its industry. There are four main groupings of ratios. Liquidity ratios measure the firm’s ability to pay of short-term obligations as they come due, and efficiency ratios tell the analyst how quickly the firm is turning over its accounts receivables, inventory, and longer-term assets. Debt ratios indicates the overall position of the firm in like of its assets base and earning power. While, profitability ratios measure the firm’s ability to earn and adequate return on sales, assets, and stokeholders’ equity. Therefore, Scientex Berhad shows ups and downs in their financial analysis throughout the year.

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