Financial Analysis of Krakatau Steel Corporation

COMPREHENSIVE PAPER OF FINANCIAL STATEMENT AND
KRAKATAU STEEL COMPANY
ADHISTIA PUTRI HERDANTI
ALOYSIA GITA PUSPA D
BETHANOVIA GLORIA
IVRI NAIBAHO
FAKULTAS EKONOMI
ANALYSIS
by
ADHISTIA PUTRI HERDANTI (1306385873)
ALOYSIA GITA PUSPA D (13
BETHANOVIA GLORIA (13
IVRI NAIBAHO (13
FAKULTAS EKONOMI UNIVERSITAS INDONESIA
DEPOK
2015

STATEMENT OF AUTHORSHIP
Kami yang bertandatangan di bawah ini menyatakan bahwa makalah/tugas terlampir adalah
murni hasil pekerjaan kami sendiri. Tidak ada pekerjaan orang lain yang kami gunakan tanpa
menyebutkan sumbernya.
Materi ini tidak/belum pernah disajikan atau digunakan sebagai bahan untuk makalah/tugas pada
mata ajaran lain kecuali kami menyatakan dengan jelas bahwa kami pernah menggunakannya.
Kami memahami bahwa tugas yang kami kumpulkan ini dapat diperbanyak dan atau
dikomunikasikan untuk tujuan mendeteksi adanya plagiarisme.
Mata Kuliah : Analisis Laporan Keuangan
Pengajar :Dwi Nastiti / Arief Wibisono Lubis
Judul Proposal :
Nama Mahasiswa : Adhistia Putri H.
NPM : 1306385873
Tanda Tangan :
Nama Mahasiswa : Aloysia Gita Puspa
NPM :
Tanda Tangan :
Nama Mahasiswa : Bethanovia Gloria
NPM :
Tanda Tangan :
Nama Mahasiswa : Ivri Naibaho
NPM :
Tanda Tangan :

Company Profile
PT Krakatau Steel is an Indonesian state-controlled company engaged in the steel
industry. It is Indonesia's largest steel producer and produces various steel products, such as hot
and cold rolled coils as well as wire rods.
It is headquartered in Cilegon, Banten. The location is on the western end of Banten and
adjacent to the Sunda Strait, and where the Krakatoa volcano and island from which the
company takes its name are located.
Krakatau Steel has 6 (six) production plants making the company as the only integrated
steel plant in the country. These plants produce many kinds of downstream products from
upstream raw materials.
Currently, Krakatau Steel’s production capacity of crude steel is 2.45 million tons per
year. Through its ten subsidiaries, the company has a diversified business empire, which include
high-added-value steel production (spiral and ERW pipes, steel bars and steel sections), utility
industry (water and electricity), infrastructure industry (port and industrial estate), EPC
(Engineering Procurement and Construction) services, information technology and medical
services (hospital). The company produces products for both the domestic and the international
market.

PAPER 1 – CASH FLOW ANALYSIS
PT Krakatau Steel (persero) TBK
Instruction :
Prepare mini paper which consists the following points of discussion:
1. Calculate ratio of Cash flow from operating divided by Net income for year of 2012, 2013,
2014, discuss the trends.
2. Is there any debt principal repayment during period of 2012, 2013, 2014? Is debt repayment
sensitive to cashflow?
3. Is there any dividend payment during period of 2012, 2013, 2014? Is dividend policy
sensitive to cashflow?
4. Calculate company’s Free Cash Flow to Firm for year of 2012, 2013, 2014, discuss the
trends.
Answers.
1. Cash flow from operating / Net Income (in thousand USD)
2012 = -1,0454  -10, 454 %
2013 = -10,2114  -1021,14%
2014 = 0,014647  1,4 %
Cash flow from operations is cash that arise from transactions affecting net income, for
example cash payments received from customers, cash paid to suppliers and employees,
other operating expenses, trading securities, interest paid or received, dividends are received,
payment of taxes, etc. When the cash flow from operations exceeds net income, the
company may be much healthier than its net income suggests. Otherwise, when the cash
flow from operations is lower than net income of the company, it's a signal that the
company's earnings quality (the usefulness of earnings) is questionable. That’s why Many

investors focus on cash flow from operations instead of net income because there is less
room for management to manipulate, or accounting rules to distort, cash flow.
As the calculation above, we see that the percentage of cash flow from operations over Net
Income in 2012 is minus 10,454 % as the result of negative income (loss) which is minus
19560 million USD, and the cash flow from operation is 20448 million USD. From our
analysis, we think that it is caused by there are so many payment of PT Krakatau Steel in
2012.
In 2013, the percentage of CFFO to net income is much lower than the previous
period, which is minus 1021,14%, as the result from positive cash flow from operating
which is 138.875 millions rupiah, and loss profit 13.600 million rupiahs. This extreme
changes is caused by so many payment of PT Krakatau Steel in 2013.
And in the 2014, the percentage of CFFO to net income is positive (1,4%), since
they both have the same minus value.
2. Answer:
Yes, there was any debt principal repayment in 2012. The amount of debt repayment
in 2012 is 14.854 millions rupiah. The sensitivity of the debt repayment to Krakatau Steel’s
cashflow is = -0,26. From the computation we can see that the debt repayment is not
to sensitive to their cashflow because even they are paying their debt principal, their total
cash flow from financing activities still positive which means their debt principal payments
is not as big as their new debt.
And in 2013, we can see that PT Krakatau Steel also pay the principal of their debt.
The amount of their debt repayment in 2013 is 7.962 millions rupiah. So, the sensitivity of
the debt repayment to their cashflow is 0,52. From the computation we can see
that Krakatau Steel’s debt principal repayment in 2013 is pretty sensitive to their cashflow
because it contributes 52 percent of their total cash outflow from financing activities.
In 2014, PT Krakatau Steel also pay their debt principal, and the amount is 24.398
millions rupiah. The sesitivityofthe debt repayment to their cashflow from financing
activities is . From the computation we can see that in 2014, their debt

repayment not to sensitive to their cashflow from financing activities. It’s because they
receipt cash from their new debt in a big amount.
3. Answer:
For the dividend payment, Krakatau Steel not always doing it every year. In 2012, Krakatau
Steel pay their cash dividends, and the amount is 25.242 millions rupiah. With that amount,
so we can compute the sensitivity of payment of cash dividends to the total cashflow from
financing activities. The sensitivity is . With that result we can say that the
payment of their cash dividends are not sensitive to their cash flow from operating activities,
because the total cash flow form financing activities is still positive even though they are
paying the cash dividends.
But in 2013 PT Krakatau Steel is not paying the cash dividend, we can see it from
their statement of cash flow. In 2014 PT Krakatau Steel pay their cash dividend again. The
amount of their cash dividend payment is 8 million rupiah. The sensitivity is
. So from the result we can say that their dividends payment policy is
not sensitive to the condition of their cash flow.
4. Answer:
Krakatau’s Free cash flow
Free Cash Flow 2012 = Cash flows from operations – capital expenditure
= 20.448 – (-22.643)
= 43.091
Free Cash Flow 2013= Cash flows from operations – capital expenditure
= 138875 – (-27.485)
= 166.360
Free Cash Flow 2014= Cash flows from operations – capital expenditure
= 2298 - (-20.672)
= 22.970

By knowing company’s free cash flow, we can see the projection of growth or health
of PT Krakatau Steel. Calculation show that free cash flow of PT Krakatau Steel from year
to year is always positive, it means earning (sales) from company able to support business.
In 2012 to 2013 free cash flow from company is increasing but from 2013 to 2014 is
decreasing. It’s shown that return in 2013 is the biggest.
0
50.000
100.000
150.000
200.000
2012 2013 2014
KRA's Free Cash Flow
KRA's Free
Cash Flow

PAPER II – LIQUIDITY ANALYSIS
1. Introduction
Liquidity is the company’s ability to convert assets into cash or to obtain cash to
meet short-term obligations. Short term is conventionally viewed as a period up to one year,
though it is identified with the normal operating cycle of a company (the time period
encompassing the buying-producing-selling-collecting cycle). The importance of liquidity is
best seen by considering repercussions stemming from a company’s inability to meet short-
term obligations. Liquidity is a matter of degree. Lack of liquidity prevents a company from
taking advantage of favorable discounts or profitable opportunities. More extreme liquidity
problems reflect a company’s inability to cover current obligations. This can lead to forced
sale of investments and other assets at reduced prices and, in its most severe form, to
insolvency and bankruptcy. These scenarios highlight why measures of liquidity are of great
importance in our analysis of a company. If a company fails to meet its current obligations,
its continued existence is doubtful.
2. Working Capital Measure of Liquidity
Working capital is defined asthe excess of current assets over current liabilities. It is
important as a measure of liquidassets that provide a safety cushion to creditors. It is also
important in measuring theliquid reserve available to meet contingencies and the
uncertainties surrounding a company’sbalance of cash inflows and outflows.
For Krakatau Steel, their working capital in 2012, 2013, and 2014 are:
2012  237.361 million rupiah
2013  -189066 million rupiah
2014  -481177 million rupiah
From the working capital of PT Krakatau Steel we can see that in 2012 they have pretty
good liquidity in their assets so they have some reserve if company meets any uncertain
condition. But we see in 2013 and 2014 that their amount of working capital is already
minus so it means that their liquidity is not good enough to cover their current obligations.

3. Current Ratio Measure of Liquidity
a. Relevance
 Current liability coverage. The higher the amount (multiple) of current assets to
current liabilities, the greater assurance we have that current liabilities will be paid.
 Buffer against losses. The larger the buffer, the lower the risk. The current ratio
shows the margin of safety available to cover shrinkage in noncash current asset
values when ultimately disposing of or liquidating them.
 Reserve of liquid funds. The current ratio is relevant as a measure of the margin of
safety against uncertainties and random shocks to a company’s cash
flows.Uncertainties and shocks, such as strikes and extraordinary losses, can
temporarily and unexpectedly impair cash flows.
b. Limitations
 Doesn’t measure and predict the pattern of future cash inflows and outflows.
 Doesn’t measure the adequacy of future cash inflows to outflows.
For Krakatau Steel, their current ratio in 2012, 2013, and 2014 are:
2012  1.2
2013  0.85
2014  0.69
From the computation of their current assets we can see that in 2012 Krakatau
Steel’s current ratio is 1.2 is means that with their current assets they can cover their
current liabilities and still has a little excess amount. But in 2013 and 2014 their current
asset ratios are below one, so it is show that Krakatau Steel doesn’t have enough liquidity
to cover their current liabilities.
0
0,5
1
1,5
2012 2013 2014
Kras's Current Ratio
Kra's Current Ratio

4. Operating Activity Analysis of Liquidity
Accounts Receivable Liquidity Measures
 Account Receivable Turnover
Accounts receivable turnover is calculated by dividing net credit sales by the
average accounts receivable for that period.
The reason net credit sales are used instead of net sales is that cash sales don't create
receivables. Only credit sales establish a receivable, so the cash sales are left out of the
calculation. Net sales simply refers to sales minus returns and refunded sales.
The net credit sales can usually be found on the company's income statement for the
year although not all companies report cash and credit sales separately. Average receivables
is calculated by adding the beginning and ending receivables for the year and dividing by
two. In a sense, this is a rough calculation of the average receivables for the year.
PT Krakatau Steel 2012 2013 2014
AR turnover 15.29777032 11.8975682 16.5684358
As we can see from the calculation above, PT Krakatau Steel’s receivable turnover
was decreasing in 2013, from 15 to 12. Since the receivables turnover ratio measures a
business' ability to efficiently collect its receivables, so a higher ratio in 2014 is more
favorable. Higher ratios mean that companies are collecting their receivables more
frequently throughout the year. Ratio of 17 in 2014 means that the company collected its
average receivables twice during the year. In other words, this company is collecting is
money from customers every 22 days.

 Days’ Sales in Receivables
The days sales in receivables is calculated by dividing the ending accounts
receivable by the total credit sales for the period and multiplying it by the number of days in
the period. Most often this ratio is calculated at year-end and multiplied by 360 days.
The days sales in receivables calculation, also called the average collection period
or days' sales outstanding, measures the number of days it takes a company to collect
cash from its credit sales. This calculation shows the liquidity and efficiency of a
company's collections department.
In other words, it shows how well a company can collect cash from its customers.
The sooner cash can be collected, the sooner this cash can be used for other operations.
Both liquidity and cash flows increase with a lower days sales outstanding measurement.
0,000
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2012 2013 2014
Days sales in receivabels
Days sales in
receivabels
Days sales in receivabels 36.72182719 20.21853268 20.90504028

From the calculation above, we can see that the ratio was decreasing in 2013,
which means it takes PT Krakatau Steel approximately 21 days to collect cash from his
customers on average. This is a good ratio since PT Krakatau Steel is aiming for a 30 day
collection period.
A lower ratio is more favorable because it means companies collect cash earlier
from customers and can use this cash for other operations. It also shows that the accounts
receivables are good and won't be written off as bad debts.
A higher ratio indicates a company with poor collection procedures and customers
who are unable or unwilling to pay for their purchases. Companies with high days sales
ratios are unable to convert sales into cash as quickly as firms with lower ratios.
Inventory Receivable Measures
 Inventory Turnover
The inventory turnover ratio is calculated by dividing the cost of goods sold for a period
by the average inventory for that period.
The inventory turnover ratio is an efficiency ratio that shows how effectively
inventory is managed by comparing cost of goods sold with average inventory for a
period. This measures how many times average inventory is "turned" or sold during a
period. In other words, it measures how many times a company sold its total average
inventory dollar amount during the year.
This ratio is important because total turnover depends on two main components of
performance. The first component is stock purchasing. If larger amounts of inventory are
purchased during the year, the company will have to sell greater amounts of inventory to
improve its turnover. If the company can't sell these greater amounts of inventory, it will
incur storage costs and other holding cost.

The second component is sales. Sales have to match inventory purchases
otherwise the inventory will not turn effectively. That's why the purchasing and sales
departments must be in tune with each other.
Inventory turnover 3.024903822 3.395486293 3.655563189
From the calculation above, we can see that there is no difference in inventory
turnover from 2012 to 2014 which means PT Krakatau Steel sold its total average
inventory dollar amount 4 times during the year
 Days’ sales in Inventory
The days sales inventory is calculated by dividing the ending inventory by the
cost of goods sold for the period and multiplying it by 360.
Ending inventory is found on the balance sheet and the cost of goods sold is listed
on the income statement. Note that you can calculate the days in inventory for any period,
just adjust the multiple.
Since this inventory calculation is based on how many times a company can turn
its inventory, you can also use the inventory turnover ratio in the calculation. Just divide
365 by the inventory turnover ratio
Days inventory usually focuses on ending inventory whereas inventory turnover
focuses on average inventory.
Days sales in inventory 108.4756435 93.96034247 94.71646104
From the calculation above, PT Krakatau Steel’s days sales in inventory was
decreasing in 2013 from 109 days to 94 days, which means the company has enough

inventories to last the next 94 days or they will turn their inventory into cash in the next
94 days.
Liqudity of Current Liabilities
 Days’ Purchases in Account Payable
DPO provides one measure of how long a business holds onto its cash.
DPO can also be used to compare one company's payment policies to another.
Having fewer days of payables on the books than your competitors means they are
getting better credit terms from their vendors than you are from yours. If a company is
selling something to a customer, they can use that customer's DPO to judge when the
customer will pay (and thus what payment terms to offer or expect).
Having a greater days payables outstanding may indicate the Company's ability to
delay payment and conserve cash. This could arise from better terms with vendors.
DPO is also a critical part of the "Cash Cycle", which measures DPO and the
related Days Sales Outstanding and Days In Inventory. When combined these three
measurements tell us how long (in days) between a cash payment to a vendor into a cash
85,00
90,00
95,00
100,00
105,00
110,00
2012 2013 2014
Days sales in inventory
Days sales in inventory

receipt from a customer. This is useful because it indicates how much cash a business
must have to sustain itself.
Average payable days outstanding 40.12980912 27.55351393 32.37571969
From the calculation above, we can see that there is a decrease in DPO from 40
days to 28 days which indicates that PT Krakatau Steel is taking fast to pay for its
suppliers. When accounts payable or DPO decrease, this is considered a use of cash, and as
such, it reduces the company's working capital (defined as current assets minus current
liabilities). But, The DPO increased in 2014 from 28 days to 32 days. When accounts
payable or DPO go up, this is considered a source of cash because the company is taking
longer to pay its invoices and thus not using cash as quickly.
Additional Liquidity Measures
 CA Composition
The composition of current assets is an indicator of working capital liquidity. Use of
common-size percentage comparisons facilitates our evaluation of comparative
liquidity, regardless of the dollar amounts.
0,00
5,00
10,00
15,00
20,00
25,00
30,00
35,00
40,00
45,00
2012 2013 2014
Average payable days outstanding
Average payable days
outstanding

ASSETS
CURRENT ASSETS 2012 2013 2014
Cash and cash equivalent 19.45% 17.36% 22.35%
Short term investment 0.56% 0.71%
Restricted time deposit 0.29% 1.90%
Trade Receivable 28.19% 25.21% 23.50%

Other Receivable 1.51% 5.20% 2.94%
Inventories 46.97% 47.39% 45.42%
Advanced and prepaid
expenses
2.94% 3.24% 3.16%
Prepaid taxes 0.83% 0.08% 0.69%
TOTAL ASSETS 100% 100% 100%
Current assets composition shows factors that have caused changes in the amount of PT
Krakatau Steel’s current asset from 2012 to 2014. An analysis of Krakatau Steel’s common-size
percentages reveals marked deterioration in current asset liquidity in 2012 relative to 2013 and
also relative to 2014.
- Acid Test Ratio
A more stringent test of liquidity uses the acid-test (quick) ratio. This ratio includes those
assets most quickly convertible to cash and is computed as:
ℎ + ℎ + +
2012 =
, , ( , , )
, ,
= 0.546
2013 =
, , ( , , )
, ,
= 0.416
2014 =
, ( , , )
, ,
= 0.343
PT Krakatau Steel have current asset lower than current liabilities. Its means their current
asset from 2012 to 2013 to 2014 is not enough to pay their liabilities for short term. From
2012 to 2013 to 2014 acid test ratio is decreasing and it is not good for company.
- Cash Flow Measures
The statistic nature of the current ratio and its inability (as a measure of liquidity) to
recognize the importance of cash flows in meeting maturing obligations has led to a search
for a dynamic measure of liquidity. This cash flow ratio is computed as:

ℎ
2012 =
,
, ,
= 0.0166
2013 =
,
, ,
= 0.1220
2014 =
( , )
, ,
= (0.0016)
From 2012 to 2013 percentage of using current liabilities for operating cash flow is
increasing. It is different from 2013 to 2014 that percentage of using current liabilities for
operating cash is decreasing.
- Financial Flexibility
Financial Flexibility is the ability of a company to take steps to counter unexpected
interruptions in the flow of funds. It can mean the ability to borrow depends on several
factors and is subject to change. It depends on profitability, stability, size, industry
position, asset composition, and capital structure. It also depends on market conditions
and trends. From calculation shows that PT Krakatau Steel have good financial flexibility
namely from their profitability and stability from year to year.
Source:
http://www.myaccountingcourse.com/

PAPER III - CAPITAL STRUCTURE AND SOLVENCY ANALYSIS
1. BASICS OF SOLVENCY
In liquidity analysis, the time horizon is sufficiently short for reasonably accurate
forecasts of cash flows. Long-term forecasts are less reliable and, consequently, analysis of
solvency uses less precise but more encompassing analytical measures.
Key elements :
- Capital structure
It is the sources of financing for a company that can range from relatively permanent
equity capital to more risky or temporary short-term financing sources. Once a company
obtains financing, it subsequently invests it in various assets. Assets represent secondary
sources of security for lenders and range from loans secured by specific assets to assets
available as general security for unsecured creditors.
- Earning (or earning power)
It is implying the recurring ability to generate cash from operations. Earnings-based
measures are important and reliable indicators of financial strength and the most desirable
and reliable source of cash for long-term payment of interest and debt principal. As a
measure of cash inflows from operations, earnings is crucial to covering long-term
interest and other fixed charges. A stable earnings stream is an important measure of a
company’s ability to borrow in times of cash shortage.
a. Importance of Capital Structure
Capital structure is the equity and debt financing of a company. A company’s
financial stability and risk of insolvency depend on its financing sources and the types
and amounts of various assets it owns.
b. Characteristics of Debt and Equity
a. Equity
o Uncertain or unspecified return
o Lack of any repayment pattern
o Degree of permanence
o Persistence in times of adversity
o Lack of any mandatory dividend requirement

Company can invest equity financing in long-term assets and expose them to business
risks without threat of recall
b. Debt ( both long-term and short-term)
- It must be repaid ; the longer the payment period and the less demanding its repayment
provisions, the easier it is for a company to service debt capital.
- It must be repaid in specified times regardless of company’s financial condition, and so
too much periodic interest on most debt.
- When the proportion of debt in the total capital structure of a company is larger, the
higher are the resulting fixed charges and repayment commitments .
For investors in common stock, debt reflects a risk of loss of the investment,
balanced by the potential of profits from financial leverage. For creditors, increased
equity capital is preferred as protection against losses from adversities. Lowering
equity capital as a proportionate share of a company’s financing decreases creditors’
protection against loss and consequently increases credit risk.
c. Motivation for Debt Capital
From a shareholder’s perspective, debt is a preferred external financing source for at least
two reasons:
1. Interest on most debt is fixed and, provided interest cost is less than the return on net
operating assets, the excess return is to the benefit of equity investors.
2. Interest is a tax-deductible expense whereas dividends are not.
d. Concept of Financial Leverage
Financial leverage is the use of debt to increase earnings. Leverage magnifies
both managerial success (income) and failure (losses). Companies with financial leverage
are said to be trading on the equity. This indicates a company is using equity capital as a
borrowing base in a desire to reap excess returns.
e. Other Effects of Leverage
Beyond the advantages from excess return to financial leverage and the tax
deductibility of interest, a long-term debt position can yield other benefits to equity
holders. In addition, if interest rates are increasing, a leveraged company paying a fixed
lower interest rate is more profitable than its nonleveraged competitor. However, the

reverse is also true. Finally, in times of inflation, monetary liabilities (like most debt
capital) yield price-level gains.
f. Adjustments for Capital Structure Analysis
1. Adjustments to Book Values of Liabilities
- Deferred Income Taxes. To the extent future reversals are a remote possibility, as
conceivable with timing differences from accelerated depreciation, deferred taxes
should be viewed like long-term financing and treated like equity.
- Operating Leases. Current accounting practice requires that most financing long-
term noncancelable leases be shown as debt. Yet companies have certain
opportunities to structure leases in ways to avoid reporting them as debt. Operating
leases should be recognized on the balance sheet for analytical purposes, increasing
both fixed assets and liabilities.
- Off-Balance-Sheet Financing. In determining the debt for a company, our analysis
must be aware that some managers attempt to understate debt, often with new and
sometimes complex means
- Contingent Liabilities. Contingencies such as product guarantees and warranties
represent obligations to offer future services or goods that are classified as liabilities.
Typically, reserves created by charges to income are also considered liabilities.
- Minority Interests. Minority interests in consolidated financial statements represent
the book value of ownership interests of minority shareholders of subsidiaries in the
consolidated group. These are not liabilities similar to debt because they have neither
mandatory dividend payment nor principal repayment requirements. Capital structure
measurements concentrate on the mandatory payment aspects of liabilities
- Convertible Debt. Convertible debt is usually reported among liabilities (or as an
item separate from both debt and equity listings). If conversion terms imply this debt
will be converted into common stock, then it can be classified as equity for purposes
of capital structure analysis.
- Preferred Stock. Most preferred stock requires no obligation for payment of
dividends or repayment of principal. These characteristics are similar to those of
equity.

2. CAPITAL STRUCTURE COMPOSITION AND SOLVENCY
The fundamental risk with a leveraged capital structure is the risk of inadequate cash
under conditions of adversity. Debt involves a commitment to pay fixed charges in the form
of interest and principal repayments. While certain fixed charges can be postponed in times
of cash shortages, the fixed charges related to debt cannot be postponed without adverse
repercussions to a company’s shareholders and creditors.This section discusses several
measures commonly used to estimate the degree of financial leverage and to evaluate the
risk of insolvency.
a. Common-Size Statements in Solvency Analysis
2012 % 2013 % 2014 %
C/L 1244435 0,485738 1138147 0,478313 1413295 0,543905
LTD 201526 0,0786613 189304 0,079556 293260 0,112861
C/S 855968 0,3341084 855968 0,359725 855968 0,329418
PIC 116956 0,0456512 117217 0,049261 116263 0,044744
other comprehensive
income
-5334 -0,002082 -55595 -0,02336 -58141 -0,02238
R/E (appropriated) 146834 0,0573134 146834 0,061708 146834 0,056509
R/E (unappropriated) -18358 -0,007166 -32344 -0,01359 -182159 -0,0701
TEC 1115986 0,4356007 1052053 0,442131 891868 0,343234
Total E & L 2561947 1 2379504 1 2598423 1
A common measure of financial risk for a company is its capital structure composition.
Composition analysis is performed by constructing a common-size statement of the
liabilities and equity section of the balance sheet.We have constructing the calculation of
common-size analysis of krakatau steel company’s liabilities and equity section of balance
sheet from 2012 until 2014. We can see that the proportion of current liabilities to total
equity and liabilities is not constan in every year.In 2013, current liabilities is decreasing, it

is caused by payment of short term bank loan in 2013, and increasing during 2013 to 2014, it
is caused by there was a proceeds from short-term bank loans in 2104. The proportion of
Long term debt to total debt and equity is always increasing during 2012 to 2014 but the
amount in dollar is decreasing in 2013 (it is caused by the smaller value of denominator).
The proportion of common stock to the right section of the balance sheet is higher in 2013
and lower in 2014 (actually the amount of common stock is stable but the proportion changes
depends on the total equity and liabilities). The proportion of paid in capital in rightside of balance
sheet is increasing in 2013 and decreasing in 2014. The proportion of retained earning to total equity
and liabilities is increasing in 2013 for about 4% and decreasing at 5% in 2014, but actually the
amount of retained earning in 2012 to 2014 is stable because in the last 3 periods company didn’t
gain profit (suffered financial loss) so it can’t magnifies the retained earning in balance sheet. In
addition, although the total amount equity capital of krakatau steel company is always decreasing
both in 2013 and 2014, the proportion to total equity and liabilities is increasing in 2013 because the
amount of total equity and liabilities in the year is lower than 2012. The company’s total equity and
liabilities is decreasing in 2013 from 2.561.947 thousand USD to 2.379.504 thousand USD, and
increasing in 2014 to 2.598.423 thousand USD. So, from all the components, PT krakatau steel uses
bigger proportion of current liabilities in its financial structure.
0,485737995
0,078661268
0,334108395
0,045651218
-0,00208201
0,057313442
-0,007165644
common size E&L
2012 C/L
LTD
C/S
PIC
other comprehensive
income
R/E (appropriated)
R/E (unappropriated)

Capital Structure Measures for Solvency Analysis
1. Total Debt to Total Capital = Total Debt : Total capital
2012 = =
, , ,
, , , , ,
= 0.56882
2013 = =
, , ,
, , , , ,
= 0.56259
2014 = =
, , ,
, , , ,
= 0.66009
0,478312707
0,079556076
0,359725388
0,049261107
-0,023364113
0,061707818-0,013592749
common size E&L 2013
C/L
LTD
C/S
PIC
other comprehensive income
R/E (appropriated)
0,543904899
0,112860762
0,329418266
0,044743677
-0,022375495
0,05650889
-0,070103674
common size E&L 2014
C/L
LTD
C/S
PIC
other comprehensive
income
R/E (appropriated)

ANALYSIS :
Based on our calculation above, we know that the proportion of debt in krakatau
steel’s capital structure in 2013 is little bit lower than 2012 and increasing for about 10%
in 2014 become 66.009%. In 2012, the company uses 56.43% of debt to finance it’s
business. In 2013, the proportion is decreasing, where 55.79% of company’s capital
structure is financed by debt, and increased in 2014 to 64,68%. The larger the company’s
debt, the higher are the resulting fixed charges and repayment commitments, thus it
becomes less good for business continuity.
2. Total Debt to Equity Capital = Total debt : shareholder’s equity
2012 = ′
=
, , ,
, ,
= 1.31922
2013 = ′
=
, , ,
, ,
= 1.28619
2014 = ′ =
, , ,
,
= 1.94199
From the calculation, the ratio implies that the krakatau steel’s total debt in 2012 is 1.32
times it’s equity capital, total debt in 2013 is 1,29 times it’s equity capital, and in 2014,
the total debt of krakatau steel is 1,94 times to its equity capital. In other words,
krakatausteel’s credit financing equals 1.32, 1.29, and 1.94 for every $1 of each equity
financing in 2012, 2013, and 2014, respectively. So, for both 3 years, although it is
fluctuative, the Krakatau steel’s debt is greater than 1, it means that it uses larger
proportion of debt than the equity.
3. Long-Term Debt to Equity Capital Ratio = LTD : shareholder’s equity
2012 = ′
=
,
, ,
= 0.183863
2013 = ′ =
,
, ,
= 0.183419
2014 = ′
=
,
, ,
= 0.333718

The proportion ofkrakatau steel’s long-term debt (usually defined as all
noncurrent liabilities) to equity capital is relative constant in 2012 and 2013 which is
about 18 %, and in 2014, the proportion of company’s long term debt increases to
33,37% of the equity capital. For their capital structure using of long term debt
4. Short-Term Debt to Total Debt
Short-term debt, as opposed to long-term debt or sinking fund requirements, is an
indicator of enterprise reliance on short-term (primarily bank) financing. Short-term debt
is usually subject to frequent changes in interest rates.
2012 = =
, ,
, ,
= 0.860628
2013 = =
, ,
, ,
= 0.857393
2014 = =
, ,
, ,
= 0.828157
Using of short term debt from their total debt is always highest from year to year.
It shows that firm more pays attention their productivity for short term. PT Krakatau
Steel also have their short term debt is decreasing for every year. It is shown good for the
firm. They can decrease their liabilities.
b. Interpretation of Capital Structure Measures
Common-size and ratio analyses of capital structure are primarily measures of the risk
of a company’s capital structure. The higher the proportion of debt, the larger the
fixedcharges of interest and debt repayment, and the greater the likelihood of
insolvencyduring periods of earnings decline or hardship.
Analysis of short-term liquidity is always important because before we assess
longterm solvency we want to be satisfied about the near-term financial survival of the
company. Loan and bond indenture covenants requiring maintenance of minimum working
capital levels attest to the importance of current liquidity in ensuring a company’s longterm
solvency. Additional analytical tests of importance include the examination of debt
maturities (as to amount and timing), interest costs, and risk-bearing factors. The latter
factors include a company’s earnings stability or persistence, industry performance, and
composition of assets.

c. Asset-Based Measures of Solvency
1. Asset Composition in Solvency Analysis
Asset composition analysis
company’s capital structure. Asset composition is typically evaluated using common
size statements of asset balances.
Composition of asset in PT Krakatau Steel is normally stable in proportion every
year. The highest proportion is their property, plant, and equipment and its increasing
from 2012 until 2014. It means PT Krakatau Steel needs more fixed asset for their
productivity. For current asset is decreasing from 2012 until 2014 except for cash in
2014. It shows that in every year company is decreasing their productivity, and it is not
good for them. In investment is increasing for 2013 and decreasing for 2014.
2012
Current Asset
Cash $ 270,267
Accounts receivable $ 412,495
Merchandise inventory $ 652,368
Investments $ 257,148
Property, plant, and
equipment
$ 748,936
Total assets $ 2,561,947
$748.936
Common
Based Measures of Solvency
Asset Composition in Solvency Analysis
osition analysis is an important tool in assessing the risk exposure of a
company’s capital structure. Asset composition is typically evaluated using common
size statements of asset balances.
ctivity. For current asset is decreasing from 2012 until 2014 except for cash in
% 2013 %
$ 270,267 10.54928 $190,232 7.994607
$ 412,495 16.10084 $333,159 14.0012
$ 652,368 25.46376 $519,086 21.81488
$ 257,148 10.03721 $269,404 11.32186
$ 748,936 29.23308 $857,738 36.04692
$ 2,561,947 100 $2,379,504 100
0 $270.267
$412.495
Common-Size Analysis of PT Krakatau Steel's Asset
Composition 2012
Cash
Accounts receivable
is an important tool in assessing the risk exposure of a
company’s capital structure. Asset composition is typically evaluated using common-
ctivity. For current asset is decreasing from 2012 until 2014 except for cash in
2014 %
$236,689 9.108948
$279,990 10.77538
$480,871 18.50626
$227,541 8.756888
$1,097,410 42.23369
$2,598,423 100

3. EARNING COVERAGE
a. Earnings Coverage Measures
Common
$857.738
Common
EARNING COVERAGE
Earnings Coverage Measures
9.108.948
1.077.538
1.850.626
8.756.888
4.223.369
Common-Size Analysis of PT Krakatau Steel's
Asset Composition 2014
Accounts
receivable
Merchandise
inventory
Investments
Property, plant, an
d equipment
Composition 2014
Cash
Accounts receivable
Mechandise inventory
Investments
Property, plant, and equipment
0 $190.232 $333.159
$519.0860$269.404
$857.738
Composition 2013
Cash
Accounts receivable
Investments
Size Analysis of PT Krakatau Steel's
Accounts
receivable
Merchandise
inventory
Investments
Property, plant, an
d equipment
Size Analysis of PT Krakatau Steel's Asset

Earnings coverage measures provide us insight into the ability of a company to meet its
fixed charges out of current earnings. There exists a high correlation between earnings
coverage measures and the default rate on debt—that is, the higher the coverage, the
lower the default rate. A study of creditor experience with debt revealed the following
default and yield rates for debt classified according to times interest earned ratios.
b. Relation of Earnings to Fixed Charges
Earnings coverage measures focus on the relation between debt-related fixed
charges and a company’s earnings available to meet these charges. These measures are
important factors in debt ratings (see Appendix 10A). Bond indentures often specify
minimum levels earnings coverage for additional issuance of debt. Securities and
Exchange Commission regulations require that the ratio of earnings to fixed charges be
disclosed in the prospectus of all debt securities registered. The typical measure of the
earnings to charges ratio is:
ℎ
ℎ
PT Krakatau Steel’s Income statement:

Using the financial data of PT Krakatau Steel, we compute the earnings to fixed charges ratio as:
2012 2013 2014
Pretax income (a) (15,471.00) (14,747.00) (182,853.00)
Total Interest expense (b & c) 46,345.00 20,281.00 1,642.00
Interest implicit in noncapitalized lease amounts (d) - - -
Depreciation included amortization of previously

capitalized interest (f) - 137.00 199.00
Total Dividend (g) (25,242.00) - -
Earnings available for fixed charges 5,632.00 5,671.00 (181,012.00)
Total interest incurred (h) 46,345.00 20,281.00 1,642.00
Amortization of stock issuance cost (c ) 22,190.00 22,190.00 2,076.00
Intereset implicit in non capitalized less amounts(d) - - -
Fix Charges 68,535.00 42,471.00 3,718.00
Earning to fixed charges ratio 0.08 0.13 (48.69)
From the computation above, we can conclude that in 2012, every 1 dollar of their fixed
cost only covered by 0.08 dollar of their earnings in current period. It means that their fixed cost
cannot be fully covered by their earnings. Where in 2013, company’s ability to cover their fixed
cost with their earnings is increasing a little bit to 13%. But even though their fixed cost
coverage was increasing, it still cannot be fully covered by company’s earnings. So it still not
good enough. Company’s ability to cover their fixed cost with their earnings become worst in
2014, where they didn’t have earnings to cover their fixed cost at all. So from their result in the
last 3 year, we can see that company’s coverage of their fixed cost is low even we could say that
it was bad. Because in the 2012 and 2013 their fixed cost were not fully covered and in 2014 it
was not covered at all.
c. Times Interest Earned Analysis
Another earnings coverage measure is the times interest earned ratio. This ratio considers
interest as the only fixed charge needing earnings coverage:

+ +
Using the financial data of PT Krakatau Steel, we compute the time interest earned ratio as:
2012 2013 2014
EBIT (16,471.00) (14,747.00) (182,853.00)
Interest Expense 46,345.00 20,281.00 1,642.00
Time Interest Earned Ratio (0.36) (0.73) (111.36)
From the computation above, we can conclude that in the last three year company
cannot cover their interest expense with their earnings before interest and tax. It means that
company cannot generate cash from its operation (EBIT) to meets their interest obligations.
So company has to use whether their cash on hand or cash from other activities to cover their
interest. And for 2014, the company’s ability to cover their interest has decreased pretty
extreme. For this situation, our group opinions are first, maybe it was because their revenues
are decreasing where some of their expenses are increasing and the second reason that may
has a pretty big impact is maybe because in 2014 the share loss that they got from their
associates are increasing pretty extreme even it was increased about 500% from last year.
d. Cash Flow to Fixed Charges Ratio
The cash flow to fixed charges ratiois computed using cash from operations rather than
earnings in the numerator of the earnings to fixed charges ratio. Cash from operations is
reported in the statement of cash flows. The cash flow to fixed charges ratio is defined as:
ℎ + ( ) ℎ ℎ ( )
ℎ
Using the financial data of PT Krakatau steel, we can compute the cash flow to fixed charges
ratio as:

Pretax Income (15,471.00) (14,747.00) (182,853.00)
Pretax cash from operations 267,341.00 378,257.00 213,532.00
Interest Expense 46,345.00 20,281.00 1,642.00
Total numerator 298,215.00 383,791.00 32,321.00
Interest incurred 46,345.00 20,281.00 1,642.00
interest portion of operating rentals - - -
Fixed charges 46,345.00 20,281.00 1,642.00
Cash flow to fixed charges ratio 6.43 18.92 19.68
From the computation above, we can conclude that in the last three year company’s
ability to cover their fixed cost with their cash flow are increasing. And in the last three year
company’s fixed cost always covered by their cash flow. From our group opinion, the reason
why Krakatau Steel cash flow from operation can cover their fixed cost when their earning
cannot cover the fixed cost is because Krakatau Steel got cash inflow from claims of their tax
refund, so it make their cash flow from operation is high. And maybe the other reason is because
their collection of receivables on that period is high, so it makes their cash flow is high too.
Overall Anaysis:
From the capital structure of Krakatau Steel, we can see that for financing their activities
they are more depend on debt rather than equity. It is showed by the proportion of debt in their
capital is larger than the equity.It was okay if the company can generate enough earnings so they
can meets their financial commitments and they have a good solvency.But for Krakatau Steel, in
the last 3 year, their earnings are not enough to cover their financial commitment.Showed by

their interest and fixed cost are not covered by their earnings.But why they can still survive when
even their earnings are not enough to cover their interest?
From our group’s opinion, the reason why they are still survive until now even with that
situation is because they are the one and only steel mining company that owned by government
in Indonesia. So, it will be “protected” by the government. Like lately, DPR just approved their
request to get a new national investment. And the amount of their new national investment is
amazing, which are Rp 1,5 trillion cash and Rp 956,49 billion non cash.And government support
are not just in the financing, but government also help the operating activities of Krakatau Steel.
Government said that all the government based construction companies must use steel from
Krakatau Steel. Even for protecting local steel, government will set a tax for import steel.

PAPER IV - CHAPTER 8 – RETURN ON INVESTED CAPITAL
1. Importance of Return on Invested Capital
The relation between income and invested capital, referred to as return on invested
capital (ROIC) or return on investment (ROI), is probably the most widely recognized
measure of company performance. It allows us to compare companies on their success with
invested capital. It also allows us to assess a company’s return relative to its capital
investment risk, and we can compare the return on invested capital to returns of alternative
investments.
Areas of analysis :
a. Measuring Managerial Effectiveness
Return on invested capital, especially when computed over intervals of a year or longer,
is a relevant measure of a company’s managerial effectiveness.
b. Measuring profitability
This profitability measure has several advantages over other long-term measures of
financial strength or solvency that rely on only balance sheet items (such as debt to
equity ratio). It can effectively convey the return on invested capital from varying
perspectives of different financing
contributors (creditors and shareholders).
c. Measure for planning and control

A well-managed company exercises control over returns achieved by each of its profit
centers and rewards its managers on these results. In evaluating investing alternatives,
management assesses performance relative to expected returns. Out of this assessment
come strategic decisions and action plans for the company.
2. Components of Return in Invested Capital
ROIC = Income / Invested capital
a. Defining Invested Capital
1. Net operating asset
Operating activities include all the activities necessary to bring a company’s
product or service to market. In the income statement, operating activities typically
include sales, cost of goods sold, and selling and general and administrative
(SG&A) expenses. On the balance sheet, operating activities are represented by the
assets and liabilities relating to these income statement accounts, such as accounts
receivable, inventories, PPE, accounts payable, and accrued expenses.
Many firms invest excess cash in financial assets, such as marketable
securities, and earn returns that are typically included in the income statement as
“other” income.Likewise, firms borrow money on short-term and long-term debt,
resulting in interest expense. Although effective management of an investment
portfolio along with astute borrowing can benefit income, these nonoperating
revenues and expenses are regarded as ancillary to the core operating activities of
the business. Consequently, investment returns and borrowing expenses do not
typically have a major impact on company value, unless they are extreme.
RNOA = net operating income after tax /average net operating asset
 Net operating income after tax (exclude investment income and interest
expense)
 average net operating asset ( TA - Financial asset such as marketable
securities)
2. Common Equity Capital
Return on common equity = (net income – preferred dividends) / Average common
equity

Common equity = total share holder’s equity – preferred stock
 Preferred is excluded from the computation since, from the viewpoint of
common shareholders, preferred stock has a fixed claim to the net assets and
cash flow of the company, just like debt.
3. Computing Invested Capital for the Period
The invested capital for the period is typically computed using theaverage capital available to a
company during the period.
b. Adjustments to Invested Capital and Income
As we discussed, many accounting numbers call for analytical adjustment and several numbers not
reported in financial statements need to be included. Some adjustments, like those relating to
inventory, affect both the numerator and denominator of return on invested capital, moderating their
effect. Whatever their impacts, the analysis of return on invested capital should use the appropriately
adjusted financial statement.
c. Computing Return on Invested Capital
1. Return on Net Operating Assets
RNOA =Net operating profits after tax (NOPAT)
Average net operating assets (NOA)
 NOA operating asset ( cash, A/R, inventories, prepaid expenses, deferred
tax assets, property, PPE and longterm investments related to strategic
acquisitions (such as equity method investments, goodwill, and acquired
intangible assets, and include investments in marketable securities) --
operating liabilities, such as accounts payable and accrued expenses, and
long-term operating liabilities, such as pensions and other postretirement
(OPEB) liabilities and deferred income tax liabilities, bonds, long term intrest-
bearing liabilities, and non current portion of capitalized leases.
- Net Financial Obligations (NFO) = Non Operating Liabilities- Non
Operating Assets
- Net operating assets (NOA) = Net financial obligations (NFO) +
Stockholders’ Equity (SE)

The distinction between operating and nonoperating activities
AVERAGE NOA OF KRAKATAU STEEL COMPANY
Analysis : From the computation above we can see that in 2012 Krakatau Steel’s
average net operating income is -6023330 million dollar. And in 2013 it increased
to -95839.5 million dollar and in 2014 it decreased to -155459.
-6023330
-95839,5 -155459
-7000000
-6000000
-5000000
-4000000
-3000000
-2000000
-1000000
0
2012 2013 2014
average NOA
average NOA

RNOA OF KRAKATAU STEEL
Analysis:
From the calculation above we can see that in 2012, company ability to
generate net income from its asset that used for operating activities are -0.486 and
in 2013 the company’s ability to generate net income from its operating asset is
decreasing significantly to -20.490 and in 2013 their ability to generate net
income from it operating activities is become better and increased to -3.975 but it
still not good enough. From year to year we can see that Krakatau Steel is not
efficient enough in using their operating asset to generate net income. It is shown
by the RNOA that is minus in the last three years.
 Net Operating profit after tax (NOPAT)
 Is the after-tax profit earned from net operating assets.
-0,486339622
-20,49063818
-3,975076627
-25
-20
-15
-10
-5
0
2012 2013 2014
RNOA= NOPAT/NOA
RNOA= NOPAT/NOA

The distinction between operating and nonoperating activities
NOPAT = (Sales - Operating expenses) x (1 - [Tax expense/Pretax profit])
NOPAT of Krakatau Steel
2. Return on Common shareholders’ Equity
ROCE = Net income - Preferred dividends
Average common shareholders’ equity
2929384,037
1963812,518
617961,4373
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
2012 2013 2014
year
NOPAT

Higher return on common shareholders’ equity as compared to its return on net
operating assets reflects the favorable effects of financial leverage.
ROCE OF KRAKATAU STEEL
Analysis :
From the computation above we can see that in 2012 company’s ability to
generate net income from their equity that is invested by their shareholders is -0.017
and in 2013 it was increasing to -0.008 but it was decreasing again in 2014 to -
0.015. But in the last 3 years we can see that the ROCE has minus value so we can
see that company is not using their shareholders’ equity not efficient enough in
generating net income.
ROIC OF KRAKATAU STEEL
-0,017108505
-0,008851978
-0,015172427
-0,018
-0,016
-0,014
-0,012
-0,01
-0,008
-0,006
-0,004
-0,002
0
2012 2013 2014
ROCE= (NI-P/S)/ average common
equity
ROCE= (NI-P/S)/
average common
equity

Analysis :
From the computation above we can see that in 2012, Krakatau Steel’s ability to generate
net income from using its invested capital is -0.0078 and in 2013 company’s ability to generate
net income from its invested capital is become better and has increased to -0.0062 and in 2014
their ability is also increasing to -0.0059. From those result in the last 3 years we can see that the
company is not use their invested capital efficient enough in their operating activities in order to
generate income. It is shown by the ROIC that has minus values in the last 3 years.
Attachment
Krakatau steel company
Year 2011 2012 2013 2014
NOPAT 2929384 1963813 617961,4
NOA 12164170 117510 -74169 -385087
average NOA -6023330 -95839,5 -155459
RNOA= NOPAT/NOA -0,48634 -20,4906 -3,97508
-0,007887055
-0,006261724
-0,005924956
-0,01
-0,008
-0,006
-0,004
-0,002
0
2012 2013 2014
ROIC = Income/ Invested capital
ROIC = Income/
Invested capital

NI 151337 -19560 -15471 -14747
preferred dividends 0 0 0 0
average common equity 1143291 1747745 971960,5
ROCE= (NI-P/S)/ average common
equity -0,01711 -0,00885 -0,01517
average invested capital 2480013 2470726 2488964
ROIC = Income/ Invested capital -0,00789 -0,00626 -0,00592
ANALYZING RETURN ON NET OPERATING ASSETS
Disaggregating Return on Net Operating Assets
The NOPAT to sales relation is callednet operating profit margin(or simplyNOPAT
margin) and measures a company’s operating profitability relative to sales. The sales to net
operating assets relation is called thenet operating asset turnover (or simply NOA turnover) and
measures a company’s effectiveness in generating sales from net operating assets. This
decomposition highlights the role of these components, both NOPAT margin and NOA turnover,
in determining return on net operating assets (RNOA). NOPAT margin and NOA turnover are
useful measures that require analysis to gain insights into a company’s profitability.
Using the financial data of PT Krakatau Steel, we can compute as:

Disaggregating Return on NOA 2012 2013 2014
Net Operating Profit after tax (NOPAT) 20,019.00 (2,214.00) (96,405.00)
Sales 2,287,445.00 2,084,448.00 1,868,845.00
Net operating profit margin 0.01 (0.00) (0.05)
Sales 2,287,445.00 2,084,448.00 1,868,845.00
Average net operating asset (Av. NOA) 6,140,840.00 21,670.50 (229,628.00)
Net operating asset turnover 0.37 96.19 (8.14)
Average net operating asset (Av. NOA) 6,140,840.00 21,670.50 (229,628.00)
Return on net operating assets (RNOA) 0.33% -10.22% 41.98%
Analysis :
From the computation above, we can conclude that PT Krakatau Steel’s RNOA in 2012
is 0,33%, because, the have highest NOPAT and highest average NOA. But, in 2013, their
RNOA is -10,22% which is decreasing and the lowest if compared to the last there years,
because they get lower NOPAT and lower average NOA. And in 2014, although the company’s
RNOA is getting even bigger, but their NOPAT and average NOA (-96,405.00 and -229,628.00)
is decreasing extremely and are the lowest of the last three years.

Relation between Profit Margin and Asset Turnover
RNOA is a function of both margin and turnover, it is tempting to analyze a company’s
ability to increase RNOA by increasing profit margin while holding turnover constant, or vice
versa. Unfortunately, the answer is not that simple because the two measures are not
independent. Profit margin is a function of sales (selling price units sold) and operating expenses.
Turnover is also a function of sales (sales/assets). Consequently, increasing profit margin by
increasing selling prices impacts units sold. Also, reductions of marketing-related operating
expenses in an effort to increase profitability usually impacts product demand. Selling prices,
marketing, R&D, production, and a host of other business areas must all be managed effectively
to maximize RNOA.
Using the financial data of PT Krakatau Steel, we can compute as:
Analysis of Return on NOA 2012 2013 2014
Sales 2,287,445.00 2,084,448.00 1,868,845.00
Net operating asset (NOA) 117,510.00 (74,169.00) (385,087.00)
Net Operating Profit after tax Margin 0.88% -0.11% -5.16%
Net operating asset turnover 19.466 (28.104) (4.853)
Return on net operating asset (RNOA) 17.04% 2.99% 25.03%
Analysis :
From the computation above, we can conclude that, in las three years, PT Krakatau Steel
in 2012 achieves a 17,04% RNOA with a relatively highest NOPAT margin and a highest NOA

turnover. In 2013, PT Krakatau SteeL’s RNOA is 2,99% which is deacreasing, because they got
a lower NOPAT margin and lowest NOA turnover. Morever, In 2014, PT Krakatau Steel
achieves the highest RNOA (25,03%) , because they got a lowest NOPAT and lower NOA
turnover.

PAPER V  PROFORMA KRAKATAU STEEL

Financial Analysis of Krakatau Steel Corporation

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Financial Analysis of Krakatau Steel Corporation