Principle of accounting Apollo food company

1. FALL 2019
ASSIGNMENT
AC2213
PRINCIPLE OF ACCOUNTING 2

2. Introduction – Apollo Food Industries
Company background
a. Founded on March 1, 1994 in Johor Bahru, Malaysia
b. A subsidiary of Keynote Capital Sdn Bhd.
c. Engaged in manufacturing compound chocolate
confectionary products and layer cakes based in Malaysia
d. Products are distributed:
Malaysia, Singapore, Indonesia, Thailand, Philippines,
Vietnam, China, Hong Kong, Taiwan, Japan, India,
Middle East, Mauritius, and Maldives

3. Vision
• To always fulfilled the customer needs and requirement by using the latest
equipment and technology
Mission
1. Implement and maintain the quality management system and continually
improve its effectiveness
2. Produce the products with top quality of raw and packaging materials

4. Current ratio
oDefinition:
• The current ratio is a liquidity ratio that measures
.
oPurpose
• It tells investors and analysts how a company can maximize the current asset on
its balance sheet to satisfy its current debt and other payables.
oFormula
•
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
= 𝑥. 𝑥𝑥 ∶ 1

5. Quick ratio
oDefinition:
• The quick ratio is an indicator of a company’s short-term liquidity position and
measures
oPurpose
• The quick ratio measures the dollar amount of liquid assets available to the
company against the dollar amount of its current liabilities. Liquid assets are the
assets that can be quickly converted into cash with minimal impact to the price
received in the open market, while current liabilities are a company's debts or
obligations that are due to be paid to creditors within one year.
oFormula
•
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡−𝑃𝑟𝑒𝑝𝑎𝑖𝑑 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠−𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
= 𝑥. 𝑥𝑥 ∶ 1

6. Inventory turnover
• Definition:
Inventory turnover is a ratio showing how many times a company has sold and
replaced inventory during a given period.
• Purpose
 A company can divide the days in the period by the inventory turnover formula
to calculate the days it takes to sell the inventory on hand. Calculating inventory
turnover can help businesses make better decisions on pricing, manufacturing,
marketing and purchasing new inventory.
• Formula

𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
= 𝑥𝑥 𝑡𝑖𝑚𝑒𝑠
Average inventory
=
𝑂𝑝𝑒𝑛𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 + 𝐶𝑙𝑜𝑠𝑖𝑛𝑔 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
2

7. Account Receivables Collection Period
• Definition:
Accounts receivable collection period sometime called the days sales
outstanding is simply mean the period (number of days) in which credit sales are
collected from customers.
• Purpose
This ratio is very important for management to assess the collection
performance as well as credit sales assessments.
Account receivable collection period measures the average number of days that
credit customers usually make the payment to the company.
• Formula

𝐴𝑐𝑐𝑜𝑢𝑛𝑡 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠
𝑆𝑎𝑙𝑒𝑠
× 365 𝑑𝑎𝑦𝑠 = 𝑥𝑥 𝑑𝑎𝑦𝑠

8.  Gross profit margin
• Definition:
Gross profit margin is a metric used to assess a company's financial health and
business model by revealing the amount of money left over from sales after
deducting the cost of goods sold.
• Purpose
There are several layers of profitability that analysts monitor to assess the
performance of a company, including gross profit, operating profit, and net
income. Each level provides information about a company's profitability.
Operating profit, also known as net profit or net profit margin, shows the amount
of revenue left after deducting selling, general, and administrative (SG&A) costs.
• Formula

𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡
𝑆𝑎𝑙𝑒𝑠
× 100 = 𝑥𝑥 %

9.  Net profit margin
• Definition:
The net profit margin is equal to how much net income or profit is generated as
a percentage of revenue.
• Purpose
 Net profit margin is the ratio of net profits to revenues for a company or
business segment. Net profit margin is typically expressed as a percentage but
can also be represented in decimal form. The net profit margin illustrates how
much of each dollar in revenue collected by a company translates into profit.
• Formula

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
𝑆𝑎𝑙𝑒𝑠
× 100 = 𝑥𝑥 %

10.  Return on Investment
• Definition:
Return on Investment (ROI) is a performance measure used to evaluate the
efficiency of an investment or compare the efficiency of a number of different
investments.
• Purpose
 ROI tries to directly measure the amount of return on a particular investment,
relative to the investment’s cost. To calculate ROI, the benefit (or return) of an
investment is divided by the cost of the investment. The result is expressed as a
percentage or a ratio.
• Formula

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑
× 100 = 𝑥𝑥 %
Capital Employed
= Owner’s equity + Non Current Liabilities
OR
=Total Asset – Current Liabilities

11. 2017 ANALYSIS OF FINANCIAL STATEMENTS
Current ratio
•
159304907
10219036
= 15.59: 1
•Business has RM 15.59 of current assets to pay its RM 1 current
liabilities.
Quick ratio
•
159304907−653846−15847951
10219036
= 13.97: 1
•Business has RM 13.97 of current assets to pay its RM 1 current
liabilities

12. Inventory turnover
•
166415292
16998176.5
= 9.8 𝑡𝑖𝑚𝑒𝑠
•Average inventory:
15847951 + 18148402
2
= 16998176.5
•In average, business replaced inventories 9.8 times in a year.
Account receivables collection period
•
37934506
208918294
× 356 𝑑𝑎𝑦𝑠 = 66 𝑑𝑎𝑦𝑠
•In average, business able to collect debt from a/c receivables in
66 days.

13. Gross profit margin
•
42503002
208918294
× 100% = 20.34%
• Every RM 100 sales, business earned RM 20.34 of gross profit.
Net profit margin
•
17833017
208918294
× 100% = 8.54%
• Every RM 100 sales, business earned RM 8.45 of net profit.
Return on investment
•
17833017
266438805
× 100% = 6.69%
• Capital employed
OR
• Every RM 100 capital employed, business earned RM 6.69 of net profit.
Total asset – current
liabilities
=276657841 – 10219036
=26643880
Owner’s equity + Non-
current liabilities
=253250424 + 13188381
=266438805

14. 2018 ANALYSIS OF FINANCIAL STATEMENTS
Current ratio
•
142915465
8003356
= 17.86: 1
•Business has RM 17.86 of current assets to pay its RM 1 current
liabilities.
Quick ratio
•
142915465−14902914
8003356
= 15.99: 1
•Business has RM 15.99 of current assets to pay its RM 1 current
liabilities.

15. Inventory turnover
•
150563092
15375432.5
= 9.79 𝑡𝑖𝑚𝑒𝑠
•Average inventory:
14902914 + 15847951
2
= 15375432.5
•In average, business replaced inventories 9.79 times in a year.
Account receivables collection period
•
29533782
190818447
× 365 𝑑𝑎𝑦𝑠 = 57 𝑑𝑎𝑦𝑠
•In average, business able to collect debt from a/c receivables in
57 days.

16. Gross profit margin
•
40255355
190818447
× 100% = 21.10%
• Every RM 100 sales, business earned RM 21.10 of gross profit.
Net profit margin
•
11071841
190818447
× 100% = 5.80%
• Every RM 100 sales, business earned RM 5.80 of net profit.
Return on investment
•
11071841
255531002
× 100% = 4.33%
• Capital employed
OR
• Every RM 100 capital employed, business earned RM 4.33 of net profit.
Total asset - current liabilities
= 263534358 - 8003356
=255531002
Owner’s equity + Non-current
liabilities
=243615822 +11915180
=255531002

17. Comparison and Interpretation of two years performance

18. In conclusion, Apollo company performs better in
2018.
Why?
• higher current ratio
• higher quick ratio
• Lower account
receivables collection
period
• higher gross profit margin