This document contains financial analysis of Amway Malaysia for the years 2012 and 2013. It includes the income statement, balance sheet, and calculation of various profitability and stability ratios. The profitability ratios like net profit margin, gross profit margin, and expense ratios improved from 2012 to 2013, indicating better management of costs. The stability ratios like working capital, debt, and inventory turnover also improved over this period. However, the P/E ratio of 18 times suggests the shares are overvalued currently. Overall, the financial health and performance of Amway Malaysia seems good based on the ratio analysis, but the shares may not be a good investment at the current price.

1. 1
SCHOOL
OF
ARCHITECTURE,
BUILDING
AND
DESIGN
FOUNDATION
IN
NATURAL
AND
BUILT
ENVIRONMENT
FEBRUARY
2014
/
SEMESTER
2
STUDENTS
NAME:
-­‐
DARREN
LOONG
CHI
YOONG
(0318029)
-­‐
TAN
ZHAO
MING
(0318724)
-­‐
HOOI
ZHAO
HONG
(0318524)
MODULE:
BASIC
ACCOUNTING
(ACC30205)
LECTURER:
MR.
CHANG
JAU
HO
ASSIGNMENT
TITLE:
FINANCIAL
RATIO
ANALYSIS
(AMWAY
MALAYSIA)
WORD
COUNT:
1162
SUBMISSION
DATE:
13TH
NOVEMBER
2014

2. 2
CONTENTS
History and Recent Developments ……………………………………… 3
Income Statement and Balance Sheet …………………………………… 4 - 7
Profitability Ratios ......………………………………………………....... 8
Stability Ratios ........................................................................................... 9
Interpretation of Results ............................................................................. 10 -11
Price/Earning Ratio & Investment Recommendation................................. 12 -13
References.................................................................................................... 14

3. History
of
AMWAY
Malaysia
Amway
Malaysia
started
its
distribution
services
in
1976
with
only
five
staffs
in
a
small
office
and
warehouse
facility
in
Jalan
Ipoh.
In
that
year,
Amway
Malaysia
was
one
of
the
earliest
direct
selling
industries
in
the
country.
AMWAY
Malaysia
was
the
first
direct
selling
company
to
be
listed
on
the
Main
Board
of
the
Kuala
Lumpur
Stock
Exchange
in
1996.
On
the
other
hand,
the
Ministry
of
Domestic
Cooperatives
and
Consumerism
awarded
a
10-­‐year
Direct
Selling
License
AMWAY
Malaysia
in
2010,
being
the
first
to
achieve
this
feat.
3
Recent
Developments
One
of
the
most
recent
developments
by
AMWAY
Malaysia
is
the
new
smartphone
application
create
by
them,
which
is
called
‘AMWAY
Central
App’.
The
main
function
of
the
application
is
to
provide
updates
and
tools
of
AMWAY
products.
For
example,
for
AMWAY
users
that
owns
an
eSpring,
which
is
a
water
filtration
system
by
AMWAY,
the
application
provides
tips
for
the
users
to
maintain
the
functioning
of
their
eSpring
system
and
to
also
enhance
the
knowledge
of
users
to
know
the
importance
of
clean
water
and
share
it
with
others
that
does
not
own
an
eSpring
yet.
AMWAY
Malaysia
will
also
be
celebrating
the
Amway
Universal
Children's
Day
on
20th
November
2013,
having
to
launch
the
AMWAY
One
By
One
campaign
back
in
2003.
Through
the
campaign,
many
of
AMWAY's
distributors
and
employees
have
travelled
to
over
50
countries
where
the
children
are
in
need
of
help.
They
have
conducted
over
300
projects
to
brighten
the
children's
future
by
building
homes
for
them,
giving
them
free
education
and
all
physiological
needs.

4. 4
Income
Statement
of
AMWAY
Malaysia
for
the
financial
year
ended
at
31
December
2012

5. 5
Balance
Sheet
of
AMWAY
Malaysia
as
at
31
December
2012

6. 6
Income
Statement
of
AMWAY
Malaysia
for
the
financial
year
ended
on
31
December
2013

7. 7
Balance
Sheet
of
AMWAY
Malaysia
as
at
31
December
2013

8. 8
Profitability
Ratios
Profiability
ratio
2012
2013
Return
on
Equity
(ROE)
99708000
(227971000 + 192322000)/2
× 100%
=
47.4%
109023000
234311000 + 227971000/2
× 100%
=
47.2%
Net
Profit
Margin
(NPM)
99708000
797523000
× 100%
=
12.5%
109023000
834222000
×100%
=
13.1%
Gross
Profit
Margin
(GPM)
251534000
797523000
× 100%
=
31.5%
266037000
834222000
×100%
=
31.9%
Selling
Expense
Ratio
(SER)
81965000/2
797523000
× 100%
=
5.1%
83961000/2
834222000
×100%
=
5.0%
General
Expense
Ratio
(GER)
81965000/2
797523000
× 100%
=
5.1%
83961000/2
834222000
×100%
=
5.0%

9. 9
Stability
Ratios
Stability
ratios
2012
2013
Working
Capital
(WCR)
248629000
106591000
=
2.33
:
1
247743000
94599000
=
2.62
:
1
Total
Debt
(TDR)
106617000
334588000
×100%
=
31.9%
94629000
328940000
×100%
=
28.8%
Stock
Turnover
(ITR)
365
days
÷
!"!#$#%%%
(!"#$%###!!"#$%&&&)/!
= 45.6 days
365
days
÷
!"#$#!%%%
(!"!#$%%%!!"#$%###)/!
=
42.6
days

10. 10
Interpretation
of
results
The
percentage
of
the
return
on
equity
(ROE)
of
AMWAY
Malaysia
in
the
year
2012
is
47.4%,
whereas
the
ROE
of
AMWAY
Malaysia
the
year
2013
is
47.2%.
In
conclusion,
the
ROE
has
decreased
from
47.4%
to
47.2%
during
2012
to
2013
period.
This
means
that
the
owner
is
simply
getting
less
return
from
his/her
capital
than
last
year.
The
percentage
of
the
net
profit
margin
(NPM)
of
AMWAY
Malaysia
in
the
year
2012
is
12.5%,
whereas
the
NPM
of
AMWAY
Malaysia
in
the
year
of
2013
is
13.1%.
Therefore
we
can
conclude
that
the
NPM
of
AMWAY
Malaysia
during
2012-­‐2013
periods
has
increased
from
12.5%
to
13.1%.
This
means
that
the
owner
is
better
at
controlling
its
overall
expenses.
The
percentage
of
the
gross
profit
margin
(GPM)
of
AMWAY
Malaysia
in
the
year
of
2012
is
31.5%,
whereas
the
GPM
of
AMWAY
Malaysia
in
the
year
of
2013
is
31.9%.
In
conclusion,
the
GPM
of
AMWAY
Malaysia
during
2012-­‐2013
periods
has
increased
from
31.5%
to
31.9%.
This
means
that
the
business
ability
to
control
COGS
getting
better.
The
percentage
of
the
selling
expenses
ratio
(SER)
of
AMWAY
Malaysia
in
the
year
2012
is
5.1%,
whereas
the
SER
of
AMWAY
Malaysia
in
the
year
of
2013
is
5.0%.
Therefore
we
can
conclue
that
the
SER
of
AMWAY
Malaysia
during
2012-­‐2013
periods
has
decreased
from
5.1%
to
5.0%.
This
means
that
the
business
is
better
at
controlling
selling
expenses.
The
percentage
of
the
general
expenses
ratio
(GER)
of
AMWAY
Malaysia
in
the
year
2012
is
5.1%,
whereas
the
GER
of
AMWAY
Malaysia
in
the
year
of
2013
is
5.0%.

11. Therefore
we
can
conclue
that
the
GER
of
AMWAY
Malaysia
during
2012-­‐2013
periods
has
decreased
from
5.1%
to
5.0%.
This
means
that
the
business
is
better
at
controlling
general
expenses.
The
Ratio
of
the
working
capital
(WCR)
of
AMWAY
Malaysia
in
the
year
2012
is
2.33:1,
whereas
the
WCR
of
AMWAY
Malaysia
in
the
year
of
2013
is
2.62:1.
In
conclusion,
the
WCR
of
AMWAY
Malaysia
during
2012-­‐2013
periods
has
increased
from
2.33:1
to
2.62:1.
This
means
that
the
business
ability
to
pay
current
liabilities
with
current
assets
is
getting
better.
In
addition,
it
does
satisfy
the
minimum
payment
of
2:1.
11
The
percentage
of
total
Debt
(TDR)
of
AMWAY
Malaysia
in
the
year
2012
is
31.9%,
whereas
the
TDR
of
AMWAY
Malaysia
in
the
year
of
2013
is
28.8%.
In
conclusion
the
TDR
of
AMWAY
Malaysia
during
2012-­‐2013
periods
has
decreased
from
31.9%
to
28.8%.
This
means
that
the
business
overall
liability
has
reduced.
Therefore
it
is
not
over
50%
maximum
limit.
The
days
of
stock
turnover
(ITR)
of
AMWAY
Malaysia
in
the
year
2012
is
45.6
days,
whereas
the
ITR
of
AMWAY
Malaysia
in
the
year
of
2013
is
42.6
days.
In
conclusion
the
ITR
of
AMWAY
Malaysia
during
2012-­‐2013
periods
has
decreased
from
45.6
days
to
42.6
days.
This
means
the
business
is
selling
it's
product
at
a
faster
rate.

12. 12
Price/Earning
(P/E)
Ratio
Share
price
of
AMWAY
Malaysia
as
at
12th
November
2014:
RM
11.560
Earnings
per
share
of
AMWAY
Malaysia
as
at
12th
November
2014:
RM
0.64
!" !!.!"
!" !.!"
=
P/E
Ratio=
18.06
times
Interpretation:
As
it
can
be
seen
from
the
P/E
ratio
calculated
above,
the
outcome
is
18.06
times.
This
means
that
the
share
price
of
AMWAY
Malaysia
is
high
and
if
an
investor
purchases
the
share
of
AMWAY
Malaysia,
he
would
have
to
wait
for
18
years
to
recoup
his
investment.
Investment
Recommendation
Based
on
the
profitability
ratios
calculated,
most
of
the
ratios
have
good
outcomes
and
it
has
improved
during
the
2012-­‐2013
period,
except
for
the
return
on
equity,
where
the
shareholder
is
getting
less
from
his
capital.
Looking
at
the
other
ratios,
such
as
the
net
profit
margin,
gross
profit
margin,
selling
expenses
ratio
and
general
expenses
ratio,
the
overall
profitability
ratio
seems
to
be
stable
and
the
shareholder
are
benefiting
based
on
the
calculation
of
the
ratios.
As
for
the
stability
ratios
on
the
other
hand,
the
calculation
shows
that
there
are
good
outcomes
of
the
working
capital,
total
debt
as
well
as
the
stock
turnover.
All
of
the
outcomes
are
getting
better
during
the
2012-­‐2013
period.
Based
on
both
the
profitability
ratios
and
the
stability
ratios,
it
can
be
seen
that
AMWAY
Malaysia
has
not
made
much
loss
during
the
2012-­‐2013
period.
Finally,
the
share
price
of
AMWAY
Malaysia
seems
to
be
high
at
RM
11.56.
The
earnings
per
share
are
also
considered
low.
Having
a
high
share
price
and
low
earnings
per
share
can
result
in
a
high
P/E
ratio.
The
current
P/E
ratio
of
AMWAY
Malaysia
is
18.06
times.
If
an
investor
were
to
purchase
the
shares
of
AMWAY
Malaysia,
he
would
have
to
wait
for
18
years
to
recoup
his
investment.
A
conservative
investor
would
purchase
a
share
with
a
P/E
ratio
of
15
times
or
less.

13. In
conclusion,
an
investment
in
AMWAY
Malaysia
doesn't
look
as
bad
as
it
is
because
overall
the
company
is
doing
very
well
year
by
year
and
they
always
strive
to
improve
every
period.
The
stability
ratios
and
profitabilty
ratios
has
proved
it.
The
biggest
downside
of
investing
in
AMWAY
Malaysia
is
to
have
a
high
P/E
ratio.
Overall,
we
would
not
recommend
an
investment
in
AMWAY
Malaysia
because
the
share
price
is
high,
which
makes
the
P/E
ratio
too
high
for
a
good
investment.
13

14. References
1.
AMWAY
Malaysia
Annual
Report
2012
-­‐
http://announcements.bursamalaysia.com/EDMS/subweb.nsf/all/F19737F1
6D107C2648257B5D00355F68/$File/AMWAY-­‐AnnualReport2012.pdf.
14
Site
accessed
on
10th
November
2014.
2.
AMWAY
Malaysia
Annual
Report
2013
-­‐
http://announcements.bursamalaysia.com/EDMS/subweb.nsf/all/A85A5F06
21D3395948257CBB0032ED02/$File/AMWAY-­‐AnnualReport2013.pdf.
Site
accessed
on
10th
November
2014
3.
AMWAY
Malaysia
Share
Price
-­‐
http://www.bursamalaysia.com/market/listed-­‐companies/list-­‐of-­‐
companies/plc-­‐profile.html?stock_code=6351.
Site
accessed
on
11th
November
2014
4.
AMWAY
Malaysia
Share
Price
and
Financial
Information
-­‐
http://www.malaysiastock.biz/Corporate-­‐
Infomation.aspx?type=A&value=A&securityCode=6351.
Site
accessed
on
12th
November
2014