Kossan's Financial Evaluation based on their annual financial statement from 2013 to 2015. We evaluate based on theory or formula from subject FIN745 (Financial Management). We also compare the result with Top Glove performance as Industry average.

1. Financial Analysis

2. 1 2 3
Features Main Board of Bursa
Malaysia in 1996
History
Established in 1979: Cutless
bearings used in the marine industry.
Business Direction
Bursa Malaysia
Company Profile
MISSION: To be a world class
glove manufacturer by providing
top quality products with
excellent services through
continuous improvement and
innovation.
To produce high quality gloves
at efficient low-cost
DATO ’ LIM KUANG SIA

3. Liquidity Analysis
Liquidity expresses the capacity of the company to
meet its short term obligations, that is, to cover its
cash outflows with adequate cash inflows.

4. 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜, 𝐶𝑅 =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Current Ratio
Year
Industry Average
2013 2014 2015
Current Assets 500,437 559,996 694,569 1,473,095
Current Liabilities 278,726 335,767 323,991 920,691
Current Ratio 1.795 1.668 2.144 1.600
1.795
1.668
2.144
1.6
0
0.5
1
1.5
2
2.5
2013 2104 2015
Caused by
surplus cash
RM100,000,000

5. Quick Ratio
1.261
1.091
1.509
1.326
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2013 2104 2015
𝑄𝑢𝑖𝑐𝑘 𝑅𝑎𝑡𝑖𝑜, 𝑄𝑅 =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Year
Industry Average
2013 2014 2015
Current Assets 500,437 559,996 694,569 1,473,095
Inventory 148,782 193,532 205,588 252,115
Current Liabilities 278,726 335,767 323,991 920,691
Current Ratio 1.795 1.668 2.144 1.600
Quick Ratio 1.261 1.091 1.509 1.326
148782
193532
205588
0
50000
100000
150000
200000
250000
2013 2104 2015

6. Efficiency Analysis
Efficiency ratios measure a company's ability to use its
assets and manage its liabilities effectively.

7. ANALYSIS & INSIGHT – DEBT RATIO
1. Trending fluctuated throughout 3 years series.
2. Compared to industry average, Kossan having very low inventory turnover
3. Indicate Kossan is moving slow in transforming its inventory into cash.
4. Indicate that Kossan also not aggressively in making sales.
2013 2014 2015 Industry average
Cost of goods sold 736,780 724,678 860,799 1,955,610
Inventory 148,782 193,532 205,588 252,115
Inventory turnover 4.95 3.74 4.19 7.8
Inventory Turnover
4.95
3.71
4.19
7.8
0
1
2
3
4
5
6
7
8
9
2013 2104 2015
Recommendation
1. Reconstruct their marketing strategy in order to attract more
customers.

8. ANALYSIS & INSIGHT – TIMES INTEREST EARNED
1. The trending from 2013 to 2015 is fluctuated. Having the highest in 2014 which is
78.8 days.
2. Throughout 3 years series, the value are higher than the industry average.
3. It shows that Kossan’s account receivable was not well manage. Result in longer
period to collect payment from the customers.
4. This also indicate that Kossan was too lenient with their customers on the credit
term.
Recommendation
1. To be strict with their customer in collecting the payment.
2. To reduce the company credit term policy. Thus, faster cash able to be gain from the
sales.
2013 2014 2015 Industry average
Accounts Receivable 242,945 280,909 311,172 380,700
Sales per day 3581.6 3566.4 4491.8 6,878.1
Average Collection Period 67.8 78.8 69.3 55.3
Average Collection Period
67.8
78.8
69.3
55.3
0
10
20
30
40
50
60
70
80
90
2013 2104 2015

9. 2013 2014 2015 Industry average
Sales 1,307,292 1,301,740 1,639,509 2,510,510
Total assets 1,106,018 1,289,665 1,476,295 2,687,930
Total Assets Turnover 1.18 1.0 1.11 0.9
Total Asset Turnover
1.18
1 1.11
0.9
0
0.2
0.4
0.6
0.8
1
1.2
1.4
2013 2104 2015

10. Leverage Analysis
Financial leverage ratios measure the value of equity
in a company by analyzing its overall debt picture &
structure.

11. 2013 2014 2015 Industry average
Total Liabilities 384,008 461,652 499,849
Total assets 500,437 1,289,665 1,476,295
Debt ratio 35% 36% 34% 39.9%
Ratio Actual (2013) Actual (2014) Actual (2015) Industry Average
(DR) 35% 36% 34% 39.9%
Debt Ratio
384008
461652 499849
0
100000
200000
300000
400000
500000
600000
2013 2104 2015
Debt AmountDebt Ratio
35
36
34
39.9
31
32
33
34
35
36
37
38
39
40
41
2013 2104 2015

12. ANALYSIS & INSIGHT – TIMES INTEREST EARNED
1. TIER in 2015 at 27.45 times - able to pay interest obligation by 27.45 times a year frm OP
2. No difficulties in paying interest payment - has safety option to cover the interest payment
3. Consistent with DR – firm did not have to pay high interest obligation due to low debt financing that serve as
capital.
4. Compared to industry average; it is only 27.45 times a year and below than industry average (88.18 times) to
show its ability in paying interest obligation.
Ratio Actual (2013) Actual (2014) Actual (2015) Industry Average
(TIER) 27.7 23.93 27.45 88.18 times
2013 2014 2015 Industry average
EBIT 187,018 194,865 278,722
Interest 6,884 8,144 10,155
TIER 27.7 23.93 27.45 88.18
Times Interest Earned Ratio

13. Recommendation – Leverage Ratio
1. Not to use more R/E because it lead to more tax payment
paid to government and reduced dividend payout to
investors (aim – to max. shareholders wealth)
2. To consider debt financing rather than using more on the
internal funding or equity funding – adv. of tax shield.
3. To involve firm lawyer, internal analysts, CFO, CEO in
discussion to select which strategy to use and risk level.
4. Future Projections:
a. To opt for trade-theory strategy (means of capital
support as firm can rationalizing the domination of
using debt over equity and retained earnings).
b. To also opt for pecking order theory when are not able
to use debt as its capital structure.
5. However, need also to consider on economic situation and
also risk tolerance level/policy of the company

14. Profitability Analysis
Profitability ratios are used to assess a business's
ability to generate earnings compared to its expenses
and other relevant costs incurred during a specific
period of time.

15. ANALYSIS & INSIGHT
1. Based on the trend pattern, the amount is slightly decreasing year by
year.
2. Gives a negative impact to the company in terms of cost of goods sold
management
3. Cost of goods sold of the company is considered high. Kossan not utilize
its Cost of goods sold in an efficient way.
4. However, when comparing with the industry average, it shows increasing
pattern.
5. Can conclude that they actually good enough to manage their cost of
goods sold than other competitor.
2013 2014 2015 Industry average
Gross Profit 736,780 724,679 860,799 554,900
Sales 1,307,292 1,301,740 1,639,509 2,510,510
Gross Profit Margin 56.36% 55.67% 52.50% 22.10%
Gross Profit Margin
56.36
55.67 52.5
39.9
0
10
20
30
40
50
60
2013 2104 2015

16. ANALYSIS & INSIGHT
1. The operating profit margin is slightly
increasing from year 2013 and 2014
which is 0.70%.
2. However, in 2015 the ratio is increasing
drastically at 16.87% and above the
industry average.
3. For every RM1 sales, company able to
generate RM16.87 of operating profit
4. High operating profit margin means that
Kossan is good in utilizing its opetrating
cost.
5. Operating profit is enough to pay the
interest and tax
2013 2014 2015 Industry average
Operating Profit 184,329 192,560 276,556
Sales 1,307,292 1,301,740 1,639,509
Operating Profit Margin 14.10% 14.80% 16.87% 14.78%
Operating Profit Margin
14.1
14.8
16.87
14.78
12.5
13
13.5
14
14.5
15
15.5
16
16.5
17
17.5
2013 2104 2015

17. 2013 2014 2015 Industry average
Net Profit 140,066 148,836 206,319
Sales 1,307,292 1,301,740 1,639,509
Net Profit Margin 10.71% 11.43% 12.58% 11.2%
Net Profit Margin
140066
148836
206319
0
50000
100000
150000
200000
250000
2013 2104 2015
Net Profit
10.71
11.43
12.58
11.2
9.5
10
10.5
11
11.5
12
12.5
13
2013 2104 2015
Net Profit Margin

18. 2013 2014 2015
Industry
average
Earnings Available for Common Shares (NIAC) (RM’000) 141,706 150,765 212,934 316,724
Numbers of Shares of Common Stock Outstanding
(unit ‘000)
1,360,532 1,360,532 1,360,532 351,632
Earnings Per Share RM0.10 RM0.11 RM0.16 RM0.90
Earnings Per Share
141706
150765
212934
0
50000
100000
150000
200000
250000
2013 2104 2015
Earning Available For C/S
10.71
11.43
12.58
11.2
9.5
10
10.5
11
11.5
12
12.5
13
2013 2104 2015
Earning Per Share

19. ANALYSIS & INSIGHT
1. ROTA fluctuates; overall still above industry average.
2. Net income after tax keep on increasing.
3. Total assets increasing from year to year.
4. The management team fully utilize total assets in converting it into profits.
5. A good signal to investors.
2013 2014 2015 Industry average
Earnings Available for Common Shares (NIAT) (RM’000) 140,055 148.836 206,319 281,192
Total Assets (RM’000) 1,106,018 1.289.665 1,476,295 2,687,930
Return on Total Assets 12.70% 11.50% 14.00% 10.46%
Return On Total Assets
12.7
11.5
14
10.46
0
2
4
6
8
10
12
14
16
2013 2104 2015

20. ANALYSIS & INSIGHT
1. ROE fluctuates; overall still above industry average.
2. Net income after tax keep on increasing.
3. Total Equity increasing from year to year.
4. Comparing with liquidity, efficiency and profitability; all shows
positive results.
RECOMMENDATION
1. Not to use more Return Earning in financing the capital – more tax
payment which can reduce net income after tax.
2. Considering debt financing – tax shield.
2013 2014 2015 Industry average
Earnings Available for Common Shares (NIAT) (RM’000) 140,055 148.836 206,319 281,192
Total Equity (RM’000) 722,010 828,013 976,446 1,614,393
Return on Equity 19.4% 18% 21.1% 17.4%
Return On Equity
ROE Value
19.4
18
21.1
17.4
0
5
10
15
20
25
2013 2104 2015

21. Recommendation
• Boost revenue/sales
• Reduce cost
• Increase profit margin
• Reduce risk
• Invest in marketing
• Advertisement
• Branding Activities
• Study/research market needs
• R&D & Gordon Growth Model
• Reevaluate current practices/SOP
• Come up with effective &
efficient solution based on
analyzation.
• Follow up with the result of
new implementation

22. Market Analysis
Market value aimed to evaluate the company’s stock.
The evaluation will defined whether the company
stock is overvalued or undervalued.

23. Price Earnings ratio = Market price per share of common stock
Earning per share
Price Earnings Ratio
2013 2014 2015 Industry average
Price earnings ratio 20.99 19.61 29.43 26.54
20.99
19.61
29.43
26.54
0
5
10
15
20
25
30
35
2013 2104 2015
Analysis & Insight
 The ratio of the company is increasing and above industry average. The trend
showed an increased in between the year of 2013 to 2015.
 It explains that the level of confidence of investors towards the company getting
higher.
 The figure indicates that the investors are willing to pay $ 29.43 for each $1.00
earning.

24. Market Book Ratio
Market Book value ratio = Market price per share of common stock
Book Value
2013 2014 2015 Industry average
Market price per share of common stocks 4.22 4.48 9.30
Book value 4.00 3.60 6.40
Market book value ratio 1.06 1.24 1.45 2.20
1.06
1.24 1.45
2.2
0
0.5
1
1.5
2
2.5
2013 2104 2015

25. Recommendation
1. Diversification
Diversification of the products and
service can help organization
improve their market share.
3. Invest in new project
Investment in the new project
can help organization to increase
their market share.
2. Social responsiveness
The company should create relationship
with the society. Organize the activities
that involve the citizen.