Vous êtes sur la page 1sur 15

2. Ratio Analysis Definition: expresses the relationship among selected items of financial statement data.

Financial ratio classified into three categories, liquidity ratio, profitability ratio and solvency ratio.

Current Ratio A liquidity ratio that measures a companys ability to pay short term obligations.

Current Ratio

2010

= = = =

Current Assets Current Liabilities 35,343,809 35,774,652 0.99 0.99 : 1

The ratio of 0.99: 1 means that for every ringgit of current liabilities, Hwa Tai has RM0.99 of current assets.
Current Ratio
2009

= = = =

Current Assets Current Liabilities 36,746,539 37,634,489 0.98 0.98 : 1

The ratio of 0.98 : 1 means that for every ringgit of current liabilities, Hwa Tai has RM0.98 of current assets.
Current Ratio
2008

= = = =

Current Assets Current Liabilities 35,795,328 45,486,169 0.79 0.79 : 1

The ratio of 0.79 : 1 means that for every ringgit of current liabilities, Hwa Tai has RM0.79 of current assets.

Current Ratio and Acid Test Ratio


Current Ratio Acid Test Ratio Series 3

0.99 0.8

0.98 0.83 0.79 0.65

2010

2009

2008

Based on the output of current ratio, for every three year, Hwa Tai ratio is under 1. Because of this matter, Hwa Tai would be unable to pay off its obligations. This data shows that the company is not in a good financial health but it does not mean that Hwa Tai will go bankrupt. Acid Test ratio This indicator to determine whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assets.

Acid Test Ratio

2010

Cast + Short Term Investment + Receivables (Net) Current Liabilities = 28,530,006 35,774,652 = 0.80 = 0.80 :1

Acid Test Ratio

2009

= =

Cast + Short Term Investment + Receivables (Net) Current Liabilities 31,403,261

37,634,489 = 0.83 = 0.83 :1 Acid Test Ratio = Cast + Short Term Investment + Receivables (Net) Current Liabilities = 29,411,898 45,486,169 = 0.65 = 0.65 : 1

2008

Acid test ratio for the respective three years shows that Hwa Tai always gain less than 1 ratio. Its shows that this company cannot pay their current liabilities and should be looked at with extreme caution. This acid test ratio is much lower compare to current ratio, it means the current assets for this company in highly dependent on inventory.

Receivable Turnover This ratio measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.
Receivables Turnover = Net Credit Sales Average Net Receivables = 77,016,224 25,424,055 = 3.03 = 3.03 times

2010

Average collection period

2010

365 days Receiveables Turnover = 365 3.03 = 120.49 = every 120 days

A high ratio implies either Hwa Tai operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient. Based on the output, Hwa Tai receivables are collected on average every 120 days.

Receivables Turnover

2009

= = = =

Net Credit Sales Average Net Receivables 72,125,922 27724051 2.60 2.6 times

Average collection period

2009

= = = =

365 days Receiveables Turnover 365 2.60 140.30 140 days

Based on the output, Hwa Tai receivables are collected on average every 140 days.

Receivables Turnover

2008

Net Credit Sales Average Net Receivables = 80,245,698 29129452.5 = 2.75 = 2.75 times

Average collection period

2008

= =

365 days Receiveables Turnover 365 2.75

= 132.50 = 132 days

Based on the output, Hwa Tai receivables are collected on average every 132 days. From the data in the three respective years, Hwa Tai took mostly more than 100 days to collect debts from the creditor and it will cause problem in running the business. Furthermore, this matter will decrease the confidence of the investor to invest in this company. Inventory Turnover This ration showing how many times a company's inventory is sold and replaced over a period

Inventory Turnover

2010

= = =

Cost of Goods Sold Average Inventory (54,393,416) 5,735,449 -9.48 9.48 times

Days in Inventory

2010

365 days Inventory Turnover = 365 -9.48 = -38.49 = 38.49 days

In 2010, 9.48 times Hwa Tai inventory is sold and replaced over a period. High inventory levels are seems unhealthy because it represents an investment with a rate of return of zero and it will give trouble to the company if the prices begin to fall.

Inventory Turnover

2009

Cost of Goods Sold Average Inventory = (49,769,251) 5684149 = (8.76) = 8.76 times = 365 days Inventory Turnover = 365 (8.76) = -41.69 = 41.69 days = Cost of Goods Sold Average Inventory = (63,838,577) 5855317.5 = (10.90) = 10.90times = 365 days Inventory Turnover = 365 (10.90) = -33.48 = 33.48 days

Days in Inventory

2009

Inventory Turnover

2008

Days in Inventory

2008

Profit Margin

This probability ratio measures how much out of every ringgit of sales a company actually keeps in earnings.

Profit Margin

2010

= Net Income Net Sales = 385,127 77,016,224 = 0.01 = 0.50 = 0.50%

Profit Margin

2009

= Net Income Net Sales = 2,051,989 72,125,922 = 0.03 = 2.85 = 2.85%

Profit Margin

2008

= Net Income Net Sales = 415,178 80,245,698 = 0.01 = 0.52 = 0.52%

Higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Based on the output in 2010, Hwa Tai got 0.50% profit margin. It means that the company has a net income of RM0.005 for each ringgit of sales. And this number did not show the good performance during 2010. Same goes to 2008, the company only has a net income of RM0.0052 for each ringgit of sales. However, this company had little increased their profit margin in 2009 which the company has a net income of RM0.0285 for each ringgit of sales. Asset Turnover

It measures the amount of sales generated for every ringgits worth of assets.

Asset Turnover

2010

Net Sales Average Assets

= 77,016,224 56502750.5 = 1.363052654 = 1 times

Asset Turnover

2009

Net Sales Average Assets

= 72,125,922 59901160.5 = 1.20 = 1 times Asset Turnover


2008

Net Sales Average Assets

= 80,245,698 63626216.5 = 1.26 = 1 times

Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue. The higher the number the better. It also indicates pricing strategy, companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover. But for Hwa Tai, they experienced low profit margin but still low in asset turnover.

Return on Assets

This indicator show how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. It also known as return on investment.

Return on Assets

2010

= Net Income Average Assets = 385,127 56502750.5 = 0.01 = 0.68 = 0.68%

Return on Assets

2009

= Net Income Average Assets = 2,051,989 59901160.5 = 0.03 = 3.43 = 3.43%

Return on Assets

2008

= Net Income Average Assets = 415,178 63626216.5 = 0.01 = 0.65 = 0.65%

ROA will tells company what earnings were generated from invested capital (assets). ROA for public companies can vary substantially and will be highly dependent on the industry. The ROA figure gives investors an idea of how effectively the company is converting the money it has to invest into net income. The higher the ROA number, the better, because the company is earning more money on less investment. From the outcome from three respective years, Hwa Thai does

not show the good ROA because they only got 0.68% for 2010, 3.43% in 2009 and 0.65% in 2008. We can conclude that, Hwa Tai earning less money on high investment. Return on Common Stockholders Equity This ratio show how many ringgit of net income the company earned for each ringgit invested by the owner.
Return on common Stockholder's Equity
2010

= =

Net Income - Preffered Dividends Average Common Stockholders' Equity 385,127 40042400

= 0.01 = 0.96 = 0.96% Return on common Stockholder's Equity


2009

= =

Net Income - Preffered Dividends Average Common Stockholders' Equity 2,051,989 40042400

= 0.05 = 5.12 = 5.12% Return on common Stockholder's Equity


2008

= =

Net Income - Preffered Dividends Average Common Stockholders' Equity 415,178 40042400

= 0.01 = 1.04 = 1.04%

From the result, it seems that in 2009, the owner of the company gain more profit compared to year 2010 and 2008.

Return on Common Stockholders' Equity


6.00% 5.00% 4.00% Percentage 3.00% 2.00% 1.00% 0.00% 2010 2009 2008 Return on Common Stockholders Equity

From the graph, it shows that this company is not doing well because the percentages keep on fluctuating from three respective years.

Earnings Per Share The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability. Earnings per share are generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio. From the companys annual report, it already stated that the Earning Per share for Hwa Tai companys is RM1 for 2010, RM5 for 2009 and RM1 for 2008. From here we can conclude that, Hwa tai shows increasing rate during 2009.

Price Earnings Ratio A valuation ratio of a company's current share price compared to its per-share earnings.

Price Earnings Ratio

2010

Market Price per Share of Stock Earnings Per Share = 0.56 1 = 0.56 = 0.56 times = Market Price per Share of Stock Earnings Per Share = 0.56 5 = 0.112 = 0.11 times = Market Price per Share of Stock Earnings Per Share = 0.56 1 = 0.56 = 0.56 times

Price Earnings Ratio

2009

Price Earnings Ratio

2008

In general, a high price earning suggests that investors are expecting higher earnings growth in the future compared to companies with a lower price earning. However, the price earnings ratio doesn't tell us the whole story by itself. It's usually more useful to compare the price earnings ratios of one company to other companies in the same industry, to the market in general or against the company's own historical price earning. It would not be useful for investors using the price earnings ratio as a basis for their investment to compare the price earning of a technology company (high price earning) to a utility company (low price earning) as each industry. It is important that investors note an important problem that arises with the price earning measure, and to avoid basing a decision on this measure alone. The denominator (earnings) is based on an accounting measure of earnings that is susceptible to forms of manipulation, making the quality of the price earning only as good as the quality of the underlying earnings number.

Payout Ratio The amount of earnings paid out in dividends to shareholders. Investors can use the payout ratio to determine what companies are doing with their earnings. For Hwa Tai, no dividend was paid or declared by the company since the end of the previous financial year. The directors do not recommend the payment of any dividends in respect of the financial year ended 31st December for the three respective year. Debt to Total Asset Ratio A ratio that indicates what proportion of debt a company has relative to its assets. The measure gives an idea to the leverage of the company along with the potential risks the company faces in terms of its debt-load.

Debt to Total Assets Ratio

2010

Total Debt Total Assets

= 16,029,961 55,460,793 = 0.289032308 = 28.90323079 = 28.90% Debt to Total Assets Ratio

2009

Total Debt Total Assets

= 15,632,505 57,544,708 = 0.271658429 = 27.16584295 = 27.10%

Based on the information of debt to total assets ratio for 2010 and 2009, the percentage of Hwa Tai is below than 30%. For this ratio, the higher percentage, it will give no benefits to the company because the company has to pay the higher interest to all their debt. Because of this matter, Hwa Tai have to pay less than 30% of their interest. Time Interest Earned

A metric used to measure a company's ability to meet its debt obligations. It is calculated by taking a company's earnings before interest and taxes (EBIT) and dividing it by the total interest payable on bonds and other contractual debt. It is usually quoted as a ratio and indicates how many times a company can cover its interest charges on a pretax basis. Failing to meet these obligations could force a company into bankruptcy. Also referred to as "interest coverage ratio" and "fixed-charged coverage".

Times Interest Earned

2010

= =

Income before Income Taxes and Interest Expenses Interest Expenses

722,004 (336,877) = -2.14322735 = 2.14times Times Interest Earned


2009

= =

Income before Income Taxes and Interest Expenses Interest Expenses

2,221,382 (169,393) = -13.11377684 = 13.11times Times Interest Earned


2008

= =

Income before Income Taxes and Interest Expenses Interest Expenses

457,177 (41,999) = -10.88542584 = 10.88times

From these three respective years result, we noticed that ratio for TIE is decrease from year 2008 to 2010. We can say that this company has to struggle in order to survive the company performance and to gain higher profit margin. Basically, for a good company, they need to have higher TIE because they will become easier for them to pay all the interest.

RATIO
Current Ratio Acid Test ratio Receivables Turnover Average Collective Period Inventory Turnover Days in Inventory Profit Margin Assets Turnover Return on Assets Return on Common Shareholder Equity Earnings Per Share Price Earnings Ratio Debt to Total Assets Ratio Time Interest Earned

2010
0.99:1 0.80:1 3.03times 120days 9.48times 38days 0.50% 1times 0.68% 0.96%

2009
0.98:1 0.83:1 2.6times 140days 8.76times 41days 2.85% 1times 3.43% 5.12%

2008
0.79:1 0.65:1 2.75times 132days 10.9times 33days 0.52% 1times 0.65% 1.04%

RM1 0.56times 28.9% 2.14times

RM5 0.11times 27.10% 13.11times

RM1 0.56%

10.88times

1.1 Summary for Liquidity Analysis, Profitability Analysis and Solvency Analysis