Basic Account Assignment: Financial Ratio Analysis

Group Members: Ng Wai Khong (0317980)

Lee Jian Ru (0318132)
Bryan Teh Qing Da (0318590)

Course: FNBE (August Intake 2014)

Submission Date: 13th November 2014

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Background History of the company

Ann Joo Resources Berhad, started out primarily as a Scrap Metal dealer in 1946
by the late Mr.Lim Kah Seng which is the founder of this company and Ann Joo
had been listed in the Main Market of Bursa Malaysia Securities BHD since 26
November 1996, which is an investment holding company. Ann Joo are committed
in providing steel products and services, where it holds the highest among the
industries with uncompromising standards and quality. Ann Joo achieved highly
regarded reputation in the steel business as one of the countrys most prominent
steel experts, with wealth and experience and unparalleled expertise, has assured
Ann Joos position as the most trusted and reliable total business solution provider
of steel products and service in Malaysia.

Ann Joo Resources Berhad are separated into two main division which is the
manufacturing division and trading division:

The manufacturing division are the leading manufacturer of long products

ranging from billets, high yield deformed bards, mild steel round bars and
wire rods. Ann Joo Resources Berhad which is the first steel mill in
Malaysia and Southeast Asia to implement an integrated management
system incorporating three internationally-acclaimed certifications.
For the trading division, it holds one of the countrys leading distributors of
the most diverse range of high grade steel products for both local and
regional markets. It also holds a broadly diversified product portfolio
comprising of a large variety of flat and long products, both locally and
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manufactured and imported ranging from carbon steels, stainless steels to

specialty steels of various grades and dimension including alloy materials as
well as copper, brass and aluminum products.

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ANNUAL REPORT OF ANN JOO RESOURCES BERHAD

P&L Statement

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Balance Sheet

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Based on Basic Account, this assignment will assists us in developing a

better appreciation in ration analysis and interpretation as a tool for evaluating realworld companies, where our example company is Ann Joo Resources Berhad. By
reading and analyzing the annual reports of publicly-traded companies, we can
acquire valuable information such as deciphering various details present in the
accounting report, give informed opinions about the companys business
operations and make recommendations regarding the worthiness of the business
common shares as an investment medium.

So, the below are the ratios we have calculated:

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Return On Equity

Return On Equity = [ NET PROFIT / AVERAGE OWNER EQUITY ] x 100%

= [ 12,268 / 1,045,316 ] x 100%
= 1.17% (2013)

Return On Equity= [ NET PROFIT / AVERAGE OWNER EQUITY ] x 100%

= [ (18,867) / 1,059,851.50 ] x 100%
= -1.78% (2012)

During the year 2012-13 period, the Return on Equity has increased from -1.78%
to 21.7% which means the owner is getting more return from his capital than last
year.

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Net Profit Margin

Net Profit Margin= [ NET PROFIT / NET SALES ] x 100%

= [ 12,268 / 2,155,373 ] x 100%
= 0.57% (2013)

Net Profit Margin= [ NET PROFIT / NET SALES ] x 100%

= [ (18,867) / 2,110,760 ] x 100%
= -0.89% (2012)

During the year 2012-13 period, the Net Profit Margin has increased from -0.89%
to 0.57% which means the business is getting better at controlling its overall
expenses.

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Gross Profit Margin

Gross Profit Margin= [ GROSS PROFIT / NET SALES ] x 100%

= [ 197,588 / 2,155,373 ] x100%
= 9.17% (2013)

Gross Profit Margin= [ GROSS PROFIT / NET SALES ] x 100%

= [ 72,711 / 2,110,760 ] x100%
= 3.44% (2012)

During the year 2012-13 period, the Gross Profit Margin increase from 3.44% to
9.17% which means the ability of the business to control cost of good sales had
getting better.

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Selling Expenses Ratio

Selling Expenses Ratio= [ TOTAL SELLING EXPENSES / NET SALES ] x 100%

= [ 37,002 / 2,155,373 ] x100%
= 1.72% (2013)

Selling Expenses Ratio= [ TOTAL SELLING EXPENSES / NET SALES ] x 100%

= [ 30,523 / 2,110,760 ] x100%
= 1.45% (2012)

The selling expenses is obtain through distribution expenses, since other operating
expenses is more on assets and operations. During the year 2012-13, the Selling
Expenses Ration has increase from 1.45% to 1.72% which means the business is
getting worsen at controlling its selling expenses.

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General Expenses Ratio

General Expenses Ratio= [ TOTAL GENERAL EXPENSES / NET SALES ] x 100%

= [ 80,019 / 2,155,373 ] x100%
= 3.71% (2013)

General Expenses Ratio= [ TOTAL GENERAL EXPENSES / NET SALES ] x 100%

= [ 84,457 / 2,110,760 ] x100%
= 4.00% (2012)

During the year 2012-13, the General Expenses Ratio has decrease from 4% to
3.71% which means the ability of the business to control its general expenses has
improved.

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Financial Expenses Ratio

Financial Expenses Ratio= [ TOTAL FINANCIAL EXPENSES / NET SALES ] x 100%

= [ 58,217 / 2,155,373 ] x100%
= 2.7% (2013)

Financial Expenses Ratio= [ TOTAL FINANCIAL EXPENSES / NET SALES ] x 100%

= [ 30,418 / 2,110,760 ] x100%
= 1.44% (2012)

During the year 2012-13, the Financial Expenses Ratio has increase from 1.44% to
2.7% which means the ability of the business to control its financial expenses has
gotten worsen.

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Working Capital

Working Capital= [ TOTAL CURRENT ASSETS / TOTAL CURRENT LIABILITIES ]

= 1,896,641 / 1,722,102
= 1.1 : 1 (2013)

Working Capital= [ TOTAL CURRENT ASSETS / TOTAL CURRENT LIABILITIES ]

=1,697,828 / 1,451,752
= 1.17 : 1 (2012)

During the year 2012-13, the Working Capital Ratio has decrease from 1.17:1 to
1.1:1. This means the business ability to pay current liabilities with current assets is
getting worsen. In addition, it does not satisfy the minimum requirement of 2:1.

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Total Debt

Total Debt= [ TOTAL LIABILITY / TOTAL ASSETS ] x 100%

= [2,048,914 / 3,098,109] x 100%
= 66.13% (2013)
Total Debt= [ TOTAL LIABILITY / TOTAL ASSETS ] x 100%
= [1,874,889 / 2,916,326] x 100%
= 64.29% (2012)

During the year 2012-13, the Total Debt ratio has increase from 64.29% to 66.13%.
This means that the business overall liability has increased. However, the
maximum limit is still over 50%.

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Stock Turnover

Stock Turnover= 365 / [ COGS / AVERAGE INVENTORY ]

= 365 / [ 1,957,785 / 1,394,627 ]
=260 days (2013)
Stock Turnover= 365 / [ COGS / AVERAGE INVENTORY ]
= 365 / [ 2,038,049 / 1,309,785 ]
=235 days (2012)

During the year 2012-13, the Stock Turnover ratio has increase from 235 days to
260 days. This means the business is selling its products at a slower rate.

Debtor Turnover
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Debtor Turnover= 365 / [ CREDITS SALES / AVERAGE DEBTORS ]

= 365 / [ 2,155,373 / 335,767.50 ]
= 57 days (2013)
Debtor Turnover= 365 / [ CREDITS SALES / AVERAGE DEBTORS ]
= 365 / [ 2,110,760 / 282,584 ]
= 49 days (2012)

Due to the absence of credit sales, we take the revenue as an example of credit
sales. During the year 2012-13, the Debtor Turnover Ratio has increased from
49days to 57 days. This means the effectiveness of a business collecting its debts is
slower.

Interest Coverage
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Interest Coverage= [INTEREST EXPENSES + NET PROFIT] / INTEREST EXPENSES

= [ 58,217 + 12,268] / 58,217
= 1.21 times (2013)
Interest Coverage= [INTEREST EXPENSES + NET PROFIT] / INTEREST EXPENSES
= [ 30,418 + (18867) ] / 30,418
= 0.38 times (2012)

During the year 2012-13, the Interest Coverage ratio has increase from 0.38 times
to 1.21 times. This means that the business ability to pay its interest expenses has
become better. In addition, the business Interest Coverage Ratio does not satisfies
the minimum requirement of 5.

P/E Ratio
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P/E Ratio = Current Share Price / Earnings Per Share (in numbers of times)

Based on BloomBerg, which is one webpage that we can view the latest news for
shares market.
So, on the date (12 November 2014), the current share price is RM1.16 and its
earnings per share is RM0.0364. This means the P/E ratio of Ann Joo Resources
Berhad is 31.868 (1.16/0.0364).

Conclusion
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The profitability is quite unsatisfying due to the loss that occurred in the year 2012
and the few profits earned in year 2013. Due to the loss in the year 2012, it has
caused the Return on Equity and Net Profit Margin to undergo a negative
percentage which gives a bad sign for the investors. But luckily in year 2013, it
started to develop better and started to cover up their loss bit by bit. However, the
profit earned in 2013 is insufficient to cover up the overall expenses and debts
from the year 2012, so I take that as a non-profitable company to invest in.

On the other hand, the stability of the company is inconsistent due to Selling and
Financial Expenses Ratio which are getting worse year by year, and only the
General Expenses Ratio gives a positive feedback but as an investor, the positive
feedback from the General Expenses Ratio does not matter at all. Thus, we need to
improve these three expenses so that it will improve the stability. Sadly, the
Working Capital, Stock Turnover and Debtor Turnover also produces
unsatisfactory results. Imagine if the Stock Turnover and Debtor Turnover began
getting worse as years pass. So, it will affect the investors decision a lot and even
though the company still can sell their products at a slower rate, the debtors might
return the money slowly or even turn out to be bad debts. Of course, this is still
quite a big loss to the company.

Lastly, the P/E ratio which is 31.868, this means that the investors would still need
to wait another 30 years to claim back the original principal he or she invested. As
investor, if the P/E ratio is more than 15, investor take it as a sign to avoid
investing in this company. Hence the answer is a NO to invest in this company
since everything is leading to a negative outcome.

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REFERENCE

1. Ann Joo Resources Berhad ( 2013. December 31) Annual Report 2013.
Retrieved from http://www.annjoo.com.my/
2. BloomBerg ( 2014. November 12) Ann Joo Resources Berhad. Retrieved
from http://www.bloomberg.com/

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