INTRODUCTION

DiGi.Com Berhad is listed on Bursa Malaysia Securities Berhad, and is part of global
telecommunications provider Telenor Group. DiGi continues to be a game-changer for the
Malaysian telecommunications industry. They have a solid history of product and service
innovation, and we are a leader in driving progressive and responsible business practices in the
provision of mobile voice and mobile internet services. The Group is committed to driving
Malaysias growth by building a mobile internet environment that enables true connectivity and
creates socio-economic development. DiGis vision is being a company that is always Changing
the Game. They do this by constantly pushing the boundaries, dening new standards, and
ensuring continuous improvements in all parts of our businesses. Meanwhile, DiGis mission is
to deliver Internet for all as part of our commitment to building a connected Malaysia, enabling
access to mobile internet services and applications by offering customers the right combination
of devices, value pricing, and the best usage experience of mobile internet (Andrian et al., 2010).
On the other hand, Axiata is one of the largest Asian telecommunications companies. Axiata has
controlling interests in mobile operators in Malaysia, Indonesia, Sri Lanka, Bangladesh and
Cambodia with significant strategic stakes in India and Singapore. In addition, the Malaysiangrown holding company has a stake in mobile telecommunication operations in Thailand. The
Group's mobile subsidiaries and associates operate under the following brands - Celcom in
Malaysia, XL in

Indonesia, Dialog in

Sri

Lanka, Robi in

Bangladesh, HELLO in

Cambodia, Idea in India and M1 in Singapore.

The Group, including its subsidiaries and associates, has over 200 million mobile subscribers in
Asia. The Group revenue for 2011 was USD5.4 billion. The Group provides employment to over
20,000 people across Asia. Axiata's vision is to be a regional champion by 2015 by piecing
together the best throughout the region in connectivity, technology and talent, uniting them
towards a single goal: Advancing Asia (Sharpe, 1994).

DISCUSSION
Asset Management Ratio and Laverage Ratio
Laverage is a way to use the funds where most of the money raised by borrowing rather than
through the issuance of shares (for a company) or using the capital (by individuals). At its most
basic, leverage means taking a loan so that you can invest money and hope your investments are
making more money than you would have to pay interest on the loan. Leverage ratios are used to
calculate the financial leverage of the company. This information provides insight into the
methods of financing the company, or it can be used to measure the company's ability to meet its
financial obligations. There are several different ratios, but the main factor involved is debt,
equity, assets, operating income, and interest expense. The most commonly used ratio is the debtto-equity (D / E, or financial leverage), which shows how many businesses rely on debt
financing. In normal conditions typical D / E ratio is 2:1, with only one-third of long-term debt.
A high D / E ratio may appear possible difficulties in paying interest and capital while obtaining
additional financing. For example, if a company has $ 10 million in debt and $ 20 million of
equity, it has a ratio of D / E 0.5 ($ 10 million / $ 20 million). Another benefit ratio can be used
to measure the mix of operating costs. This helps to show how any change in output can affect
operating income. There are two types of operating costs: fixed and variable. This mix will vary
depending on the company and industry. A high operating leverage can lead to risk prediction.
For instance, a small error made in forecasting sales can trigger much larger errors when it comes
to cash flow forecast based on sales. There is also interest coverage, which measures the margin
of safety, and shows how many times the company can make interest payments. This figure is
calculated by dividing earnings before interest and taxes by interest expense (Merton, 1995).

1st Company DIGI

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DIGI is owned in majority by Telenor ASA of Norway with 49%. On the 24 May 1995, the DIGI
became the first Telco in the Malaysia and they start to launch and operate a fully digital cellular
network. DIGI are also the first to offer the GPRS and later EDGE in Malaysia in 14 May 2004.
They use the native dialing prefix identifier of 010, 0143, 016, 0146 and the 0149.

2nd Company Axiata Group Berhad

The Axiata Group Berhad is the emerging leader in Asian mobile telecommunications. The
group, one of the largest telecommunications company in the region, has extensive operations
and businesses in other 10 countries in Asia. They provide a comprehensive range of mobile
communication services to a combined base of over 94 million subscribers. The Group currently
has controlling the interests in its mobile communications operations in Indonesia, Bangladesh,
Sri Lanka, Cambodia and Malaysia as well as strategic stakes in Iran, Singapore, Pakistan, India
and Thailand through its various subsidiaries and affiliates. Their mobile subsidiaries and
affiliates operate under the brand names XL in Indonesia, AKTEL in Bangladesh, Dialog
in Sri Lanka, Hello in Cambodia, M1 in Singapore, MTCE in Iran, Idea in India.
Comparison
First, the liquidity ratio is used to determine the ability of the company to clear short term debt
obligations. Liquidity ratios include net working capital, the acid test (quick) ratio and current
ratio. The current ratio is used to measure the ability to meet current liabilities from current
assets. Net working capital is a measure of operating liquidity available for companies to use in
developing and expanding the business. On the acid-test ratio (quick), it is a more conservative
version of the current ratio, and it is used to show the relative liquidity of the firm except for
inventories to current liabilities. The main difference between the quick ratio and current ratio
quick ratio does not include inventory. The formula used to calculate the current ratio (current
assets / current liabilities), and the formula used to calculate the Net Working Capital (Current
Assets - Current Liabilities) and about the formula used to calculate the Acid Test Ratio (Current
Assets - (Inventory + prepaid expenses) / Current Liabilities) (DeAngelo et al., 2002).
DIGI vs Axiata
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Current Ratio = 874,096 / 2,025,786 = 0.431

Current Ratio = 3,697,735 / 6,633,770 = 0.557
Net Working Capital = 874,096 2025786 = 1,151,690
Net Working Capital = 3,697,735 6,633,770 = 2,936,035
Acid-Test Ratio = 874,096 (13,061 + 0) / 2,025,786 =0.425
Acid-Test Ratio = 3,697,735 (35,344 + 0) / 6,633,770 =0.552

As a result, the current ratio between Axiata DIGI and not more than one, so that means that they
are difficult to meet their short-term obligations. But during Aixata ratio is higher than DIGI, so
that means that Axiata is better than DIGI as Axiata has a better position to meet the short-term
finance their short-term debt obligations. Second, the net working capital of DIGI and Axiata,
DIGI is better than Axiata for DIGI net working capital is higher than Axiata. But DIGI and
Axiata may have difficulty repaying creditors in the short term because they are not current
assets exceed current liabilities them. Next, about the acid test ratio between DIGI and Axiata,
Axiata is higher than the DIGI so means that Axiata is better because Axiata has a greater ability
to meet their short-term obligations with their liquid assets. But the acid test ratio and AxiataDIGI is less than one, which will cause the firm will hard to meet their current obligations.
Next is the use of assets (activity) ratio, this ratio is used to determine how effectively the firm
manage their assets, and it is necessary to assess the liquidity or specific account activity time.
Including asset utilization ratio "Accounts receivable turnover", "average collection period",
"Inventory turnover ratio," "Fixed asset acquisition" and "total asset turnover". Accounts
receivable turnover is used to indicate the number of times the firm collect their credit
throughout the year. The formula used to calculate the accounts receivable (net credit sales /
Average accounts receivable). The second is the average collection period, was used to indicate
the number of days that the firm takes to collect on their receivables. Formula Average collection
period (credit sales Accounts receivable / Daily). Next is the inventory turnover ratio, this ratio is
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used to indicate how many times the inventory of a firm is replaced and sold during the year.
Formula inventory turnover ratio (cost of goods sold inventory / average). For the acquisition of
fixed assets, this ratio is used to measures the firm's ability to generate revenue or income from
fixed asset investments. Formula acquisition of fixed assets (net sales / total fixed assets). Here is
the total asset turnover; it is used to assess the ability of a firm to use assets efficiently to
generate income (Gerpott et al., 2008).

The formula of calculate the total asset turnover is (net sales / total asset)
DIGI vs Axiata
Accounts receivable turnover= 4,909,565 / (420,336 + 420,807) / 2 = 4,909,565 / 420,571.5
= 11.67
Accounts receivable turnover =13,105,054 / (1,559,158 + 1,539,878) / 2 =13,105,054 / 1,549,518
= 8.46
Average collection period = 420,336 / (4,909,565 / 365) = 420,336 / 13,451 =31.25
Average collection period = 1,559,158 / (13,105,054 / 365) = 1,559,158 / 35,904 = 43.43
Inventory turnover ratio = N/A / 15,057
Inventory turnover ratio = N/A / 56,303.50
Fixed asset turnover = 4,909,565 / 3,858,348 = 1.27
Fixed asset turnover = 13,105,054 / 11,630,137 = 1.13
Total Asset turnover = 4,909,565 / 4,732,444 = 1.04
Total Asset turnover = 13,105,054 / 37,144,355 = 0.35

As a result, accounts receivable turnover is higher than DIGI Axiata so that DIGI is better
because accounts receivable higher mean that DIGI more efficient in the collection of accounts
receivable and credit extension. On average collection period, Axiata is higher than the DIGI, so
that means that DIGI is better than Axiata for short collection period means DIGI can receive
quick payment by the debtor and which will also reduce the chance of bad debts. Further, the
acquisition of fixed assets, DIGI is higher than Axiata, so it means that DIGI is better. That also
means that DIGI is more efficient to use their fixed assets to generate revenue or income. After
that, the turnover of total assets is higher than the DIGI Axiata, so DIGI is better than Axiata. As
a result, it means that DIGI is more efficient to use their assets to generate income.
Next is the leverage ratio, and also can call the debt management ratios are used to assess the
ability of firms to use their assets efficiently to generate income. Further, it also shows a firm's
ability to meet long-term obligations as they become due. In addition, it also focuses on longterm structural financial and business operations. Leverage ratios include debt ratio, debt / equity
ratio and times interest earned (interest coverage) ratio. Debt ratio is used to indicate the
percentage of the total funds raised from creditors, such as suppliers or banks. The formula used
to calculate the debt ratio (Total Liabilities / Total Assets). Second is the debt / equity ratio, this
ratio is an important measure of solvency since a high degree of debt in the capital structure can
make it difficult. The formula used to calculate the debt / equity ratio (Total Liabilities /
Shareholders' equity was). Next are the times interest earned (interest coverage) ratio. This ratio
reflects the number of times pre-tax earnings for interest rate protection and it also shows how
much of a reduction in the total income of the company can absorb.

The formula of calculate the times interest earned ratio is (Earnings before interest and tax
/ Interest expense).

Debt Ratio = 3,210,976 / 4,732,444 = 0.68

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Debt Ratio = 18,263,907 / 37,144,355 = 0.5

Debt/Equity ratio = 3,210,976 / 1,521,468 = 2.1
Debt/Equity ratio = 18,263,907 / 18,184,085 = 1
Times interest earned ratio = 1,407,045 / 40,590 = 34.66
Times interest earned ratio = 3,425,252 / 759,031 = 4.5

First, regarding the debt ratio, the ratio of Axiata DIGI and not greater than 1, this means that
their debt is less than their assets. But Axiata debt ratio is lower than the DIGI, so it means that
Axiata is better. Next is the ratio of Debt / Equity ratio is less than DIGI Axiata, so that means
that Axiata is better than DIGI as Axiata has more ability to use their equity to pay liabilities.
About time interest earned ratio, DIGI is higher than Axiata so means that Axiata is better than
for DIGI has a high ratio of the importance of time, which shows that the DIGI have undesirable
lack of debt or they are paying too much debt.
The next ratio, this ratio is an indicator of this firm's financial situation this year. In addition, this
ratio is also used for the analysis of how effective the firm is managed and how the company's
ability to earn profits and return on investment. Profitability ratios include gross profit margin,
net profit margin, return on total assets and return on common equity. The gross profit margin is
the percentage of each dollar that was left after the business has to pay for their goods. Formula
calculate gross profit margin (gross profit / net sales). Second is the net profit margin, it shows
the profit generated from the revenue or income and it is an important measure of operating
performance. The formula uses to calculate the net profit margin (net profit / net sales). The third
is the return on total assets, it shows the efficiency of the management has used the resources
available to generate income. The formula used to calculate the return on total assets (Net
Income / Average Total Assets). Here is the return on common equity; it shows the rate of return
earned on the investment of common stock (DeAngelo et al., 2002).

The formula used to calculate the return on common equity (Income Available to Common
Shareholders / Average Shareholders' Equity.

Gross profit margin = N/A / 4,909,565

Gross profit margin = N/A / 13,105,054
Net profit margin = 1,000,471 / 4,909,565 = 0.2
Net profit margin = 1,755,908 / 13,105,054 = 0.13
Return on total assets = 1,000,471 / 4,694,148 = 0.21
Return on total assets = 1,755,908 / 37,248,376 = 0.05
Return on common equity = 1,000,471 / 1,709,320 = 0.59
Return on common equity = 1,755,908 / 14,700,404 = 0.12

First, about the net profit margin, the ratio is higher than the DIGI Axiata so mean DIGI is better
because DIGI have more capacity to accommodate them when times were hard and it also has
more advantages over their competition. Second, about the return on total assets, DIGI is higher
than Axiata, which means DIGI is better because the higher the return on total assets, the DIGI is
more effective to manage the resources available for them to generate income. Next, about the
return on common equity, DIGI is more than that it means DIGI Axiata is better because of
higher returns on common quity means that DIGI has generated more money than the return on
investment of internal common shareholders.
The last ratio is the ratio of market value, this ratio is related to the firm's stock price to earnings
or book value per share. In addition, the inventors also use this ratio to monitor and evaluate
progress in their investments. The ratio of the market value including the earnings per share, the
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price / earnings ratio, book value per share and the dividend ratio. Earnings per share are
showing total revenue for each ordinary share held. The formula used to calculate earnings per
share ({Net Income - Dividend Option} / Total common shares outstanding). Second, about the
ratio of the price / earnings, it shows that the company considers investing public. The formula
used to calculate the price / earnings ratio (Market Price Per Share / Earnings Per Share). Third,
the book value per share, it is similar to the income per share but has shareholders' equity relate
to the number of outstanding shares and stock raw value.

CONCLUSION
Ratio Asset Management attempted to measure the success of the firm in managing its assets to
generate sales. For example, this ratio can provide insight to the success of a firm credit policy
and inventory management. This ratio is also known as Activity or turnover ratios. Financial
leverage ratio is of little use in isolation. To make meaningful conclusions about the company's
financial health, trend analysis and industry analysis to be done. Trends and industry analysis
will tell how managed financial position. The trend analysis will show whether the company's
financial position improved or deteriorated over time. Industry analysis will show how
companies perform compared to other companies in the same industry. Companies need to
carefully manage their financial leverage ratio to ensure their financial risk at an acceptable
level. Careful management of financial leverage ratio is also important when applying for a loan
from banks and financial institutions. Favorable ratio can help companies to negotiate a
favorable interest rate.
(2953 words)

REFERENCES
Adrian, T., & Shin, H. S. (2010). Liquidity and leverage. Journal of financial
intermediation, 19(3), 418-437.
DeAngelo, H., DeAngelo, L., & Wruck, K. H. (2002). Asset liquidity, debt covenants, and
managerial discretion in financial distress:: the collapse of LA Gear. Journal of Financial
Economics, 64(1), 3-34.
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Gerpott, T. J., Thomas, S. E., & Hoffmann, A. P. (2008). Intangible asset disclosure in the
telecommunications industry. Journal of intellectual capital,9(1), 37-61.
Merton, R. C. (1995). Financial innovation and the management and regulation of financial
institutions. Journal of Banking & Finance, 19(3), 461-481.
Sharpe, W. F. (1994). The sharpe ratio.

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