NAME

UK NUMBER

YONG KUENT HAN SITTI NAJWA BT SULONG @ ABDUL RAZAK SITI HAMIZA SHAIRA BT RIFIN NURUL NAZIRAH BT GHAZALI JAMALIA BT ABDUL GHANI

UK22685 UK23521 UK23624 UK23660 UK23728

 Hafiz was dilemma whether to use economic earnings as required by the Group or profits as practised by MarineCorp to report the financial performance of MarineCorp and its subsidiaries.

 Creating value requires investments on which returns exceed the capital cost of investment. Implementing a comprehensive value-based management system helps a company to attain the goal of value maximization. Value based management (VBM) system is where the performance of the company would be linked to performance evaluation and appraisal of the employees, and the value of a company would be measured by economic earnings.

 Economic earnings reveal where value is created and where value is destroyed. Ways to improve economic earnings: Invest in divisions where the returns on those divisions exceed the costs of capital. Increase the operating performance of its existing divisions thus increasing the net operating profits after tax (NOPAT) without increasing the finance charge.

 In practice, many organisations use profit-based measures as the primary measure of their financial performance. Two problems relating to profit in this area are: Profit ignores the cost of equity capital. Companies only generate wealth when they generate a return in excess of the return required by providers of capital which is both equity and debt.

Profits calculated in accordance with accounting standards do not truly reflect the wealth that has been created, and are subject to manipulation by accountants.

Profit (RM) Green Port 27,370,609 Sungai Emas Port 5,841,524 MarineCorp 15,348,792

Economic Earnings (RM)

31,381,168-(10% X 459,694,004) =(14,588,232) 5,218,364-(10% x 1,878,007) =5,030,563 15,128,917-(10% x 8,543,064) =14,274,611

 Hafiz needs to rank the companies in terms of their financial performance. To rank this we need to consider all factors which is profit based, economic earnings, profit margin, current ratio and return on asset.

MarineCorp

Green Port

Sungai Emas Port 5,841,524

Profit based

27,370,609

15,348,792

Economic Earnings

14,274,611

(14,588,232)

5,030,563

Profit Margin

15,348,792 53,123,159 =28.89% 21,016,419 8,517,304 =2.47 15,348,792 21,750,340 =70.57%

27,370,609 96,184,171 =28.46% 32,445,994 28,654,074 =1.13 27,370,609 492,433,648 =5.56%

5,841,524 24,311,065 =24.03% 21,217,253 7,165,503 =2.96 5,841,524 21,682,474 =26.94%

Current Ratio

Return on Asset

 Marine Corp has better financial performance compare to other companies even current ratio Sungai Emas is higher than Marine Corp but the different is not too large. Marine Corp still can pay the debt. Follow by Sungai Emas Port and lastly Green Port.

Capitalize expenses: dredging cost

Dividend payback back or invest?

 GM Green Port asked Hafiz to amortize the dredging cost. Why? - violate the accounting principle of prudent -increase the profit because expense will decrease Therefore, it gives benefits to Anita because the higher the profit, the higher bonus she will get.

 GM MarineCorp refuses to pay dividend to shareholder Why? Because for him, generate interest income on fund investment is better than giving dividend to shareholder. Investor will interested more to invest in company that have high profit When the profit is high, it will give the company be in top rank Therefore, this will make as his performance review is good in company

Review back goals, mission and vision of the organization Identify key metrics and measure key performance indicator (KPI) Create balanced scorecard to strategic performance Conduct research and implement the SWOT analysis Focus more in welfare of the employees

Appoint employee that fulfill the requirement that have been set by the companies
Focus on stakeholders retention