Digi 4G 19:30 30%, -- Part D (32 marks) You are an intern working in Invest Hub

Question

Digi 4G 19:30 30%, -- Part D (32 marks) You are an intern working in Invest Hub Sdn. Bhd. (IHSB) Currently IHSB is interested to invest RM500,000 in the stock market. Your manager has asked you to interpret the financial statement of a company of your choice (you may choose any public listed company from Bursa Malaysia) for the financial year 2017. Your team is required to produce arn analysis report, which focuses on specific aspects of financial performance and financial position of the chosen company. Your report should contain the following a Prepare the following ratio calculations (choose 9 ratios) based on the 2017 financial statements (use company figures rather than group figures). Please DO NOT select companies that has mutual funds / trust funds / REITs or whatever funds as their main type of business. Funds companies are NOT able to provide enough information needed for our ratio calculations. Try not to choose fully service oriented company with no products to sell, instead try to choose companies that sell f obtaining closing inventory). The financial statements namely SOCI, SOE, SOFP of the company should be products (for the purpose o attached in the assignment submission Profitability net profit margin, return on capital employed, capital turnover Liquidity - current ratio, quick ratio Working capital trade receivables collection period, trade payables payment period, Long-term solvency debt to assets ratio, (18 marks) inventory turnover gearing ratio, interest coverage

Explanation / Answer

RATIOS 2016 2017

1.NET PROFIT MARGIN (net income / operating revenue)

a.net income 134693 215144

b.operating revenue 1313462 1371882

net profit margin (a/b) 10.25% 15.68%

note:- since increase in net profit margin its a positive sign for investing as net profit margin gets increased either due to increase in sales or reduction in cost.

2.ROCE (EBIT / Capital employed)

a. EBIT 284862 298534

b.capital employed 740367 946629

ROCE (a/b) 38.47% 31.53%

note:- capital employed is the total of equity holders fund and long term borrowing.

when compared to previous year in 2017 it delivered some less return on capital employed but there might be situation where in 2017 dividend might have been paid which reduces retained earnings and which may reduce ROCE. that should also be seen.

3. CAPITAL TURNOVER (turnover / capital employed) 1.77times 1.45times

note:- it should be measured like how many times company made sales over capital and sales are reduced from above analysis. negative factor.

4.CURRENT RATIO
a. current assets 1030036 1212362

b. current liabilities 1576843 1506122

current ratio (a/b) 0.65 times 0.805times

note: it is favourable as it tells us how much liquidity is there in the company. i.e. higher the current ratio higher the liquidity.

5. TRADE RECEIVABLE COLLECTION PERIOD

a. sales 1313462 1371882

b. account receivable 544307 669933

c. a/b 2.41times 2.04times

d. total no.of days in a year 365 365

e. account receivable for period (d/c) 151.45 179

note:- collection period is more in 2017 compared to 2016. if ocollection perio is less it is a favourable situation as company is more liquidated.

Analysed the NESTLE in malaysia.

there can be many ratio analysis can be made and if majority are positive we can go with investing in the company.in short.

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