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Trimester 2 Year 2010/2011

Assignment

Company Analysis

Subject : Financial Statement Analysis

Subject code : BAC 2684Company : Golden Pharos Berhad

: Kenmark Berhad

Lecturer Name : Nik Mohamad Zaki Bin Nik Salleh

Group Member:

Name Student ID Major

Kong Dickson 1081108469 Bachelor of Accounting

Wong San Jian 1091106362 Bachelor of Accounting

Soo Kwee Lee 109110 6069 Bachelor of Accounting

Cynthia Hang Hui Xin 108110 7960 Bachelor of Accounting

Yap Li Ying 108110 7944 Bachelor of Accounting


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Table of Content

No. Content Page Number

1 Introduction 2

2 Ratio Analysis Kenmark 2009 3, 4, 53 Ratio Analysis Kenmark 2008 6, 7, 8, 9

4 Ratio Analysis Golden Pharos 2009 10, 11, 12, 13

5 Ratio Analysis Golden Pharos 2008 14, 15, 16, 17

6 Report Analysis 18, 19, 20,21,22

7 Conclusion 23

8 Reference 24

Introduction


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Kenmark Industrial Co. (M) Bhd and Golden Pharos Berhad are Malaysia-based companies

which focus on manufacturing activities.

The main products that manufactured by Kenmark Industrial Co. (M) Bhd are computer

workstations, cabinets, furniture, investment holdings, plastic injections for furniture parts, and

assembly and distribution of liquid crystal display (LCD). The products they manufactured will

be exported to several countries. The company also owned several subsidiaries including the

Kenmark Paper Sdn Bhd, Kenmark (Labuan) Limited, Pheonix International Group Limited and

Billion Bynamic Sdn Bhd.

Meanwhile, Golden Pharos Bhd engaged in investing holding and provision of management

services to the subsidiaries. There are six direct subsidiaries, several indirect subsidiaries and

associated companies under the company. The companys operations were carried out in

Malaysia and other regions such as United States, United Kingdom, and others. The core

business of doors was engineered doors and balance, solid panelled and glazed doors and were

manufactured and marketed in United Kingdom, United States, Europe, Australia and South

Korea.

The main purpose of the report is to analyse and evaluate the financial performance of these two

companies in order to get an accurate, clear and full report for the company to make their

investment decision.

Calculation


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Kenmark 2009 (Group)

Profitability Ratio

Net Profit Margin

= Net Profit after Tax Net Sales

= 3858 259408

= 1.49%

Return on Asset

= Net Profit after Tax Total Assets

= 3858 550036

= 0.70%

Return on Equity

= Net Profit after Tax Shareholders Equity

= 3858 341131

=1.13%

Efficiency Ratio

Account Receivable Turnover

= Net Credit Sales Average Account Receivable

= 259408 [(164265+5130+126626+5119)/2 ]

=1.72

Fixed Asset Turnover

= Net Sales Net Property, Plant and equipment


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= 259408 311516

= 0.83

Sales to net working capital

= Net Sales (Account Receivable + Inventory Account Payable)

= 259408 (164265+5130+39845-41056)

= 1.54

Account Payable to Sales

= Account Payable Sales Revenue

= 41056 259408

= 0.16

Liquidity Ratio

Current Ratio

= Current Asset Current Liability

= 211763 131683

=1.61

Acid- Test Ratio

= (Cash and cash equivalents + Marketable Securities +Account Receivable) Current Liabilities

= (543+164265+5130) 131683

= 1.29

Collection Period

= Average Account Receivable Sales/360


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= [(164265+5130+126626+5119) /2] (259408 /360)

= 208.96 days

Days to Sell Inventory

= Average Inventory Cost of Sales /360

= [(39845+29033) /2] (230498 /360)

= 53.79 days

Financial Gearing Ratio

Debt to Total Asset Ratio

= Total Debt Total Asset

= (164265+5130) 550036

= 0.31

Equity Ratio

= Owners Equity Total Asset

= 341131 550036

= 0.62

Debt to Equity

= Total Liabilities Shareholders Equity

= 208905 341131

= 0.61

Investment Ratio

Return on Common Equity


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= Net Income Average Shareholders Equity

= 3858 [(341131+323804) /2]

= 1.16 %


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Kenmark 2008 (Group)

Profitability Ratio

Net Profit Margin


= 10111 308673

= 3.28%

Return on Asset


= 10111 538971

= 1.88%

Return on Equity


= 10111 323804

=3.12%

Efficiency Ratio



= 308673 [(126626+5119+97656+5387)/2]

=2.63


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= 308673 330186

= 0.93



= 308673 (126626+5119+29033-49484)

= 2.77



= 49484 308673

= 0.16

Liquidity Ratio

Current Ratio


= 181388 139092

=1.30

Acid- Test Ratio


= (18892+126626+5119) 139092

= 1.08


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Collection Period


= [(126626+5119+97656+5387) /2] (308673 /360)

= 136.91 days



= [(29033+33655) /2] (273936 /360)

= 41.19 days




= (126626+5119) 538971

= 0.24

Equity Ratio


= 323804 538971

= 0.61

Debt to Equity


= 215167 323804

= 0.66


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Investment Ratio



= 10111 [(323804+328514) /2]

= 0.03 %


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Golden Pharos 2009 (Group)

Profitability Ratio

Net Loss Margin

= Net Loss after Tax Net Sales

= 13405 83733

= 16.01%

Return on Asset

= Net Loss after Tax Total Assets

= 13405 550036

= 24.36%

Return on Equity

= Net Loss after Tax Shareholders Equity

= 13405 70752

=18.95%

Efficiency Ratio



= 83733 [(11410+6004+17026+7929)/2]

=3.95


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= 83733 28602

= 2.93



= 83733 (11410+6004+21599-13790)

= 3.32



= 13790 83733

= 0.16

Liquidity Ratio

Current Ratio


= 58174 27219

=2.14

Acid- Test Ratio


= (16228+11410+6004) 27219

= 1.24


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Collection Period


= [(11410+6004+17026+7929) /2] (83733 /360)

= 91.08 days



= [(21599+34108) /2] (77975 /360)

= 128.60 days




= (11410+6004) 104005

= 0.17

Equity Ratio


= 70752 104005

= 0.68

Debt to Equity


= 33253 70752

= 0.47


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Investment Ratio



= 13405 [(70752+84157) /2]

= 17.31 %


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Golden Pharos 2008 (Group)

Profitability Ratio

Net Profit Margin


= 5007 114442

= 4.38%

Return on Asset


= 5007 121714

= 4.11%

Return on Equity


= 5007 84157

=5.95%

Efficiency Ratio



= 114442 [(17026+7929+17449+12027)/2]

=4.21


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= 114442 29088

= 3.93



= 114442 (17026+7929+34108-17296)

= 2.74



= 17296 114442

= 0.15

Liquidity Ratio

Current Ratio


= 75336 31059

=2.43

Acid- Test Ratio


= (15844+17026+7929) 31059

= 1.31


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Collection Period


= [(17026+7929+17449+12027) /2] (114442 /360)

= 85.61 days



= [(34108+25483) /2] (91348/360)

= 117.42 days




= (17026+7929) 121714

= 0.21

Equity Ratio


= 84157 121714

= 0.69

Debt to Equity


= 37557 84157

= 0.45


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Investment Ratio



= 5007 [(84157+73619) /2]

= 6.35%


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Report Analysis

Profitability Ratios

Profitability ratios measure the organizations profitability. It includes gross profit margin,

operating profit margin, net profit margin, the return on assets (ROA) ratio, and the return on

equity (ROE) ratio.

The Net Profit Margin determines the portion of profit generates over each dollar of sales.

The Net profit margin of Kenmark 2008 and 2009 decreased from 3.28% to 1.49%. Kenmarks

profit margin indicates that either the numbers of sales increase but not the profit, or the net

profit drops; and in this case, both of them dropped. Meanwhile, the Golden Pharos profitmargin had dropped from 4.38% in 2008 to loss margin of 16.01% in 2009. This is because

Golden Pharos had incurred a net loss in 2009.

The Return on Asset (ROA) ratio determines the amount of income each dollar of assets

generates.

The Kenmark have the ROA ratio decreased from 1.88% to 0.7%. This indicates that each dollar

of Kenmark assets produced income had dropped due to the decrease in net income. In the same

time, Golden Pharos had incurred negative return on asset of 24.36% in 2009, which is $0.16 of

lost is incurred whenever there is a dollar of asset is produced. In the year of 2008, Golden

Pharos has 4.1% of ROA ratio and it is said to be each dollar of Golden Pharos asset produced

income almost of $0.04 in the year 2008.

The Return on Equity (ROE) is used to determine the amount of income produced for each

dollar that common stockholders have invested.

An ROE in Kenmark 2009 indicates that the company returned 1.13% for every dollar investedby common stockholders which is 1.99% lower compare in the group of 2008. The Kenmark

returned 3.12% in the group 2008. Golden Pharos had incurred 18.85% for every dollar invested

by common stockholders in 2009 which a loss is incurred while 5.95% of return in the group of

2008.


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Liquidity Ratios

Liquidity ratios measure the organizations ability to meet short-term obligations.

The Current Ratio is used to determine whether the company has a sufficient amount of current

assets to pay off current liabilities.

A current ratio of 1.30 in 2008 had increase to 1.61 in 2009 by the Kenmark. This indicates that

the company has $1.30 in 2008 and $1.61 in 2009 of current assets for every $1.00 of current

liabilities. In Golden Pharos, there is a slight decrease from 2008 to 2009 which is 2.43 to 2.14.

This indicates that Golden Pharos has $2.43 in 2008 and $2.14 in 2009 of current asset for every

$1.00 of current liabilities.

However, Kenmark has longer collecting period of 137days in 2008 compare to 2009 which is

209days while Golden Pharos has shorter collection period of 86days in 2008 and 91days in

2009. 209days is a ridiculous and it indicates that Kenmark is collecting their debt almost once a

year.

The Acid- Test ratio is used to determine the company's ability to repay current liabilities after

the least liquid of its current assets is removed from the equation.

Kenmark has an acid- test ratio of 1.29 during 2009 and 1.08 during 2008. This indicates that

the company could pay off 129% in 2009 and 108% in 2008 of its current liabilities by

liquidating all current assets other than inventory. In 2008, Golden Pharos could pay off 131%

more than 124% in 2009 of its current liabilities by liquidating all current assets other than

inventory.

The days to sell of the inventory in Kenmark is 54 days in 2009 which is longer compare to 2008

which is only 41 days. Golden Pharos have shorter period of 117 days to sell of the inventory in

2008 compare to 2009 which took long period by 128 days. The lesser days the company use to

sell off the inventories, the better the company.


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Financial Gearing Ratio measures the amount of debt an organization is using and the ability of

the organization to pay off the debt.

The Debt-to-Total Asset Ratio is used to determine the percentage of the company's assets that

is financed with debt. The debt to total assets ratio of Kenmark during 2009 to total asset ratio of

0.31 indicate that 31% of company assets are financed with non- owner funds. In 2008, the

company have lower debt ratio of 0.24 indicate that 24% of company assets are financed with

non- owner funds in 2008. Golden Pharos had 0.21 and 0.17 of debt ratio in 2008 and 2009

respectively. This indicate that 21% and 17% of Golden Pharos asset are financed with non-

owner funds.

The Equity Ratio is a financial ratio indicating the relative proportion ofequity used to finance a

company's assets. The two components are often taken from the firm'sbalance sheet or statement

of financial position (so-called book value), but the ratio may also be calculated using market

values for both, if the company's equities are publicly traded.

The equity ratio of Kenmark is roughly the same between 2008 and 2009 which is 0.60 and 0.62

respectively. There is only a 0.01 difference of equity ratio in Golden Pharos by the year 2008

and 2009, which is 0.69 and 0.68.

The Debt-to-Equity Ratio (D/E) is a financial ratio indicating the relative proportion

ofshareholders' equity and debt used to finance a company's assets. The two components are

often taken from the firm'sbalance sheet or statement of financial position, but the ratio may also

be calculated using market values for both, if the company's debt and equity arepublicly traded,

or using a combination of book value for debt and market value for equity financially.

The Kenmark have 0.66 of debt to equity ratio in 2008 which is more compare to 0.61 in 2009.

The Golden Pharos has 0.45 in the year 2008 and slightly increases a 0.02 in the year 2009 which

is 0.47.
http://en.wikipedia.org/wiki/Financial_ratiohttp://en.wikipedia.org/wiki/Equity_(finance)http://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Financial_ratiohttp://en.wikipedia.org/wiki/Shareholders'_equityhttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Public_corporationhttp://en.wikipedia.org/wiki/Equity_(finance)http://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Financial_ratiohttp://en.wikipedia.org/wiki/Shareholders'_equityhttp://en.wikipedia.org/wiki/Debthttp://en.wikipedia.org/wiki/Balance_sheethttp://en.wikipedia.org/wiki/Public_corporationhttp://en.wikipedia.org/wiki/Financial_ratio


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Return on Investment (ROI) Ratio

The ROI is perhaps the most important ratio of all. It is the percentage of return on funds

invested in the business by its owners. In short, this ratio tells the owner whether or not all the

effort put into the business has been worthwhile. If the ROI is less than the rate of return on an

alternative, risk-free investment such as a bank savings account, the owner may be wiser to sell

the company, put the money in such a savings instrument, and avoid the daily struggles of small

business management.

From the ROI ratio report, Kenmark incurred a 0.03% of in 2008 while 1.16% in 2009, while

Golden Pharos had a drastic increase, from 6.37% in 2008 to 17.31% in 2009.

Efficiency Ratio

The efficiency ratio, a ratio that is typically applied to banks, in simple terms is defined as

expenses as a percentage of revenue (expenses / revenue), with a few variations. A lower

percentage is better since that means expenses are low and earnings are high. It is related

to operating leverage, which measures the ratio between fixed costs and variable costs.

A high Account Receivable Turnover ratio implies either that a company operates on a cash

basis or that its extension of credit and collection of accounts receivable is efficient. This can be

explained as the frequency of the companies collecting their debts.

Kenmark have a 5.11 account receivable turnover in 2008 and 1.33 in 2009. While Golden

Pharos have 4.21 account receivable turnover in 2008 and 3.95 in 2009.This indicate that the

lower account receivable turnover in 2008 for Kenmark and 2009 for Golden Pharos implies the

company should re-asset its credit policies in order to ensure the timely collection of imparted

credit that is not earning interest for the firm.

Fixed asset turnoveris the ratio ofsales (on the Profit and loss account) to the value offixed

assets (on the balance sheet). It indicates how well the business is using its fixed assets to

generate sales.

The fixed asset turnover is higher in 2008 compare to 2009 in Kenmark, which is 0.93 and 0.83

respectively. Golden Pharos has 3.93 and 2.93 in the year 2008 and 2009.
http://en.wikipedia.org/wiki/Operating_leveragehttp://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Fixed_assethttp://en.wikipedia.org/wiki/Fixed_assethttp://en.wikipedia.org/wiki/Operating_leveragehttp://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Fixed_assethttp://en.wikipedia.org/wiki/Fixed_asset


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Generally speaking, the higher the ratio, the better, because a high ratio indicates the business

has less money tied up in fixed assets for each dollar of sales revenue. This indicates the situation

of Golden Pharos have higher fixed asset turnover ratio among the other groups. A declining

ratio of Kenmark may indicate that the business is over-invested in plant, equipment, or other

fixed assets.

Sales to net working Capital is the money used to make goods and attract sales. Working

Capital management is about the commercial and financial aspects of Inventory, credit,

purchasing, marketing, and royalty and investment policy.

The sales to net working capital in Kenmark had increase to 1.54 in 2009 from 1.47 during 2008,

while Golden Pharos had decrease from 2.74 in 2008 to 1.59 in 2009. The higher the profit

margin, the lower is likely to be the level of Working Capital tied up in creating and selling titles,

the faster the company creates and sells the books the higher is likely to be the return on

investment.

Account Payable to Sales indicates the relationshipbetween unpaid suppliers' bills and the sales

revenue in an accounting period is considered high if it approaches 1.0 and, in some industries,

may be a sign that the firm is having liquidityproblems.

The account payable to sales is said to be respectively the same in all groups and all company. It

is between 0.16 and 0.15. It is considered low and the industries are free from liquidity problems.
http://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/Equipmenthttp://www.businessdictionary.com/definition/relationship.htmlhttp://www.businessdictionary.com/definition/supplier.htmlhttp://www.businessdictionary.com/definition/bill.htmlhttp://www.businessdictionary.com/definition/sales-revenue.htmlhttp://www.businessdictionary.com/definition/sales-revenue.htmlhttp://www.businessdictionary.com/definition/accounting-period.htmlhttp://www.investorwords.com/2306/high.htmlhttp://www.businessdictionary.com/definition/industry.htmlhttp://www.businessdictionary.com/definition/sign.htmlhttp://www.investorwords.com/1967/firm.htmlhttp://www.businessdictionary.com/definition/liquidity.htmlhttp://www.businessdictionary.com/definition/problem.htmlhttp://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/Equipmenthttp://www.businessdictionary.com/definition/relationship.htmlhttp://www.businessdictionary.com/definition/supplier.htmlhttp://www.businessdictionary.com/definition/bill.htmlhttp://www.businessdictionary.com/definition/sales-revenue.htmlhttp://www.businessdictionary.com/definition/sales-revenue.htmlhttp://www.businessdictionary.com/definition/accounting-period.htmlhttp://www.investorwords.com/2306/high.htmlhttp://www.businessdictionary.com/definition/industry.htmlhttp://www.businessdictionary.com/definition/sign.htmlhttp://www.investorwords.com/1967/firm.htmlhttp://www.businessdictionary.com/definition/liquidity.htmlhttp://www.businessdictionary.com/definition/problem.html


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Conclusion

As a conclusion, we decided to choose Golden Pharos. This is because Golden Pharos hasa high return of investment. On the other hand, reason that we do not choose Golden Pharos first

of all is because Kenmark has been suspended from Bursa Malaysia due to failure to submit its

quarterly financial results. Secondly is because Kenmarks landslide drops a total of 61% in net

profit which significantly affected the outsiders perception towards Kenmark very badly.

Furthermore, Kenmark also faces difficulty in collecting debts in shorter period of time because

Kenmarks account receivable turnover ratio is lower than the previous year which from 5.11

during the year 2008 drop till 1.33 during the year 2009. In addition, Kenmarks debt to total

asset ratio increases from 24% during the year 2008 to 31% during the year 2009, meaning that

its debt are financed more through equity rather than assets which is very bad. The fifth reason is

that Kenmarks days of selling off inventory increases from the year 2008 of 41 days to the year

2009 of 54 days, this shows that Kenmark increase a total of 13 days which is more than Golden

Pharos increase by 9 days. The lesser days the company use to sell off the inventories, the better

the company. Last but not least, Kenmark has more money tied to their fixed asset because the

fixed asset turnover lower in 2009 which is 0.83 compare to 2008 which is 0.93. This shows that

Kenmarks performance using fixed assets to generate sales worst off.


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References

1) http://wrightreports.ecnext.com/coms2/reportdesc_COMPANY_C458D1550

2) http://wrightreports.ecnext.com/comsite5/bin/comsite5.pl?

page=report_description&report=COMPANY&cusip=C458G8530
http://wrightreports.ecnext.com/coms2/reportdesc_COMPANY_C458D1550http://wrightreports.ecnext.com/comsite5/bin/comsite5.pl?page=report_description&report=COMPANY&cusip=C458G8530http://wrightreports.ecnext.com/comsite5/bin/comsite5.pl?page=report_description&report=COMPANY&cusip=C458G8530http://wrightreports.ecnext.com/coms2/reportdesc_COMPANY_C458D1550http://wrightreports.ecnext.com/comsite5/bin/comsite5.pl?page=report_description&report=COMPANY&cusip=C458G8530http://wrightreports.ecnext.com/comsite5/bin/comsite5.pl?page=report_description&report=COMPANY&cusip=C458G8530

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