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Down here, I am going to display the five companies that I am going to apply the required
information in the above. The following companies are the selected of my choice of selecting the
public listed companies are:
3. ADVENTA BERHAD
5. ANCOM BERHAD
ABLE GROUP BERHAD
Company (1)
The vertical analysis of ABLE GROUP financial statement shows the relationship of each item
to its base amount, which is the 100% figure. Every other item on the statement is then reported
as a percentage of that base. For the income statement, a net sale is the base.
2016
Dollar Amount in millions Amount Percent of Total
Revenues $9,894 100%
Cost of sales (8,473) 85.6
Gross Profit $1,421 14.4
Other income $291 2.9
Selling and marketing expense (20) 0.2
Administrative expense (2,397) 24.2
Other expense (26) 0.3
Finance costs (138) 1.4
Loss before tax (869) (8.8)
Income tax - -
Net loss (869) (8.8)
2016
Dollar Amount in millions Amount Percent of Total
Asset
Current Asset
Inventories 3,342 6.8%
Property Development Cost 35,839 74.9
Amount owing by contract customers 1,753 3.5
Trade and other receivables 3,658 7.4
Amount owing by subsidiaries - -
Current tax assets 15 0.03
Deposits placed with licensed banks 3,051 6.2
Cash and bank balances 173 0.35
Total Current Assets 47,831 96.6%
Property Plant and Equipment 1,009 2
Intangible Asset - -
Investment Property 659 1.3
Total noncurrent Assets 1,668 3.4
Total Assets 49,499 100%
Liabilities
Current Liabilities
Amount owing to contract customers 6 0.01
Trade and Other Payable 2,739 5.5
Loan and borrowings 898 1.8
Total current liabilities 3,643 7.4
Long term Liabilities
Loan and borrowings 28 0.06
Total long term liabilities 28 0.06
Total Liabilities 3,671 7.4
Shareholder’s Equity
Share capital 39,585 80%
Other reserves 569 1.1
Retained profits 5,674 11.5
Total stockholder’s Equity 45,828 92.6
Total Liabilities & Equity 49,499 100%
Company (2
The vertical analysis of THONG GUAN financial statement shows the relationship of each item
to its base amount, which is the 100% figure. Every other item on the statement is then reported
as a percentage of that base. For the income statement, a net sale is the base.
2016
Dollar Amount in millions Amount Percent of Total
Revenues $742,868 100%
Cost of sale s (624,819) 84%
Gross Profit $118,049 15.9%
Other income $9,789 1.3%
Administrative expense (27,077) 3.6%
Selling and marketing expense (29,434) 4%
Other expenses (3,531) 0.5%
Result from operating activities 67,796 9.1%
Interest income 1,715 0.2%
Finance costs (1,367) 0.2%
Profit before tax 68,144 9.2%
Tax Expense (10,716) 1.4%
Profit for the financial year 57,428 7.7%
Total Other comprehensive income for the financial year (1,834) 0.2%
Total comprehensive income for the financial year $55,594 7.5%
Balance sheet for the Year Ended 31 December 2016
2016
Dollar Amount in millions Amount Percent of Total
Asset
None Current Asset
Property, plant and equipment $138,905 22.4%
Prepaid lease payments 12,684 2%
Intangible asset 222 0.04%
Investment in subsidiaries - -
Other investments 567 0.09%
Deferred tax asset 1,113 0.2%
Fixed deposit with a licensed bank 30 0.005%
Total None Current Asset $153,521 24.8%
Current Asset
Inventories 157,059 27.4%
Current tax assets 587
Trade and other receivables 156,034 15.1%
Cash and cash equivalents 152,610 4.7%
Total Current Assets 466,290 60.6%
Total Assets 619,811 100%
Liabilities
Current Liabilities
Loans and borrowings 45,368 7.4%
Trade and Other Payable 117,468 19%
Current Tax Payable 889 0.1%
Total current liabilities 163,725 26.4%
None Current Liability
Deferred tax liabilities 6,431 1%%
Loans and borrowings 11,372 1.8%
Total None Current Liabilities 17,803 2.9%
Total Liabilities 181,528 29.3%
Shareholder’s Equity
Share capital 118,307 19%
Reverse acquisition reserve 311,606 50.3%
Total Equity attributable to owners of the Company 429,913 69.4%
Non-controlling interests 8,370 1.4%
Total stockholder’s Equity 438,283 70.7%
Total Liabilities & Equity 619,811 100%
Company (3)
The vertical analysis of a ADVENTA BERHAD financial statement shows the relationship of
each item to its base amount, which is the 100% figure. Every other item on the statement is then
reported as a percentage of that base. For the income statement, a net sale is the base.
2016
Dollar Amount in millions Amount Percent of Total
Revenues $39,931 100%
Cost of sales (25,319) 63.4
Gross Profit 14,612 36.6
Other income 694 1.7
Administrative expense (4,948) 12.4
Selling and marketing expense (3,118) 7.8
Other Operating Expense (3,254) 8.4
Finance costs (1,588) 4
Profit/loss before tax 2,398 6
Income Tax Expense (1,714) 4
Profit/loss for the year, representing tool 684 1.7
comprehensive income/loss financial year
Profit/loss attribute to:
Owners of parent 684 1.7
Total comprehensive income $684 1.7
Balance sheet for ADVENTA BERHAD
2016
Dollar Amount in millions Amount Percent of Total
Asset
None Current Asset
Property, plant and equipment 53,595 39.7
Investment - -
Intangible Assets 31,592 23.4
Deferred tax assets 424 0.3
Total None Current Asset 85,611 63.4
Current Asset
Inventories 15,318 11.3
Trade and other receivables 12,378 9.2
Other current assets 825 0.6
Tax recoverable 4 0.003
Cash and bank balances 21,001 15.5
Total Current Assets 49,528,256 36.6
Total Assets 135,140,216 100%
Liabilities
Current Liabilities
Trade and Other Payable 12,976,419 9.6
Income tax payable 122,108 0.09
Loan and borrowing 9,403,471 7
Total current liabilities 22,501,998 16.7
None Current Liability
Loss and borrowing 31,531,615 23.3
Total None Current Liabilities 31,531,615 23.3
Total Liabilities 54,033,613 40
Shareholder’s Equity
Share capital 53,475,020 39.6
Share premium 4,829,789 3.6
Retained earning 22,801,794 16.9
Total stockholder’s Equity 81,106,603 60
Total Liabilities & Equity 135,140,216 100%
Company (4)
The vertical analysis of a ANN JOO RESOURCES statement shows the relationship of each
item to its base amount, which is the 100% figure. Every other item on the statement is then
reported as a percentage of that base. For the income statement, a net sale is the base.
2016
Dollar Amount in millions Amount Percent of Total
Revenues 1,870,050 100%
Cost of sales (1,505,322) 80.5
Gross Profit 364,728 19.5
Other income 2,428 0.1
Administrative expense (76,637) 4.1
Distribution Expense (40,841) 2.2
Other Operating Expense (6,250) 0.3
Results from operating activities 243,428 13
Interest income 2,228 0.12
Finance costs (43,516) 2.3
Operating Profit 202,140 10.8
Share of results of associates (12)
Profit/(Loss) before tax 202,128 10.8
Income Tax Expense (35,353) 1.9
Profit/loss for the year 166,775 8.9
Exchange differences on translating foreign operations
Change in fair value of equity securities classified as
available-for-sale 870 0.05
Net movement on cash flow hedges 31 0.002
Foreign currency forward contracts (223) 0.01
Other comprehensive income for the year, net of tax 678 0.04
Total comprehensive income for the year 167,453 9%
BALANCE SHEET FOR ANN JOO RESOURCES
2016
Dollar Amount in millions Amount Percent of Total
Asset
None Current Asset
Property, plant and equipment 1,019,188 43.9
Prepaid lease payments 10,527 0.5
Investment properties 4,011 0.2
Intangible Assets 7,468 0.3
Investment in subsidiaries - -
Investment in associate 486 0.02
Other Investment 60 0.003
Deferred tax assets 50,969 2.2
Total None Current Asset 1,092,709 47.1
Current Asset
Inventories 830,764 35.8
Receivables and prepayments 336,276 14.5
Current tax assets 6,138 0.3
Cash and bank balances 54,941 2.4
Total Current Assets 1,228,119 52.9
Total Assets 2,320,828 100%
Liabilities
Current Liabilities
Loan and borrowing 956,657 41.2
Payable and accrual 210,828 9.1
Derivative liabilities 221 0.01
Current tax liabilities 179 0.008
Total current liabilities 1,167,885 50.3
None Current Liability
Loss and borrowing 1,831 0.08
RCPS - Liability component 58,610 2.5
Provision for retirement benefits 6,307 0.3
Deferred tax liabilities 18,056 0.8
Total None Current Liabilities 84,804 3.7
Total Liabilities 1,252,689 54
Shareholder’s Equity
Share capital 522,842 23.8
Treasury shares (71,389) 3.1
Redeemable Convertible Cumulative Preference 3,926 0.2
Shares (“RCPS”) - Equity component
Other reserves 86,920 3.7
Retained earnings 525,840 22.7
Total stockholder’s Equity 1,068,139 46
Total Liabilities & Equity 2,320,828 100%
Company (5)
The vertical analysis of ANCOM BERHAD financial statement shows the relationship of each
item to its base amount, which is the 100% figure. Every other item on the statement is then
reported as a percentage of that base. For the income statement, a net sale is the base.
2016
Dollar Amount in millions Amount Percent of Total
Revenues 1,509,312 100%
Cost of sales (1,321,177) 87.5
Gross Profit 188,135 12.5
Other operating income 23,503 1.6
Distribution Cost (73,236) 4.9
Administrative expense (96,546) 6.4
Other Operating Expense (9,413) 0.6
Finance costs (13,038) 0.9
Share of results of associates, net of tax (1,643) 0.1
Share of results of joint ventures, net of tax (540) 0.04
Profit/(Loss) before tax 17,222 1.1
Taxation (14,880) 1
Profit for the financial year 2,342 0.2
ANCOM BERHAD
2016
Dollar Amount in millions Amount Percent of Total
Asset
None Current Asset
Property, plant and equipment 235,551 25.8
Investment properties 371 0.04
Investment in subsidiaries - -
Investment in associate 3,023 0.3
Investment in joint venture - -
Other Investment 692 0.08
Intangible assets 4,499 0.5
Goodwill on consolidation 96,700 10.6
Deferred tax assets 26,230 2.9
Total None Current Asset 367,066 40.2
Non-current assets held for sale 51 0.006
Current Asset
Inventories 119,846 13.1
Trade and other receivables 315,773 34.6
Amounts owing by associates 5,685 0.6
Amounts owing by joint ventures 56 0.006
Current tax assets 3,291 0.4
Other investments 1,179 0.1
Cash and bank balances 99,835 11
Total Current Assets 545,665 60
Total Assets 912,782 100%
Liabilities
Current Liabilities
Borrowing 213,683 23.4
Trade and other Payable 222,535 24.4
Amounts owing to associates 101 0.01
Derivative liabilities -
Current tax liabilities 4,730 0.5
Total current liabilities 441,049 48.3
None Current Liability
Borrowing 15,855 1.7
Provision for retirement benefits 3,808 0.4
Deferred tax liabilities 10,572 1.2
Total None Current Liabilities 30,808 3.4
Total Liabilities 471,284 51.6
Shareholder’s Equity
Share capital 218,956 24
Treasury shares (2,377) 0.3
Reserve 65,906 7.2
Non-controlling interests 159,013 17.4
Total stockholder’s Equity 441,498 48.4
Total Liabilities & Equity 912,782 100%
Perform a horizontal analysis for (5 years: 2016, 2015, 2014, 2013, 2012) on items of Statement
of Income (Profit & Loss) and Statement of Financial Position.
In one horizontal analysis approach, a base year is selected and the dollar amount of each
financial statement item in subsequent years is converted to a percentage of the base year dollar
amount. Assuming 2012 is the base year, 2013, 2014, 2015 and 2016 revenues were (109%,
1228%, 1386% and 173% of the base year amount, as shown in the following calculations:
2016 Revenue, $9,894 / Revenue 2012 $5,699 = 173% and also same the reset of it.
Balance sheet for the Year Ended 31 December 2016
Perform a horizontal analysis for (5 years: 2016, 2015, 2014, 2013, 2012) on items of Statement
of Income (Profit & Loss) and Statement of Financial Position.
ADVENTA BERHAD
Perform a horizontal analysis for (5 years: 2016, 2015, 2014, 2013, 2012) on items of Statement
of Income (Profit & Loss) and Statement of Financial Position.
Other 2,428 (93.1) 4,061 (88.4) 14,540 (58.6) 6,505 (81.5) 35,102 100%
income % % %
Administrati (76,637) (9.3)% (71,064) (15.9) (79,520 (5.8)% (80,019) (5.3)% (84,457) 100%
ve expense %
Distribution (40,841) 33.8% (37,085) 21.5% (42,208) 38.3% (37,002 21.2% (30,523) 100%
Expense
Other (6,250) 478.2% (7,889) 629.8% (27,077) 2404.8 (26,263 2362.8 (1,081) 100%
Op.Expense % %
Results 243,428 2851.4 (82,901) 905.1% 78,884 856.4% 60,809 637.3% (8,248) 100%
from Op. %
Activities
Interest 2,228 35.4% 2,459 49.4% 2,429 47.6% 1,890 14.8% 1,646 100%
income
Finance (43,516) 43.1% (60,092) 97.6% (56,323) 85.2% (58,217 91.4% (30,418) 100%
costs
Operating 202,140 446% (140,534) 279.6% 24,990 (32.5) 4,482 (87.9) (37,020) 100%
Profit % %
Share of (12) (89.2) (10) (91)% (20) (82)% (2) (98.2) (111) 100%
result % %
Profit/(Loss 202,128 444.4% (140,544) 278.5% 24,970 (32.6) 4,480 (87.9) (37,131) 100%
) before tax % %
Income Tax (35,353) 93.6% 5,069 (72.2) (1,582) (91.3) 7,788 (57.4) 18,264 100%
Expense % % %
Profit/loss 166,775 784% (135,475) 618% 23,388 24% 12,268 (35)% (18,867) 100%
for the year
Perform a horizontal analysis for (5 years: 2016, 2015, 2014, 2013, 2012) on items of Statement
of Income (Profit & Loss) and Statement of Financial Position.
ANCOM BERHAD
The financial ratio is a ratio of selected values from the firm’s financial statements. These ratios
are used to evaluate the overall financial condition of a corporation to determine the strength and
weaknesses.
Liquidity ratio measures the ability of a company to meet its short term obligations. This ratio is
important to short term creditors and bondholders.
a) Current Ratio
Current ratio is the number of times current assets cover current liabilities. It is a measure of the
company’s solvency or its ability to meet current liabilities as they are due. The current ratio of ABLE has
been increasing from a high of 5.70 in year 2015 to the highest of 13.13 in year 2016. However, it has
return back to a high of 13.13 in recent year of 2016. This shows that ABLE is able to cover its current
liabilities 13.13 times using its current assets.
b) Quick Ratio
The current ratio may be refined further by removing inventories from the equation, which is the least
liquid of current assets. This ratio is known as the quick ratio or simple acid test ratio. In 2016, ABLE is
able to cover its current liabilities 12.212 using quick assets. This shows that even after removing
inventories from its current assets, ABLE is still able to cover its current liabilities 12.212 times over.
Higher inventory list due to higher demand from year to year has significantly decreased the quick ratio
(5.323 in 2015).
Profitability ratios show a company's overall efficiency and performance. Profitability ratios are divided
into two types: margins and returns.
a) Return on Asset
This ratio indicates how profitable a company is relative to its total assets. The return on assets ratio
illustrates how well management is employing the company’s total assets to make a profit. The higher the
return, the more efficient management is in utilizing its asset base. The ROA ratio is calculated by
comparing net income to average total assets, and is expressed as a percentage.
The return on asset of ABLE has been decreasing from -2.53%in year 2015 to the lowest of -1.755% in
year 2016. However, it has return back to a lowest of -1.755% in recent year of 2016. This shows that
ABLE management is not utilizing their assets efficiently. There were in loss of the amount $(869) in year
2016 and also $(1,425) in year 2015.
b) Return on Equity
This ratio indicates how profitable a company is by comparing its net income to its average shareholders’
equity. The return on equity ratio measure how much the shareholders earned for their investment in the
company. The higher the ratio percentage, the more efficient management is in utilizing its equity based
and the better return is to investors.
The return on equity of ABLE has been decreasing from -3.05%in year 2015 to the lowest of -1.896%in
year 2019. However, the company has earned the lowest rate of 0.019 in the year 2016. This shows that
the ABLE company has not utilized their equity because of the company has not been doing a good job
using the investors’ money.
Solvency ratios measure the stability of a company and its ability to repay debt. These ratios are of
particular interest to bank loan officers. They should be of interest to you, too, since solvency ratios give a
strong indication of the financial health and viability of your business.
a) Debt to Equity
This ratio indicates the degree of financial leverage being used by the business and includes both short-
term and long-term debt. A Company rising debt-to-equity ratio implies higher interest expenses, and
beyond a certain point, it may affect a company’s credit rating, making it more expensive to raise more
debt. Debt to Equity ratio of ABLE Group has 8% in year 2016 and 20.5% in year 2015. This shows that
the ABLE company has 92% of asset in year 2016 while 8% is debt and also it has 79.5% assets in year
2015 while 20.5% was debt. so that ABLE group has high solvency ratio, because of its equity is too high
comparing its debt. The financial leverage appears to be at comfortable levels, with debt at only 8% of
equity and only
b) Debt to Assets
Another leverage measure, this ratio quantifies the percentage of a company's assets that have been
financed with debt (short-term and long-term). A higher ratio indicates a greater degree of leverage, and
consequently, financial risk. So that Debt to Asset ratio of ABLE group has 7.41% in year 2016 and 17%
in year 2015. This shows that the ABLE Company has 92.59% of assets in year 2016 while 7.41% is debt
and it has 83% of assets in year 2015 while 17% was debt in year 2015. but financial leverage appears to
be at comfortable levels, with debt at only 8% of equity in year 2016 and also 20.5% debt in 2015 and
only 7.4% of assets financed by debt in year 2016 and also 17% of assets financed by debt in year 2015.
Cash flow analysis uses ratios that focuses on cash flow and how solvent, liquid, and viable the company is.
Here are the most important cash flow ratios with their calculations and interpretation.
a) Operating activities to net sale
This ratio, which is expressed as a percentage, compares a company’s operating cash flow to its net sales or
revenues, which gives investors an idea of the company’s ability to turn sales into cash. It would be worrisome
to see a company’s sales grow without a parallel growth in operating cash flow. Positive and negative changes
in a company’s terms of sale and/or the collection experience of its accounts receivable will show up in this
indictor. So that the ABLE Company’s cash flows of year 2016 is -3.14, and also in year 2015 was 0.88. so
that the investors will take and idea that the company will not have ability to turn sales in to cash because of its
in debt of -3.14 times to the cash flow of the company in year 2016. This shows that every $1 of operating
cash flow will generate $-3.14 times Net Sale in year 2016 and also every $1 of operating cash flow will
generate $0.88 times of net sale in year 2015.
b) Operating activities to average total liability
The operating cash flow ratio is a measure of the number of times a company can pay off current debts
with cash generated in the same time period. A higher number means a company can cover its current
debts more times, which is a good thing. Companies with a high or increasing operating cash flow ratio
are in good financial health. Those that are struggling to cover liabilities may be in trouble, at least in the
short-term. So that the ABLE Company’s operating activities to total liabilities in year 2016 is 0.74 time
to their cash of the company can provide beyond its liability payments. And also in year 2015 was -0.13
times, this ratio provides an indication of a company's ability to not cover total debt with its yearly cash
flow from operations. The lower the percentage ratio, the lowest the company's ability to carry and service
its total debt.
b) Return on Equity
This ratio indicates how profitable a company is by comparing its net income to its average shareholders’
equity. The return on equity ratio measure how much the shareholders earned for their investment in the
company. The higher the ratio percentage, the more efficient management is in utilizing its equity based
and the better return is to investors.
The return on equity of THONG GUAN has been increasing its profit from 10% in year 2015 to the
heights profit of 13.1% in year 201. However, the company has earned the heights rate of 13.1% in the
year 2016. This shows that the THONG company has utilized their equity because of the company has
been doing a good job using the investors’ money.
Solvency ratios measure the stability of a company and its ability to repay debt. These ratios are of
particular interest to bank loan officers. They should be of interest to you, too, since solvency ratios give a
strong indication of the financial health and viability of your business.
c) Debt to Equity
This ratio indicates the degree of financial leverage being used by the business and includes both short-
term and long-term debt. A Company rising debt-to-equity ratio implies higher interest expenses, and
beyond a certain point, it may affect a company’s credit rating, making it more expensive to raise more
debt. Debt to Equity ratio of THONG GUAN has 41.42% in year 2016 and 35.80% in year 2015. This
shows that the THONG Company has 58.58% of equity in year 2016 while 41.42 % is debt and also it
has 64.2% equity in year 2015 while 35.80% was debt. So that THOGUN has middle solvency ratio,
because of its equity is too close comparing its debt. The financial leverage appears to be at comfortable
levels, with debt at only 41.42% of equity in year 2016 and also with debt at only 35.8% in year 2015, it
appears that in year 2015 has lower debt comparing to the year of 2016.
d) Debt to Assets
Another leverage measure, this ratio quantifies the percentage of a company's assets that have been
financed with debt (short-term and long-term). A higher ratio indicates a greater degree of leverage, and
consequently, financial risk. So that debt to asset ratio of THOGUN GUAN has 29.9% in year 2016 and
26.36% in year 2015. This shows that THOGUN Company has 70.1% of assets in year 2016 while
29.9% is debt and also it has 73.64% of assets in year 2015 while 26.36% was debt in year 2015. But
financial leverage appears to be at comfortable levels, with debt at only 29.9% of assets in year 2016 and
also with debt of 26.36% of assets in 2015 and only 29.9% of assets financed by debt in year 2016 and
also 26.36% of assets financed by debt in year 2015.
Cash flow analysis uses ratios that focus on cash flow and how solvent, liquid, and viable the company is.
Here are the most important cash flow ratios with their calculations and interpretation.
a) Operating cash flow to net sale
This ratio, which is expressed as a percentage, compares a company’s operating cash flow to its net sales or
revenues, which gives investors an idea of the company’s ability to turn sales into cash. It would be worrisome
to see a company’s sales grow without a parallel growth in operating cash flow. Positive and negative changes
in a company’s terms of sale and/or the collection experience of its accounts receivable will show up in this
indictor. So that the THOGUN Company’s operating cash flows of year 2016 is 1.3times and also in year 2015
was 2 times. so that the investors will take and idea that the company will have ability to turn sales in to cash
because of it have normal net sale, the company terms of sale is positive as appeared in year 2016. This shows
that every $1 of operating cash flow will generate $1.3 Net Sale in year 2016 and also every $1 of operating
cash flow will generate $2 of net sale in year 2015.
B) Operating activities to average total liability
The operating cash flow ratio is a measure of the number of times a company can pay off current debts
with cash generated in the same time period. A higher number means a company can cover its current
debts more times, which is a good thing. Companies with a high or increasing operating cash flow ratio
are in good financial health. Those that are struggling to cover liabilities may be in trouble, at least in the
short-term. So that the THONG GUAN Company’s operating activities to total liabilities in year 2016 is
0.42 time to their cash of the company can provide beyond its liability payments. And also in year 2015
was 0.57 times to their cash of the company can provide beyond its liability payments. This ratio provides
an indication of a company's ability to cover total debt with its yearly cash flow from operations.
Liquidity ratio measures the ability of a company to meet its short term obligations. This ratio is
important to short term creditors and bondholders.
a) Current Ratio
Current ratio is the number of times current assets cover current liabilities. It is a measure of the
company’s solvency or its ability to meet current liabilities as they are due. The current ratio of ADVENT
BERHAD has been increasing its assets from a high of 2.058 in year 2015 to the higher of 2.201 in year
2016. However, it has return back to a high of 2.2times in recent year of 2016. This shows that ADVENT
is able to cover its current liabilities 2.2 times using its current assets.
b) Quick Ratio
The current ratio may be refined further by removing inventories from the equation, which is the least
liquid of current assets. This ratio is known as the quick ratio or simple acid test ratio. In 2016, ADVENT
is able to cover its current liabilities 1.5times using quick assets. This shows that even after removing
inventories from its current assets, ADVENT is still able to cover its current liabilities 1.5 times over.
Higher inventory list due to higher demand from year to year has significantly increased the quick ratio
(1.6 in year 2015).
Profitability ratios show a company's overall efficiency and performance. Profitability ratios are divided
into two types: margins and returns.
a) Return on Asset
This ratio indicates how profitable a company is relative to its total assets. The return on assets ratio
illustrates how well management is employing the company’s total assets to make a profit. The higher the
return, the more efficient management is in utilizing its asset base. The ROA ratio is calculated by
comparing net income to average total assets, and is expressed as a percentage.
The return on asset of ADVENT has been decreasing from 2.3%in year 2015 to the lowest of 0.5% in
year 2016. However, it has return back to a lowest of 0.5% in recent year of 2016. This shows that
ADVENT management is not utilizing their assets efficiently.
b) Return on Equity
This ratio indicates how profitable a company is by comparing its net income to its average shareholders’
equity. The return on equity ratio measure how much the shareholders earned for their investment in the
company. The higher the ratio percentage, the more efficient management is in utilizing its equity based
and the better return is to investors.
The return on equity of ADVENT has been decreasing from 3.8% in year 2015 to the lowest of 0.8% in
year 2016. However, the company has earned the lowest rate of 0.8% in the year 2016. This shows that
the ADVENT company has not utilized their equity because of it has 99.2% of equity in year 2016 while
0.8% is net sale and also it has 96.2% of equity in year 2015 while 3.8% is net sale the company has not
been doing a good job using the investors’ money.
Solvency ratios measure the stability of a company and its ability to repay debt. These ratios are of
particular interest to bank loan officers. They should be of interest to you, too, since solvency ratios give a
strong indication of the financial health and viability of your business.
e) Debt to Equity
This ratio indicates the degree of financial leverage being used by the business and includes both short-
term and long-term debt. A Company rising debt-to-equity ratio implies higher interest expenses, and
beyond a certain point, it may affect a company’s credit rating, making it more expensive to raise more
debt. Debt to Equity ratio of ADVENT is 66.6% in year 2016 and 66.4% in year 2015. This shows that
the ADVENT Company has 33.4% of equity in year 2016 while 66.6% is debt and also it has 33.6% of
equity in year 2015 while 66.4% was debt. So that ADVENT group has low solvency ratio in terms of
their debt, because of its debt is too high comparing its equity. The financial leverage appears to be at
comfortable levels, with debt at only 66.6% of equity in year 2016 and also with debt at only 66.4% 0f
equity in year 2015,
b) Debt to Assets
Another leverage measure, this ratio quantifies the percentage of a company's assets that have been
financed with debt (short-term and long-term). A higher ratio indicates a greater degree of leverage, and
consequently, financial risk. So that Debt to Asset ratio of ADVENT is 40% in year 2016 and 39.9% in
year 2015. This shows that the ADVENT Company has 60% of assets in year 2016 while 40% of is debt
and it has 60.1% of assets in year 2015 while 39.9% was debt in year 2015. But financial leverage
appears to be at comfortable levels, with debt at only 40% of assets in year 2016 and also 39.9% debt in
2015 and only 40% of assets financed by debt in year 2016 and also 39.9% of assets financed by debt in
year 2015.
Cash flow analysis uses ratios that focuses on cash flow and how solvent, liquid, and viable the company is.
Here are the most important cash flow ratios with their calculations and interpretation.
a) Operating cash flow
This ratio, which is expressed as a percentage, compares a company’s operating cash flow to its net sales or
revenues, which gives investors an idea of the company’s ability to turn sales into cash. It would be worrisome
to see a company’s sales grow without a parallel growth in operating cash flow. Positive and negative changes
in a company’s terms of sale and/or the collection experience of its accounts receivable will show up in this
indictor. So that the ADVENT Company’s operating cash flows of year 2016 is 5.721times, and also in year
2015 was 0.84 times. so that the investors will take and idea that the company will have ability to turn sales in
to cash because of it has normal net sale, the company terms of sale is positive as appeared in year 2016. This
shows that every $1 of operating cash flow will generate $5.7 Net Sale in year 2016 and also every $1 of
operating cash flow will generate $0.84 of net sale in year 2015.
b) Operating activities to average total liability
The operating cash flow ratio is a measure of the number of times a company can pay off current debts
with cash generated in the same time period. A higher number means a company can cover its current
debts more times, which is a good thing. Companies with a high or increasing operating cash flow ratio
are in good financial health. Those that are struggling to cover liabilities may be in trouble, at least in the
short-term. So that the ADVENT Company’s operating activities to total liabilities in year 2016 is 0.07
time to their cash of the company can provide beyond its liability payments. And also in year 2015 was
0.048 times to their cash of the company can provide beyond its liability payments. This ratio provides an
indication of a company's ability to cover total debt with its yearly cash flow from operations. The lower
the percentage ratio, the lowest the company's ability to carry and service its total debt.
Liquidity ratio measures the ability of a company to meet its short term obligations. This ratio is
important to short term creditors and bondholders.
a) Current Ratio
Current ratio is the number of times current assets cover current liabilities. It is a measure of the
company’s solvency or its ability to meet current liabilities as they are due. The current ratio of ANN
JOO has been increasing from a higher of 0.87 in year 2015 to the highest of 1.05 in year 2016. However,
it has return back to a highest of 1.05 times in recent year of 2016. This shows that ANN JOO is able to
cover its current liabilities 1.05 times using its current assets.
B) Quick Ratio
The current ratio may be refined further by removing inventories from the equation, which is the least
liquid of current assets. This ratio is known as the quick ratio or simple acid test ratio. In 2016, ANN JOO
is able to cover its current liabilities 0.34 times using quick assets. This shows that even after removing
inventories from its current assets, ANN JOO is still able to cover its current liabilities times over. Higher
inventory list due to higher demand from year to year has significantly decreased the quick ratio (2.22 in
year 2015).
Profitability ratios show a company's overall efficiency and performance. Profitability ratios are divided
into two types: margins and returns.
a) Return on Asset
This ratio indicates how profitable a company is relative to its total assets. The return on assets ratio
illustrates how well management is employing the company’s total assets to make a profit. The higher the
return, the more efficient management is in utilizing its asset base. The ROA ratio is calculated by
comparing net income to average total assets, and is expressed as a percentage.
The return on asset of ANN JOO has been increasing from -5.5%in year 2015 to the highest of 7.2% in
year 2016. However, it has return back to a highest of 7.2% in recent year of 2016. This shows that ANN
JOO management is doing good job which is utilizing their assets efficiently in year 2016.
b) Return on Equity
This ratio indicates how profitable a company is by comparing its net income to its average shareholders’
equity. The return on equity ratio measure how much the shareholders earned for their investment in the
company. The higher the ratio percentage, the more efficient management is in utilizing its equity based
and the better return is to investors.
The return on equity of ANN JOO has been increasing from -14.6% in year 2015 to the highest of 15.6%
in year 2016. However, the company has earned the highest rate of 15.6% in the year 2016. This shows
that the ANN JOO company has been utilizing their equity because of the company has been doing a
good job using the investors’ money.
Solvency ratios measure the stability of a company and its ability to repay debt. These ratios are of
particular interest to bank loan officers. They should be of interest to you, too, since solvency ratios give a
strong indication of the financial health and viability of your business.
a) Debt to Equity
This ratio indicates the degree of financial leverage being used by the business and includes both short-
term and long-term debt. A Company rising debt-to-equity ratio implies higher interest expenses, and
beyond a certain point, it may affect a company’s credit rating, making it more expensive to raise more
debt. Debt to Equity ratio of ANN JOO has 117% in year 2016 and 163.9% in year 2015. This shows
that the ANN JOO Company has -17% of equity in year 2016 while 117% is debt and also it has -63.9%
equity in year 2015 while 163.9% was debt. so that ANN JOO has lowest solvency ratio, because of its
debt is too high above hundred comparing its equity. the financial leverage appears not to be at
comfortable levels, with debt at only 117% of equity in year 2016.
b) Debt to Assets
Another leverage measure, this ratio quantifies the percentage of a company's assets that have been
financed with debt (short-term and long-term). A higher ratio indicates a greater degree of leverage, and
consequently, financial risk. So that Debt to Asset ratio of ANN JOO has 54% in year 2016 and 62% in
year 2015. This shows that the ANN JOO Company has 46% of assets in year 2016 while 54% is debt
and also has 38% of assets in year 2015 while 62% was debt in year 2015. But financial leverage appears
to be at comfortable levels, with debt at only 54% of equity in year 2016 and also 62% debt in 2015 and
only 54% of assets financed by debt in year 2016 and also 62% of assets financed by debt in year 2015.
Still there is a large amount of asset financed by debt that will lead the company in to Bankrupt/insolvent.
Cash flow analysis uses ratios that focuses on cash flow and how solvent, liquid, and viable the company is.
Here are the most important cash flow ratios with their calculations and interpretation.
c) Operating cash flow
This ratio, which is expressed as a percentage, compares a company’s operating cash flow to its net sales or
revenues, which gives investors an idea of the company’s ability to turn sales into cash. It would be worrisome
to see a company’s sales grow without a parallel growth in operating cash flow. Positive and negative changes
in a company’s terms of sale and/or the collection experience of its accounts receivable will show up in this
indictor. So that the ANN JOO company’s cash flows of year 2016 is 1.8times and also in year 2015 was -1
times, so that the investors will take and idea that the company will not have ability to turn sales in to cash
because of the historical background of the company is not good, like in year 2015 the company is in debt as
appeared in the table, but the company terms of sale is positive as appeared in year 2016. This shows that every
$1 of operating cash flow will generate $1.8 Net Sale in year 2016 and also every $1 of operating cash flow
will generate $-1 of net sale in year 2015.
b) Operating activities to average total liability
The operating cash flow ratio is a measure of the number of times a company can pay off current debts
with cash generated in the same time period. A higher number means a company can cover its current
debts more times, which is a good thing. Companies with a high or increasing operating cash flow ratio
are in good financial health. Those that are struggling to cover liabilities may be in trouble, at least in the
short-term. So that the ANN JOO Company’s operating activities to total liabilities in year 2016 is 0.24
time to their cash of the company can provide beyond its liability payments. And also in year 2015 was -
0.09 times to their cash of the company can provide beyond its liability payments. This shows that every $1
of operating activities to average total liability will generate $0.24 total liability in year 2016 and also every $1
of operating activities generate $-0.09 of the total assets in year 2015.
Liquidity ratio measures the ability of a company to meet its short term obligations. This ratio is
important to short term creditors and bondholders.
a) Current Ratio
Current ratio is the number of times current assets cover current liabilities. It is a measure of the
company’s solvency or its ability to meet current liabilities as they are due. The current ratio of ANCOM
has been increasing from a high of 1.23 in year 2015 to the highest of 1.24 in year 2016. However, it has
return back to a high of 1.24 in recent year of 2016. This shows that ANCOM is able to cover its current
liabilities 1.24 times using its current assets.
b) Quick Ratio
The current ratio may be refined further by removing inventories from the equation, which is the least
liquid of current assets. This ratio is known as the quick ratio or simple acid test ratio. In 2016, ANCOM
is able to cover its current liabilities 0.97 times using quick assets. This shows that even after removing
inventories from its current assets, ANCOM is still able to cover its current liabilities 0.97 times over.
Higher inventory list due to higher demand from year to year has significantly increased the quick ratio
(0.99times in year 2015).
Profitability ratios show a company's overall efficiency and performance. Profitability ratios are divided
into two types: margins and returns.
a) Return on Asset
This ratio indicates how profitable a company is relative to its total assets. The return on assets ratio
illustrates how well management is employing the company’s total assets to make a profit. The higher the
return, the more efficient management is in utilizing its asset base. The ROA ratio is calculated by
comparing net income to average total assets, and is expressed as a percentage.
The return on asset of ANCOM has been decreasing from 0.57%in year 2015 to the lowest of 0.26% in
year 2016. However, it has return back to a lowest of 0.26% in recent year of 2016. This shows that
ANCOM management is not utilizing their assets efficiently.
b) Return on Equity
This ratio indicates how profitable a company is by comparing its net income to its average shareholders’
equity. The return on equity ratio measure how much the shareholders earned for their investment in the
company. The higher the ratio percentage, the more efficient management is in utilizing its equity based
and the better return is to investors.
The return on equity of ANCOM has been decreasing from 1.25% in year 2015 to the lowest of 0.53% in
year 2016. However, the company has earned the rate of 0.53% in the year 2016. This shows that the
ANCOM company hast not utilized their equity because of the company has no doing a good job using
the investors’ money.
Solvency ratios measure the stability of a company and its ability to repay debt. These ratios are of
particular interest to bank loan officers. They should be of interest to you, too, since solvency ratios give a
strong indication of the financial health and viability of your business.
f) Debt to Equity
This ratio indicates the degree of financial leverage being used by the business and includes both short-
term and long-term debt. A Company rising debt-to-equity ratio implies higher interest expenses, and
beyond a certain point, it may affect a company’s credit rating, making it more expensive to raise more
debt. Debt to Equity ratio of ANCOM has 106.7% in year 2016 and 119.11% in year 2015. This shows
that the ANCOM company has -6.7% of equity in year 2016 while 106.7% is debt and also it has -19.1%
assets in year 2015 while 119.1% was debt. so that ANCOM gr has lowest solvency ratio, because of its
debt is too high comparing its equity as percentage. the financial leverage appears not to be at comfortable
levels, with debt at only 106.7% of equity in year 2016 and also with debt at only 119.1% of equity in
year 2015.
g) Debt to Assets
Another leverage measure, this ratio quantifies the percentage of a company's assets that have been
financed with debt (short-term and long-term). A higher ratio indicates a greater degree of leverage, and
consequently, financial risk. So that Debt to Asset ratio of ANCOM has 51.6% in year 2016 and 54.4%
in year 2015. This shows that the ANCOM company has 48.4% of assets in year 2016 while 51.6% is
debt and it has 45.6% of assets in year 2015 while 54.4% was debt in year 2015. but financial leverage
appears to be at comfortable levels, with debt at only 51.6% of equity in year 2016 and also 54.4% debt
in 2015 and only 51.6% of assets financed by debt in year 2016 and also 54.4% of assets financed by debt
in year 2015.
Cash flow analysis uses ratios that focuses on cash flow and how solvent, liquid, and viable the company is.
Here are the most important cash flow ratios with their calculations and interpretation.
d) Operating cash flow
This ratio, which is expressed as a percentage, compares a company’s operating cash flow to its net sales or
revenues, which gives investors an idea of the company’s ability to turn sales into cash. It would be worrisome
to see a company’s sales grow without a parallel growth in operating cash flow. Positive and negative changes
in a company’s terms of sale and/or the collection experience of its accounts receivable will show up in this
indictor. So that the ANCOM company’s cash flows of year 2016 is 21.8 times and also in year 2015 was 10.
so that the investors will take and idea that the company will have ability to turn sales in to cash because of its
in debt, the company terms of sale is negative as appeared in year 2016.
This shows that every $1 of operating cash flow will generate $21.8 Net Sale in year 2016 and also every $1 of
operating cash flow will generate $10 of net sale in year 2015. So that this company has good cash flow
comparing to other companies.
b) Operating activities to average total liability
The operating cash flow ratio is a measure of the number of times a company can pay off current debts
with cash generated in the same time period. A higher number means a company can cover its current
debts more times, which is a good thing. Companies with a high or increasing operating cash flow ratio
are in good financial health. Those that are struggling to cover liabilities may be in trouble, at least in the
short-term. So that the ANCOM Company’s operating activities to total liabilities in year 2016 is 0.1 time
to their cash of the company can provide beyond its liability payments. And also in year 2015 was 0.1
times to their cash of the company can provide beyond its liability payments. This ratio provides an
indication of a company's ability to cover total debt with its yearly cash flow from operations. This shows
that every $1 of operating activities to average total liability will generate $0.1 total liability in year 2016 and
also every $1 of operating activities generate $0.1 of the total assets in year 2015. So that company has low
debt comparing to other companies and can continuous its’s operation related to the cash and so on.
Based on the above analyses, the potential companies of making investments in the five selected are as
flows: comparing to all companies that I have discussed in the above are very difference in terms of
vertical analysis, horizontal analysis and financial ratio analysis. For example, the first company (ABLE)
net income/sale in terms of vertical analysis was loss, which shows that the company wouldn’t making
any investment because it’s in debt even the historical year, and also the balance of this company was in
debt according to the historical year. And also the horizontal analysis of the company as same as the
vertical analysis. The ratio analysis of (ABLE) company is good at liquidity and solvency but the
profitability and cash flow is in debt, because of the management of that company has not utilized the
assets and the equity they have.
The second company (THONG) net income/sale in terms of vertical analysis was high, because of they have
good revenue and also their balance sheet was good comparing to the asset and liability. And also the
horizontal analysis was good according to the historical year. The Balance sheet of this company was good
according to the historical year and the current year. The ratio analysis of this company has enough liquidity
ratio and also high profitability ratio and also normal solvency and normal cash flow.
The third company (ADVENT) net income/loss in terms of horizontal was very low comparing to the base
year and also with the vertical analysis with the same as horizontal analysis and also the balance sheet was not
dab whether vertical and horizontal and also the ratio analysis of the this company is not good at the second
company (THONG), because of the ratio analysis of ADVENT company at the side of the profitability is very
low and also at side of the solvency was high ratio that causes the company in to Bankruptcy/insolvency, and
also has normal liquidity and cash flow.
The fourth company (ANN JOO) net income/loss in terms of vertical and horizontal is very good but some of
the historical years are in debt and also the balance sheet of this company is very good according to the
historical years but the current year is very low comparing the past years and also the ratio analysis of the
company has good profitability and less liquidity and also it have very high rate of solvency that will cause
bankruptcy/insolvency of the company and even low cash flow that couldn’t run the business in to long time.
The fifth company that I have selected and discussed (ANCOM) net income/loss in terms of vertical and
horizontal was normal there is not much more expenses that revenue and also the balance sheet of the company
in terms of horizontal and vertical was normal no more liabilities than equity of the company and also in terms
of financial ratio the ANCOM company has low liquidity and lowest solvency and also low profitability but
only has good cash flow of the current year. So that all companies are in that situation that I have discussed on
the above.
The company of THONG is the best one of the five selected companies that I have discussed in the above and
the first one that I can say or I can make potential investment, because of all other companies are in debts in to
many different area and also same as the company that I have mentioned in the above, although the company
that I have mentioned in the above is lowest companies in terms of cash flow and in terms of profitability. So
that THONG is the only company that can able to run long time, in terms of profitability, liquidity, cash flow
and solvency and also can pay immediately its debt, because it has good solvency and profitability and even
cash flow. THONG company is the first company that can deserve the potential of making investments
comparing to the rest of the companies. There are some other companies which are making potential
investment, though some of them in debt in some area but capable to carry potential investment, those
companies are ADVENTA BERHAD and ABLE GROUP BERHAD. The second company that deserves
to make potential investment is ABLE, because of ABLE has good liquidity and good solvency that is
possible to return the company debt quickly and also solvency, since solvency ratios give a strong
indication of the financial health and viability of your business. So that is why I gave it second company.
The third company that deserves to make potential investment is ADVENT, because of ADVENT has
normal liquidity and normal cash flow and low profit, only it has bad solvency but the rest of ratio is not
bad so that comparing the rest of the companies the ADVENT is deserves to make potential investment.
The rest of tow companies are the lowest companies and they are in debt so that they are not deserves to
make potential investment.
The criteria that I can deem fit and provide my professional arguments are to compare the five companies at
the side of ratio analysis and I will rank all those companies to their best and worst. By comparing all five
companies I will do a table that I can classify the areas that they are good and bad, so that I will get good
measurement that I can rank their best. Down here is table that I can compare the companies in terms of ratio
analysis:
1 2 3 4 5
For the year Ended ABLE GROUP THONG GUAN ADVENTA ANN JOO ANCOM
of 2016-2015 BERHAD INDUSTRIES BERHAD RESOURCES BERHAD
Profitability ratio -1.755% -2.53% 9.265% 7.365% 0.5% 2.3% 7.2% 5.5% 0.26% 0.57%
(Return on assets 15.6% 14.6% 0.53% 1.25%
& Return on -1.896% -3.05% 13.1% 10% 0.8% 3.8%
equity)
Solvency ratio 8% 20.5% 41.42% 35.80% 66.6% 66.4% 117.3% 163.9% 106.7% 119.1%
(Debt to equity 54% 62.1% 51.6% 54.4%
&Debt to Assets) 7.41% 17% 29.29% 26.36% 40% 39.9%
Cash flow ratio -3.140 0.880 1.3 2 5.721 0.840 1.823 -1 21.8 10.12
(Cash return to 0.243 0.089 0.11 0.11
sale ratio & cash 0.743 -0.131 0.415 0.568 0.072 0.048
debt coverage
ratio)
As appeared in the above table, I have made comparison between the five companies that I have already
selected and discussed. In my best understanding of financial reporting and analysis, I would like to make
ranks for the five companies which indicates the best one and the worst one of them. In my best efforts of hard
working towards this assignment, I would provide ranks to the all five companies which is as flows
THONG GUAN INDUSTRIES BERHAD is the best company one when I compare it to the others that I
have selected and discussed so that I have provided it for the rank of A level. Because it has good liquidity
comparing to other companies and good/ higher profitability, the company has earned the heights profit
rate comparing to the others and also normal solvency comparing to the others, the financial leverage
appears to be at comfortable levels, with debt and good cash flow that can able to run the business for long
term. And it’s the best company that can make investment comparing to the others as appeared in the table
above. ABLE is the second best one comparing to the others, because of it has good liquidity comparing
to all companies and also good solvency which is the financial leverage appears to be higher comfortable
levels that would be paid their liability immediately but it has negative profitability and cash flow and is
not big effect of the company’s ongoing long time, though it has good solvency and liquidity, so that I
have provided it for the rank of B level.
ADVENT is the third best one comparing to the others, because of it has normal liquidity comparing the
rest of the selected companies and low profitability that might change the coming quarters or semiannual
or years and it has hope or high expectation that will generate good income if the management will do
good job of utilizing the assets and the equities of the companies. But it has high rate of solvency that will
cause bankruptcy/insolvency and also has good cash flow that can run the longtime of the company. So
that I have provide it for the rank of C level.
The rest of the two companies are the lowest and they have high rate of solvency and low cash flow and
also low liquidity and profitability comparing to the top three, so that I have provided for both of the
companies for the rank of level F. that means they have failed to appears the top and they are in debt they
can run their operation anymore, because of if the debt has been taken the companies will become
insolvency that is why they have been getting F levels.