CROSS-SECTIONAL ANALYSIS

Liquidity Ratios

From analysing the liquidity ratios of both companies, we gathered that both companies
had a slight decrease in their current ratio and quick ratio in 2016 from 2015. As at 2015, Advanced
Packaging Technology (ADVPKG), had a current ratio of 7.01 which then dropped to 5.07 in
2016. While Bright Packaging had a current ratio of 10.04 which fell to 7.19 in 2016. Therefore,
in both years Bright Packaging had a higher current ratio compared to ADVPKG. However, the
drop of current ratio between 2015 and 2016 is more drastic in Bright Packaging, which was about
28.39%, compared to a drop of 27.67% in ADV Packaging. This slightly greater decrease in Bright
Packaging is due to the increase of about 67% in their current liabilities from RM 4,875,219 in
2015 to RM8, 148,335 in 2016, compared to an increase of just 57% in ADVPKG’s current
liabilities despite an increase of current assets in both companies in 2016. This shows that both
companies are now less capable of paying their obligations in 2016 compared to in 2015.
Therefore, since both ratios are not below 1, both companies are not financially unhealthy.
However, since both companies current ratios are above 3, depending on how the company’s assets
are allocated, this ratio suggest that that company is not using its current assets efficiently.

Current Ratio

7.01
2015
10.04
Years

5.07
2016
7.19

0.00 2.00 4.00 6.00 8.00 10.00 12.00

Ratio

ADVPKG Bright
 Diagram 1.0: Current Ratio of Bright and ADVPKG

As we stated earlier, the quick ratios of both Bright and ADVPKG declined in 2016. ADV
Packaging’s quick ratio decreased to 4.14 from 5.74 in 2015, while for Bright Packaging it
decreased to 5.59 from 8.28 in 2016. In both cases, we see that Bright Packaging’s ratio is higher.
Quick ratio of Bright of 8.26 and ADV of 5.74 in 2016 means that the company has RM8.26 and
RM5.74 of liquid assets available to cover each RM1 of current liabilities respectively. However,
the decrease in quick ratio of ADV of 27.87% is much lower compared to 32.49% in Bright. This
decrease could have been affected by the increase in current liabilities of 67% in Bright Packaging
and 57% in ADV Packaging, despite an increase of current assets in both companies in 2016 as
mentioned in the current ratios. As the higher the quick ratio, the better the company's liquidity
position, in the case, Bright Packaging is more financially healthier than ADV, therefore, ADV
Packaging has lesser current assets to pay off their obligations unless they sell their long-term
assets. Hence, Bright Packaging has more liquidity in both 2015 and 2016 compared to ADV
Packaging.

Quick Ratio

5.74
2015
8.28
Years

4.14
2016
5.59

0 1 2 3 4 5 6 7 8 9
Ratio

ADVPKG Bright

Diagram 1.1: Quick Ratio of Bright and ADVPKG

 Cash Conversion Cycle (CCC) measures how fast a company can convert cash on hand
into inventory and accounts payable, through sales and accounts receivable, and then back into
cash. This shows the productivity of the management's ability to employ short-term assets and
liabilities to generate cash for the company. As we can see ADV Packaging’s CCC was 138 days
in 2015 but reduced slightly about 5.8% to 130 days in 2016, while for Bright Packaging, it reduced
greatly from 120 days to 85 days, which is about 29% in 2016. This reduction could have been
affected by the increase in Average Payable Period of ADV of 82% and Bright of 9.5%; an increase
in Average Collection Period of ADV of 26.3% and decrease in Bright of 37.3%; as well as the
increase in Average Age of Inventory for ADV of 7.9% and constant duration of 79 days for
Bright. These are average amounts are the results of the Account Receivable, Average Sales per
Day, Account Payable, Average Purchases per Day, Inventory and Cost of Goods Sold per Day of
the companies. For CCC, smaller or shorter amount of days are presumed to be good, as it means
that a company's money is tied up in inventory for less time and they can buy inventory, sell it,
and receive cash from customers in less time. Therefore, in this case, Bright Packaging is more
efficient in generating money for their company as their Cash Conversion Cycle for both years is
shorter.

Cash Conversion Cycle

138
2015
120
Years

130
2016
85

0 20 40 60 80 100 120 140 160

Days

ADVPKG Bright
 Diagram 1.2: Cash Conversion Cycle of Bright and ADVPKG

Diagram 1.3: Cash Conversion Cycle of Bright and ADVPKG

As a summary of the liquidity ratios, we agreed that Bright Packaging has better liquidity
as it has a higher current ratio as they are capable of paying their obligations, they have a higher
quick ratio, suggesting their liquidity position is better and their cash conversion cycle is shorter,
signifying that they are more productive in employing short-term assets and liabilities to generate
cash compared to Advanced Packaging Technology.
Activity Ratios

Activity ratios of a company reflects the efficiency of a company based on its use of its
assets, leverage or other such balance sheet items and are essential to determine whether a
company's management is doing a good job of generating revenues and cash from its resources.
The first ratio we are going to highlight is the inventory turnover,

the Panasonic is preferable by the investors than the Pensonic. Because the inventory
turnover of Panasonic (19.19 times) not only greater than the Pensonic (4.37 times), and also there
was an increase for about 22.54% while Pensonic having a 14.48% decrease in its inventory
turnover from 2015 to 2016. The increasing inventory turnover of Panasonic may reduce the
holding costs and lead to the rise in net income from selling their own products. However,
sometimes the higher the turnover rate does not mean that it is good, because it might cause for
the stock shortage. Therefore, the companies always try to maintain their inventory turnover for
not too high or too low.

Inventory Turnover

3.6
2015
4.62
Years

3.34
2016
4.65

0 1 2 3 4 5
Times

ADVPKG Bright

Diagram 2.0: Inventory Turnover of Bright and ADVPKG

 There was an increase of average collection period (ACP) for Panasonic and Pensonic,
the former has increased for 12.08 days and the latter has increased for 2.43 days. Since we do not
know the credit terms for both companies, so we just simply compared how many days they need
to be taken for the collection of the money from their credit sales. Although the increase for number
of days of Panasonic is more than the number of days of Pensonic, the ACP of Panasonic is
remaining lesser than the Pensonic which is 37.27 days and 67.71 days, respectively. Panasonic is
only take 37.27 days to collect their credit sales while Pensonic is taking for 67.71, nearly is the
twice of the former. Thus, the ACP of Panasonic is still more favourable than Pensonic in 2016.

Average Collection Period

101
2016
52
Years

80
2015
83

0 20 40 60 80 100 120
Days

ADVKPG Bright

Diagram 1.5: Average Collection Period of Bright and ADVPKG

 In the next ratio will be the exactly contrary of the above ratio that is known as average
payment period (APP). Nevertheless, this ratio is opposite of the ACP, however, it does not
represent that if a firm having a higher APP is considered as good. To maintain a period that could
enjoy the discount for early payment and also taking advantage of the credit period allowed by
supplier at the same time, 30 to 60 days would be considered as a best time period for a company.
Unfortunately, the APP for both companies were also exceed the best time period, Panasonic rise
from 75.22 to 82.06 days and Pensonic even if dropped by 13.98 days, it is still exceeding the best
time period for about 2.18 days.

Average Payment Period

80
2016
46
Years

44
2015
42

0 10 20 30 40 50 60 70 80 90
Days

ADVPKG Bright

Diagram 1.6: Average Payment Period of Bright and ADVPKG

 The average age of inventory (AAI) of Panasonic was decreased from 23.31 days to 19.02
days while Pensonic was increased from 71.43 days to 83.52 days. This result indicates that the
Panasonic is so much more efficiency than Pensonic. Since the AAI of Pensonic itself is already
relatively high, and along with the increased in AAI of Pensonic and the decreased in Panasonic,
the AAI of Pensonic has become the quadrupled of the Panasonic. In other words, the Pensonic is
worse in selling its items and have a slower rate for clearing their inventories. They may be facing
the risk of obsolete inventory and might have to write-off their products or adjust the price down.
This circumstance could be caused by the firm that is not properly and efficiently manage their
inventories.

Average Age of Inventory

109
2016
79
Years

101
2015
79

0 20 40 60 80 100 120
Days

ADVPKG Bright

Diagram 1.7: Average Age of Inventory of Bright and ADVPKG

 The last ratio for activities ratio is called total assets turnover, in this ratio the amount for
both companies are not much difference. For the Panasonic, it is rise from 1.03 to 1.10 and for the
Pensonic, it is declined from 1.454 to 1.447, which means Panasonic had been rise for 0.07 and
Pensonic had been declined by 0.007 from 2015 to 2016. In general, if a firm total assets turnover
is equal to 1, it indicates the firm is generating each Ringgit Malaysia of sales for every Ringgit
Malaysia they invested in their assets. Due to this ratio is considered as the higher the better, even
though the Panasonic is higher than 1 and has an increase trend, Pensonic is still more favourable
by investors and creditors. In summary, the overall of Panasonic in activities ratio is performance
better and healthier in financial conditions than Pensonic.

Total Assets Turnover

69.07
2016
0.47
Years

70.28
2015
0.34

0 10 20 30 40 50 60 70 80
Days

ADVPKG Bright

Diagram 1.8: Total Assets Turnover of Bright and ADVPKG