FIN420 CASE Study Financial Ratio Analysis PDF

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FACULTY OF BUSINESS MANAGEMENTUiTM PERLISFIN 420 (FINANCIAL MANAGEMENT)CASE STUDY (FINANCIAL RATIO ANALYSIS)PREPARED FOR: MADAM NORSHAMSHINA BINTI MAT ISAPREPARED BY: NAME STUDENT ID GROUP SAKINAH BINTI SALIM 2020993627 RBA2431A NURUL EZATY BINTI MOHD ZIN 2019219282 RBA2432A INTAN NUR SHAFINIE BINTI...

Description

FACULTY OF BUSINESS MANAGEMENT UiTM PERLIS

FIN 420 (FINANCIAL MANAGEMENT)

CASE STUDY (FINANCIAL RATIO ANALYSIS)

PREPARED FOR: MADAM NORSHAMSHINA BINTI MAT ISA

PREPARED BY: NAME

STUDENT ID

GROUP

SAKINAH BINTI SALIM

2020993627

RBA2431A

NURUL EZATY BINTI MOHD ZIN

2019219282

RBA2432A

INTAN NUR SHAFINIE BINTI SALLEH

2019612102

RBA2432A

NURDIANA SYAZWANI BINTI NORHADI

2020975517

RBA2432A

ZATI ATHIRAH BINTI SHAHARUDDIN

2020872462

RBA2432A

TABLE OF CONTENTS

Contents

Page

Table of Content

i

1.0

Introduction

1

2.0

Background of Main Company: Chemical Company of Malaysia (CCM)

2

3.0

Background of Competitor Company: PETRONAS Chemicals Group Berhad (PCG)

3

4.0

Financial Ratio Analysis

4

4.1 Trend Analysis of Main Company (CCM)

4-7

4.2 Trend Analysis of Competitor Company (PCG)

8-9

4.3 Comparative Analysis Between Main Company and Competitor Company for Year 2017, 2018 and 2019

5.0

10 - 12

Conclusion

13

References

14

Appendices

15 - 18

i

1.0

INTRODUCTION

The case study will assist students in developing a better appreciation in financial ratio analysis and interpretation as a tool for evaluating real-world companies. By reading and analysing the three-year financial statements of a Malaysia public listed company and its competitor, students can acquire valuable skills such as deciphering the various details contained in an accounting report, give informed opinions about the company’s business operations and make recommendations regarding the worthiness of the business’ common shares as an investment medium. Our group have chosen Chemical Company of Malaysia (CCM) as the main company, and Petronas Chemicals Group Berhad (PCG) as the competitor company for our case study.

1

2.0

BACKGROUND OF MAIN COMPANY: CHEMICAL COMPANY OF

MALAYSIA (CCM)

Chemical Company of Malaysia Berhad is an investment holding and management company. This company is engaged in the manufacturing and marketing of fertilizers, chemicals and pharmaceuticals products and services. Its segments are including Pharmaceuticals, Chemical and Fertilizers. Pharmaceuticals segments is engaged in the manufacture and marketing of pharmaceutical and healthcare product. Next, the story of CCM is they are leading chemicals company in Malaysia with 50 years of expertise in the industry. The strengths of this company is in the specialty chemicals and polymers. [ CITATION Mar \l 17417 ] Its other operations relate to rental of investment property. It produces over 200 generic products, including medications, such as Omesec and Vascor, and also approximately 20 over-the-counter (OTC) brands, such as Champs, Proviton, Flavettes, Donna and Diamelon. It offers products in the therapeutic areas of oncology, biosimilars and vaccines.[ CITATION Mar \l 17417 ]

2

3.0 BACKGROUND OF COMPETITOR COMPANY: PETRONAS CHEMICALS GROUP BERHAD (PCG) PETRONAS Chemicals Group Berhad (PCG) is the leading petrochemical producer in Malaysia and the largest gas-based chemicals producer in Southeast Asia. PCG is involved primarily in the manufacturing, marketing and sales of a diverse range of petrochemical products including olefins, polymers, fertilisers, methanols and other chemicals and derivative products[ CITATION PET19 \l 1033 ].

Today, their integrated petrochemical complexes in Kertih, Terengganu and Gebeng, Pahang as well as manufacturing complexes in Gurun in Kedah, Bintulu in Sarawak, and Labuan, have a total production capacity of 12.8 mtpa. PCG has marketing subsidiaries in Malaysia, Thailand, Indonesia and China, as well as international representative offices in Vietnam and the Philippines. PCG has more than 1,000 active customers around the world, with more than 80 per cent of their business coming from customers who have been with them for more than 10 years.

3

4.0

FINANCIAL RATIO ANALYSIS

4.1

Trend Analysis of Main Company (CCM) (b) Analysis

(a) Ratios 2017

2018

1.21

3.26

2019

Perform or not

Type

Perform Liquidity ratios

Current ratio Net working Capital Fixed Asset Turnover

2.08 116,696.00

0.43

Times

92,125.00

Not Perform

Millions

0.64

Perform

Times

201,391.00

1.39

Activity ratios 1.15

0.65

1.01

Not perform

Times

67.39%

44.55%

46.23%

Not perform

%

Perform

Times

Total Asset Turnover Debt ratio Debt equity ratio Times interest earned

2.07

0.80

0.86

1

2.31

7.25

Debt or leverage ratios

Perform

Times

Profitability ratios

Gross profit margin Net profit margin

26.49%

26.11%

10.74%

7.76%

Perform

19.13% 4.17%

Perform

4

% %

Interpretation Liquidity ratios measure a company's ability to pay debt obligations. In 2018 the company show the efficiency rather than 2017 and 2019. Its show that the company able to pay their obligation. The efficiency in Liquidity ratio show you whether a business will be able to pay off it short terms debt.

Activity ratio is measured how effect to company to general revenue and cash. In 2019, show that company is efficient rather than 2018 and 2017. It shows that company can handle the company management. The efficient inventory can attract investor to invest in our company because they believe this company have a efficient turnover or inventory to generate the revenue and cash. The good debt or leverage ratio is in 2018 because they show the good in managed their debt rather than year 2017 and 2019. year 2018 show that they managed a debt efficiency. Profitability ratios show how efficiently a company generates profit and value for shareholders. Profitability ratios show how efficiently a company generates profit and value for shareholders. The most effiecient GPM and NPM are in 2017 while ROA are 2018. Year 2018 and 2017 shows that the company generate thier profit efficiently.

Return on total assets

4.62%

5.34%

Perform 2.65%

%

LIQUIDITY RATIOS

ACTIVITY RATIOS

5

DEBT OR LEVERAGE RATIOS

PROFITIBLITY RATIO

4.2

Trend Analysis of Competitor Company (PCG)

LIQUIDITY RATIO

7

LEVERAGE RATIO

PROFATIBILITY RATIO

ACTIVITY RATIO

8

4.3 Comparative Analysis Between Main Company and Competitor Company for Year 2017, 2018 and 2019

LIQUIDITY RATIO

9

LEVERAGE RATIO

PROFITABILITY RATIO

10

ACTIVITY RATIO

11

5.0

CONCLUSION

Financial ratios can be used broadly classified into liquid ratio, profitability ratio, leverage ratio and activity ratio. Therefore, these ratios are used to analyze different aspect of business’s financial position, performance and cash flow. Financial ratio calculates and analyses in certain situation depend on the user of the financial statements.

In conclusion, as in the report it clearly shows that PCG’s performance is way more better than CCM especially in leverage ratio and profitability ratio. For example, in leverage ratio PCG has lower percentage of debt compared to CCM. Therefore, it means PCG has more assets than debt. However, in profitability ratio, CCM indicates worse growth prospect and productivity of assets in producing profit as they all have lower percentage than PCG.

12

REFERENCES Annual Report 2017. (2017). Retrieved from Chemical of Malaysia Co Bhd: https://www.ccmberhad.com/financial-statements.php Annual Report 2018. (2018). Retrieved from Chemical of Malaysia Co Bhd: https://www.ccmberhad.com/financial-statements.php Annual Report 2019. (2019). Retrieved from CCM: https://www.ccmberhad.com/financialstatements.php Annual Report 2019. (2019). Retrieved from Chemical of Malaysia Co Bhd : https://www.ccmberhad.com/financial-statements.php Bragg, S. (2020). Laverage ratios. Retrieved from https://www.accountingtools.com/articles/leverage-ratios.html#:~:text=Leverage%20ratios %20are%20used%20to,or%20equity%20of%20a%20business.&text=Debt%20ratio.,debt %20divided%20by%20total%20assets. CFI. (n.d.). What are Activity Ratios? Retrieved from https://corporatefinanceinstitute.com/resources/knowledge/finance/activityratios/#:~:text=Activity%20ratios%20are%20financial%20metrics,efficient%20a %20company's%20operations%20are.&text=Activity%20ratios%20are%20useful%20for,peers %20in%20comparable%20co Hayes, A. (19 August, 2020). Liquidity Ratio Definition. Retrieved from Investopedia: https://www.investopedia.com/terms/l/liquidityratios.asp#:~:text=Liquidity%20ratios %20measure%20a%20company's,and%20operating%20cash%20flow%20ratio. Kenton, W. (28 Julai, 2020). Profitability Ratios. Retrieved from Investopedia: https://www.investopedia.com/terms/p/profitabilityratios.asp#:~:text=Profitability%20ratios %20are%20metrics%20that,profit%20and%20value%20for%20shareholders. Market f. (n.d.). Retrieved from Financial Times.

13

APPENDICES INCOME STATEMENT CHEMICAL COMPANY of MALAYSIA BERHAD FOR THE YEAR 2017,2018,2019 Total Revenue Revenue Cost of sales Gross Profit

2017 370,709 -272,510 98,199

2018 395,939 -292,564 103,275

2019 385,220 -311,544 73,676

Other income

7,706

16,332

4,129

-9,176 -54,031

-11,405 -40,177

-11,066 -34,337

Distribution expenses Administrative expenses Net (loss on impairment) / gain on reversal of impairment of financial instrument

-1,512

Other expenses

-8,710

-2,939

-3,522

Result from Operating activities

33,988

65,186

27,368

Finance income

5,021

5,991

3,989

Finance cost

-24,965

-21,071

-6,710

Net Finance (Cost) / Income

-19,944

-15,080

-2,721

681 14,725 -17,374

1,510 51,616 -20,872

1,716 26,363 -10,291

-2,649

30,744

Share of profit of equity - accounted associated net of tax Profit before tax Tax (expense) / income (Loss) / Profit from Continuing Operations Discontinued Operation Profit / (Loss) from discontinued operation, net of tax Profit of the year Other comprehensive income, net of tax Item that is or may be classified Subsequently to profit or loss Fair value of available - for - sale financial assets Foreign currency translation differences for foreign operations

39,818

30,744

-4,505

-4,505

18,578

18,578

14

16,072

1,367

BALANCE SHEET OF CHEMICAL COMPANY of MALAYSIA BERHAD FOR THE YEAR 2017,2018,2019

15

PETRONAS CHEMICAL GROUP BHD ANNUAL REPORT FOR 2017, 2018 AND 2019

STATEMENT OF PROFIT OR LOSS Revenue Cost of Revenue Gross profit Selling and distribution expenses Administration expenses Other expenses Other income Operating profit Financing costs Share of profit of equity-accounted joint ventures and associates, net of tax Profit before taxation Tax expense PROFIT FOR THE YEAR

2017

Total comprehensive income attributable to: Shareholders of the Company Non-controlling interests TOTAL COMPREHENSIVE INCOME FOR THE YEAR Basic earnings per ordinary share (sen)

16

2019

6874 -818 -694 -200 397 5559 -17

1637 0 1191 4 4456 -878 -754 -107 523 3240 -31

16

108

-54

5236 -822 4414

5650 -592 5058

3155 -360 2795

166

-112

36

6

202

-106

5260

2689

4177 237 4414

4979 79 5058

2811 -16 2795

2743 237

5182 78

2705 -16

2980

5260

2689

52.7

62.2

35.1

1740 7 1102 1 6386 -764 -615 -9 242 5240 -20

OTHER COMPREHENSIVE (EXPENSES)/ INCOME Foreign currency translation differences -1321 Share of other comprehensive (expenses)/income of equity-accounted joint -113 ventures and associates TOTAL OTHER COMPREHENSIVE -1434 (EXPENSES)/INCOME FOR THE YEAR TOTAL COMPREHENSIVE INCOME FOR THE 2980 YEAR Profit attribute to: Shareholders of the company Non-controlling interests PROFIT FOR THE YEAR

2018 19576 -12702

BALANCE SHEET OF PETRONAS CHEMICAL GROUP BERHAD FOR THE YEAR 2017,2018,2019

STATEMENT OF FINANCIAL POSITION

2017

2018

2019

ASSETS Property, plant and equipment Prepaid lease payments Investments in joint ventures and associates Intangible asset Long term receivables Deferred tax assets TOTAL NON-CURRENT ASSETS

20792 42 1192 1 113 300 22440

19080 28 1232

20482

29 237 20606

971 23095

Trade and other inventories Trade and other receivables Tax recoverable Cash and cash equivalents TOTAL CURRENT ASSETS TOTAL ASSETS

1723 2370 55 6674 10822 33262

1698 2668 64 12329 16759 37365

1658 1994 71 12045 15768 38863

Share capital

8871

8871

8871

Reserves

18994

21608

21062

Total equity attributes to shareholders of the Company Non-controlling interests TOTAL EQUITY

27865 1003 28868

30479 695 31174

29933 605 30538

838 212 1050

919 163 1082

1875 627 906 1699 5107

3217 127 3344 4394 33262

2072 2896 141 5109 6191 37365

1058 584

EQUITY

LIABILITIES Borrowings Lease liabilities Deferred tax liabilities Other long term liabilities and provisions TOTAL NON-CURRENT LIABILITIES Lease liabilities Borrowings Trade and other payables Current tax payables TOTAL CURRENT LIABILITIES TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES

78

17

3063 77 3218 7117 37365...