Introduction
What is financial statement and why it is important for an organization? A financial statement is a formal record written to describe the financial health of company. The organization will include summarized data of its income statement, balance sheet, liabilities and often include cash flow statement. Financial statement are usually compiled on a quarterly and annual basis. The purpose to do this financial statement in order to compare our identify the financial position analysis with our competitor. There are four main types for financial statement, balance sheets, profit account and loss accounts, cash flow statements and income statements. Balance sheets provide the whole financial condition of a company in accurate form. It shows the tangible and intangible goods that the company. Next are profit and loss accounts. Profit account and loss accounts provide the income and expenses of the company within the given time. Accruals also include. It will be used after profit and loss account statement is prepared. Next is cash flow. Cash flow show how money is predicted to move around within a given time. It will be useful to plan for future expenses. It shows whether the money will be enough to carry out the planned activities. It also shows whether the coming in money is enough to cover up expenses. Liquidity is determine by this cash flow. Lastly is income statement. Income statements use to measure the sales and expenses of the company within a given time. It also shows the results of accounting during operating.
Ratio analysis has five ratios to identify the financial statement. The five ratios are Liquidity ratio, Asset utilization ratio, Leverage ratio, Profitability ratio and Market value ratio. Liquidity ratio is to determine the company ability to pay off its short-terms debts. Mostly to cover up short term the value of ratio should be higher so that the company will be safe. Asset utilization ratio is used to determine how quickly various account are converted into sales or cash. Leverage ratio is used to giving idea to change in output so it will affect operating income and measure company's mix of operating costs. Fixed and variable costs are the two types of operating costs. It depend on the company and the industry but the mix will differ. Profitability ratio is indicating the goods financial health and identifying the effective of the organization is being managed to earn a satisfactory profit and return in investment. Market value ratio is the final group of the ratio that gives has the stock price its earnings per share of the organization.
We had asked to find out the most recent financial statement of two companies in the same industry. The two organizations are Pan Malaysia Holdings Berhad and Landmarks Berhab. We had evaluate the financial position and performance for each of these two companies using accounting ratio analysis. Both organizations are hotel industry and both of them are listed on the Main Market of Bursa Malaysia Securities Berhad. Pan Malaysian Holdings Berhab was incorporated in Malaysia on 8 January 1983 and listed on 25 May 1987PMH is an investment holding company. The principal activities of the PMH group are in hotel, travel, property and investment holding. Through its associated company, the PMH Group is also involved in stock and share broking and corporate advisory services, research and fund management services, nominee and custodian services and property and investment holding. Landmarks Berhad inaugurate in 1973 when a company known as Basset Rubber Company was incorporated. Basset Rubber Company then changed its name to Ytong Malaysia Berhad, and then to Premium Holdings Berhad. On 6 July 1983 Premium Holdings Berhad changed its name to Landmarks Holdings Berhad (LHB). The Company then merged with Landmarks Corporation Berhad. The merger was successfully completed in July 1983.
Table below is showing the accounting ratio for both Bursa Malaysia Holding Berhad and Landmark Berhad for the year 2009 .
Liquidity Ratios
Ratios
Equation
Pan Malaysian Holding Berhad.
Landmarks Berhad.
Net working capital
Current assets - Current liabilities
RM 63,290,000 - RM 10,319,000 = RM 52,971,000
RM 279,774,000 - RM 26,135,000 = RM 253,639,000
Current
Current assets
Current liabilities
RM 63,290,000
RM 10,319,000
= RM 6.13
RM 279,774,000
RM 26,135,000
= RM 10.70
ACID-TEST (Quick) Ratio
[Current asset- (Inventory +Prepaid expenses)] / Current liabilities
[RM 63,290,000 -RM 320,000] /
RM 10,319,000
= 6.10
[RM 279,774,000 - RM 1,077,000] /
RM 26,135000
= 10.66
Asset Utilization (activity) Ratio
Ratio
Equation
Pan Malaysia Holding Berhad.
Landmark Berhad.
Account receivable turnover
Net credit sale
Average account receivable
RM 18,234,000
RM 2,087,000
= 8.74 time
RM 46,605,000
RM 5,366,500
= 8.68 time
Average collection period
365_________
Account receivable turnover
365
8.74
= 41.8 day
365
8.68
= 42.1 day
Inventory turnover ratio
Cost of goods sold
Average inventory
RM 10,141,000
RM 323,500
= 31.35 time
RM 17,984,000
RM 1,161,500
= 15.5 time
Total asset turnover
Net sale
Total fixed asset
RM 18,234,000
RM 80,998,000
= 0.23
RM 46,605,000
RM 2,102,172,000
= 0.022
Total asset turnover
Net sale
Total asset
RM 18,234,000
RM 144,288,000
= 0.13
RM 46,605,000
RM 2,381,946,000
= 0.02
Leverage Ratios
Ratio
Equation
Pan Malaysia Holding Berhad.
Landmark Berhad.
Debt ratio
Total liabilities
Total asset
RM 39,662,000
RM 144,288,000
= 0.27
RM 675,642,000
RM 2,381,946,000
=0.28
Debt / equity ratio
Total liabilities
Stock holder's equity
RM 39,662,000
RM 104,461,000
= 0.38
RM 675,642,000
RM 1,325,712,000
= 0.51
Times interest earned ratio
Earnings before interest tax
Interest expense
RM 7,444,000
RM 2,936,000
= 2.54
RM 2,998,000
RM 3,052,000
= 0.98
Profitability Ratios
Ratio
Equation
Pan Malaysia Holding Berhad.
Landmark Berhad.
Gross profit Margin
Gross profit
Net sale
RM 8,111,000
RM 18,234,000
= 0.44
RM 28,792,000
RM 46,605,000
= 0.62
Net profit margin
Net profit
Net sale
RM 5,910,000
RM 18,234,000
= 0.32
RM 9,515,000
RM 46,605,000
= 0.20
Return on total asset
Net income
Average total asset
RM 5,190,000
RM 160,471,500
= 0.032 x 100
=3.2%
RM 9,515,000
RM 2,384,163,500
=0.039 x 100
=3.9%
Return on common equity
Earnings available to common stockholder / Average stockholder equity
RM 5,910,000
RM 101,507,000
= 0.0058 x 100
= 0.58%
RM 9,515,000
RM 1,325,733,000
=0.0071 x 100
=0.71%
Market value ratios
Ratio
Equation
Pan Malaysia Holding Berhad.
Landmark Berhad.
Earnings per share
(Net income - Preferred dividends) / Total common share outstanding
RM 5,190,000
RM 928,867,000
= 0.0056
RM 9,515,000
RM 480,682,000
=0.02
Price / earnings ratio
Market price per share
Earnings per share
NA
NA
Book value per share
(Total stockholder's equity - Preferred dividend) / Shares outstanding
RM 104,626,000
RM 928,867,000
=0.11
RM 1,705,691,000
RM 480,682,000
=3.55
Dividend yield
Dividends per share
Market Price per share
NA
NA
Dividend payout
Dividend payout
Earnings per share
NA
1 / 0.02 = 50
Conclusion
The five ratios above are showing the financial statements for the both organizations. The both organization didn't include the information about preferred share dividend and they also didn't provide market price per share and earnings per share so we can obtain the value of price / earnings ratio. We also cannot identify the dividend of yield because they didn't give the information. From the above table we can identify that Landmark Berhad does have a good financial statement when compared to Pan Malaysian Holding Berhad. Because the five ratios are showing high amount for Landmark Berhad and for Pan Malaysia Holding Berhad is lesser compared to its competitor. So Landmark Berhad have more advantage compare to Pan Malaysian Holding Berhad. These advantages gives Landmark Berhad the upper hand in a business transaction point of view. Landmark Berhad should constantly keep upgrading their services to maintain their lead in this market sector.
