Financial Statements As A Measure Of Company Health Accounting Essay

What is fiscal statement and why it is of import for an organisation? A fiscal statement is a formal record written to depict the fiscal wellness of company. The organisation will include summarized informations of its income statement, balance sheet, liabilities and frequently include hard currency flow statement. Fiscal statement are normally compiled on a quarterly and one-year footing. The intent to make this fiscal statement in order to compare our place the fiscal place analysis with our rival. There are four chief types for fiscal statement, balance sheets, net income history and loss histories, hard currency flow statements and income statements. Balance sheets provide the whole fiscal status of a company in accurate signifier. It shows the touchable and intangible goods that the company. Following are net income and loss histories. Net income history and loss histories provide the income and disbursals of the company within the given clip. Accumulations besides include. It will be used after net income and loss history statement is prepared. Following is hard currency flow. Cash flow demo how money is predicted to travel about within a given clip. It will be utile to be after for future disbursals. It shows whether the money will be plenty to transport out the planned activities. It besides shows whether the coming in money is adequate to cover up disbursals. Liquidity is determine by this hard currency flow. Lastly is income statement. Income statements use to mensurate the gross revenues and disbursals of the company within a given clip. It besides shows the consequences of accounting during operating.

Ratio analysis has five ratios to place the fiscal statement. The five ratios are Liquidity ratio, Asset use ratio, Leverage ratio, Profitability ratio and Market value ratio. Liquidity ratio is to find the company ability to pay off its short-terms debts. Largely to cover up short term the value of ratio should be higher so that the company will be safe. Asset use ratio is used to find how rapidly assorted history are converted into gross revenues or hard currency. Leverage ratio is used to giving thought to alter in end product so it will impact runing income and step 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 bespeaking the goods fiscal wellness and placing the effectual of the organisation is being managed to gain a satisfactory net income and return in investing. Market value ratio is the concluding group of the ratio that gives has the stock monetary value its net incomes per portion of the organisation.

We had asked to happen out the most recent fiscal statement of two companies in the same industry. The two organisations are Pan Malaysia Holdings Berhad and Landmarks Berhab. We had measure the fiscal place and public presentation for each of these two companies utilizing accounting ratio analysis. Both organisations 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 investing keeping company. The chief activities of the PMH group are in hotel, travel, belongings and investing retention. Through its associated company, the PMH Group is besides involved in stock and portion broking and corporate advisory services, research and fund direction services, nominee and custodian services and belongings and investing retention. Landmarks Berhad inaugurate in 1973 when a company known as Basset Rubber Company was incorporated. Basset Rubber Company so changed its name to Ytong Malaysia Berhad, and so to Premium Holdings Berhad. On 6 July 1983 Premium Holdings Berhad changed its name to Landmarks Holdings Berhad ( LHB ) . The Company so merged with Landmarks Corporation Berhad. The amalgamation was successfully completed in July 1983.

Table below is demoing the accounting ratio for both Bursa Malaysia Holding Berhad and Landmark Berhad for the twelvemonth 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 disbursals ) ] / 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 recognition sale

Average history receivable

RM 18,234,000

RM 2,087,000

= 8.74 clip

RM 46,605,000

RM 5,366,500

= 8.68 clip

Average aggregation period

365_________

Account receivable turnover

365

8.74

= 41.8 twenty-four hours

365

8.68

= 42.1 twenty-four hours

Inventory turnover ratio

Cost of goods sold

Average stock list

RM 10,141,000

RM 323,500

= 31.35 clip

RM 17,984,000

RM 1,161,500

= 15.5 clip

Entire plus turnover

Net sale

Entire fixed plus

RM 18,234,000

RM 80,998,000

= 0.23

RM 46,605,000

RM 2,102,172,000

= 0.022

Entire plus turnover

Net sale

Entire plus

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

Entire liabilities

Entire plus

RM 39,662,000

RM 144,288,000

= 0.27

RM 675,642,000

RM 2,381,946,000

=0.28

Debt / equity ratio

Entire 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

Timess involvement earned ratio

Net incomes before involvement revenue enhancement

Interest disbursal

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 net income Margin

Gross net income

Net sale

RM 8,111,000

RM 18,234,000

= 0.44

RM 28,792,000

RM 46,605,000

= 0.62

Net net income border

Net net income

Net sale

RM 5,910,000

RM 18,234,000

= 0.32

RM 9,515,000

RM 46,605,000

= 0.20

Tax return on entire plus

Net income

Average entire plus

RM 5,190,000

RM 160,471,500

= 0.032 tens 100

=3.2 %

RM 9,515,000

RM 2,384,163,500

=0.039 x 100

=3.9 %

Tax return on common equity

Net incomes available to common shareholder / Average shareholder equity

RM 5,910,000

RM 101,507,000

= 0.0058 tens 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.

Net incomes per portion

( Net income – Preferred dividends ) / Entire common portion outstanding

RM 5,190,000

RM 928,867,000

= 0.0056

RM 9,515,000

RM 480,682,000

=0.02

Price / net incomes ratio

Market monetary value per portion

Net incomes per portion

Sodium

Sodium

Book value per portion

( Entire shareholder ‘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 output

Dividends per portion

Market Price per portion

Sodium

Sodium

Dividend payout

Dividend payout

Net incomes per portion

Sodium

1 / 0.02 = 50

Decision

The five ratios above are demoing the fiscal statements for the both organisations. The both organisation did n’t include the information about preferable portion dividend and they besides did n’t supply market monetary value per portion and net incomes per portion so we can obtain the value of monetary value / net incomes ratio. We besides can non place the dividend of output because they did n’t give the information. From the above tabular array we can place that Landmark Berhad does hold a good fiscal statement when compared to Pan Malaysian Holding Berhad. Because the five ratios are demoing high sum for Landmark Berhad and for Pan Malaysia Holding Berhad is lesser compared to its rival. So Landmark Berhad have more advantage comparison to Pan Malaysian Holding Berhad. These advantages gives Landmark Berhad the upper manus in a concern dealing point of position. Landmark Berhad should invariably maintain upgrading their services to keep their lead in this market sector.