Companies On The Kuala Lumpur Stock Exchange Finance Essay

You are required to calculate and compare the accounting ratios between these two companies, and conclude the consequences of your determination. The restrictions or jobs of utilizing accounting ratios for public presentation analysis should be included in your decision.

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Profitableness

Ratio

Formula

Rubberex

Kossan

Gross Profit Margin

Gross net income x100

Net gross revenues

23,295,108 x100

317,627,647

= 7.334

85,828,051 x100

842,135,011

=10.192

Net Net income Margin

Net net income x100

Net gross revenues

22,567,776 x100

317,627,647

=7.105

67,334,239 x100

842,135,011

=7.996

Tax return on entire assets

Net income _

Average Entire assets

22,567,776 x100

311,015,459

=7.26

67,334,239 x100

671,121,413

=10

Tax return on common equity

Gaining available to common Stockholders

Average shareholder equity

__22,567,776 ___x100

( 163,957,269+159,650,547 ) /2

=13.95

__67,334,239 ___x100

( 358,999,713+299,858,657 ) /2

=20.44

Liquidity Ratio

Formula

Rubberex

Kossan

Net working capital

Current assets – Current liabilities

146,081,116-90,640,859

=55,440,257

327,877,272-

260,911,424 =66,965848

Current ratio

Current assets

Current liabilities

146,081,116

90,640,859

=1.61

327,877,272

260,911,424

=1.26

Acid trial ( speedy ratio )

Current assets- ( Inventory + prepaid disbursals )

Current liabilities

( 146,081,016- 67,972,894 )

90,640,859

=0.862

( 327,877,272- 109,917,464 )

260,911,424

=0.835

Asset Utilization ( activity ) Ratio

Formula

Rubberex

Kossan

Account Receivable Employee turnover

Net recognition gross revenues

Average histories receivable

317,627,647

49,514,406

=6.41

_842,135,011 _

147,166,950.5

=5.72

Average aggregation period

Account receivable

Daily recognition gross revenues

57,236,134___ ( 317,627,647/365 )

=66 twenty-four hours

142,046,009

( 842,135,011/365 )

=62 twenty-four hours

Inventory turnover ratio

Cost of good sold

Average stock list

189,753,556

70,398,947.5

=2.7

550,189,299

110,960,144

=4.96

Fixed plus turnover

Net sales____

Entire fixed assets

317,627,647

173,643,601

=1.83

842,135,011

68,635,616

=12.27

Entire plus turnover

Net gross revenues

Entire plus

317,627,647

319,724,617

=0.99

842,135,001

688,546,753

=1.22

Leverage Ratio

Formula

Rubberex

Kossan

Debt ratio

Entire liabilities

Entire plus

155,767,348

319,724,617

=0.362

329,547,040

688,546,753

=0.479

Debt liquidness ratio

Entire liabilities

Stockholder ‘s equity

155,767,348

163,957,269

=0.95

329,547,040

358,999,713

= 0.9197

Timess involvement ( involvement coverage ratio )

Earning_before_interest and_tax

Interest disbursals

23295108

31321641

=0.7437

85828051

94990364

=0.9035

Market Value Ratio

Formula

Rubberex

Kossan

Gaining per portion

Net income – preferable dividend

Entire common portion outstanding

22,567,776

98,623,917

=0.2288

67,334,239

79,933,488

=0.8424

Price/ gaining ratio

Market_price_per

_share

Gaining per portion

N/A

N/A

Book value per portion

Entire shareholder ‘s equity – preferable dividends _

Share outstanding

163,957,269

98,623,917

=1.66

358,999,713

79,933,488

=4.49

Dividend outputs

Dividends per portion

Market monetary value per portion

N/A

N/A

Dividend layout

Dividends per portion

Gaining per portion

0.0525

0.2288

=0.23

_0.09__

0.8424

=1.07

Profitability Ratio

Gross Profit Margin

Both companies have good net income. Company Kossan has better turning on net income comparison to company Rubberex.

Net Net income Margin

After revenue enhancement and disbursals, the net net income of both company shows excellence acting. Both the net net income is around 7percent, but Kossan shows better consequence.

Tax return on entire assets

The return which is net income earn back on entire assets. Kossan has great net income return ( 10 % ) , that is a batch for a company, whereas Rubburex merely 7.26 % .

Tax return on common equity

The return on common equity of Kossan is more the Rubberex. It is because the shareholder equity of Kossan is more than Rubberex.

Liquidity Ratio

Net working capital

Kossan has approximately 10,000,000 ringgit more than Rubberex.

Current ratio

The good ratio showed on Rubberex because it ‘s current liabilities is really low.

Acid trial ( speedy ratio )

In overall, both company have really near ratio on acerb trial.

Asset Utilization ( activity ) Ratio

Account receivable turnover

The ratio shown the Rubberex higher than Kossan. Rubberex has more loaning to other and besides its clients are slower to pay back the debt. The period of return is longer.

Average aggregation period

66 yearss on the Rubberex, the longer the period, the liquidness of hard currency is lesser comparison with Kossan which merely 62 yearss.

Inventory turnover ratio

Inventory of Kossan has greater ratio of turnover. It is because the gross revenues of Kossan is better than Rubberex.

Fixed plus turnover

The turnover of fixed plus on both company have really large different. The Kossan has 12.27 turnover rate which really high in the industry.

Entire plus turnover

Compare both company consequence, it show the large difference but overall consequence is really close which is 0.99 ( Rubberex ) and 1.22 ( Kossan ) .

Leverage ratio

Debt ratio

Both companies has low debt ratio, but Kossan has higher debt comparison with Rubberex.

Debt liquidness ratio

Debt on Kossan is more than Rubberex.

Timess involvement ( involvement norm ratio )

The involvement disbursals on Kossan is excessively much that can non be pay in a short period whereas Rubberex is low disbursals on involvement.

Market value ratio

Gaining per portion

Net income of Rubberex is lower than the Kossan although the debt is high.

Price/earning ratio

This is the restriction of these 2 companies. There are no market monetary value per portion in both one-year study.

Book value per portion

Kossan has more shareholder so that the book value is higher than Rubberex.

Dividend outputs

Lapp job here, which is no market monetary value per portion is found in both one-year study.

Dividend payout

The good dividend per portion come from Kossan and it give 1.07 dividend layout for public.

Question 2

Identify and discourse three different ways for reassigning capital or fund from rescuers to borrowers in the fiscal market.

Introduction

Fiscal establishment is an establishment that provides fiscal services for its clients or members. Probably the most of import fiscal service provided by fiscal establishments is moving as fiscal mediators. Most fiscal establishments are extremely regulated by authorities.

Function of fiscal establishment

Fiscal establishments provide service as mediators of the capital and debt markets. They are responsible for reassigning financess from investors to companies in demand of those financess. Financial establishments facilitate the flow of money though the economic system. To make so, salvaging arisk brought to supply financess for loans. Such is the primary agencies for depositary establishment to develop gross. Should the output curve become reverse, houses in this sphere will offer extra fee-generating services including securities underwriting.

3 ways to reassign financess

Direct transportation

First, this direct transportation of financess from rescuers to borrowers occurs when no mediator is involved. Many big organisations will negociate face to face with one another as it is cost effectual. It can besides reassign from one type of tax-deferred retirement program or history to another. When a concern sells its stocks or bond can straight travel to rescuers without traveling through any type of fiscal establishment. The concern delivers its securities to rescuers, who in bend give the house the money it needs. Examples of one of the usage direct transportation is when an single accepts a new occupation with an new employer. Assuming that both employers offer a similar retirement program, it is possible to travel the financess from the original program to the program that is offered by the new employer. This allows the employee to avoid holding to pay revenue enhancements on the financess that are transferred, since the dealing counts as a direct rollover.

Direct trgansfers are non considered to be distributions and are hence non nonexempt as income or capable to any punishments for early distribution. This type of transportation is now normally done electronically, without a cheque being cut from one keeper to another. Direct transportations can consequence by the history proprietor by make fulling out the needed paperwork. Normally, this transportation takes several yearss to finish. Although this procedure is now by and large faster in the electronic and computing machine age than in the yesteryear.

Investing banking house

An organisation that underwrites and distributes new investing securities and assist concerns achieve funding. For an instance, Merrill Lynch which underwrites the affair. An underwriter serves as a jobber and facilitates the issue of securities. The corporation sells its stocks or bonds to the investing bank, which in order sells these fiting securities to rescuers.

Fiscal Mediators

Fiscal mediators are specific fiscal houses that facilitate the transportation of money from rescuers to demanders of capital. Financial intermediary such as a bank or common fund where merely relocate money and securities between houses and rescuers ; they literally create new fiscal merchandises. The intermediary obtains financess from rescuers in exchange for its single securities. The intermediary so uses this money to purchase and so keep concerns ‘ securities. The endurance of mediators greatly increases the efficiency of money and capital markets. The chief comparative advantage of fiscal mediators over fiscal markets is in get the better ofing the information dissymmetry between borrowers and loaners. Financial mediators are improved right to cut downing the public good problem of free-riding. Because of fiscal mediators can do investings without helpful their actions instantly in concern markets. With glowing working fiscal markets information is au naturel right off through fiscal monetary values, supplying single investors with less inducement and motive to acquire information.

On other manus, fiscal mediators are better at before station monitoring and exercising company direction than fiscal markets. It is because with liquid fiscal markets, entity investors are able to enthusiastically sell company ‘s portions and have fewer inducements to maintain an oculus on directors exhaustively. In general, they have less inside information about houses than fiscal mediators.

Furthermore, mediators are largely good suited to supplying external finance to newer houses that involve theatrical finance. Because fiscal mediators can extra believably obligate to offering extra financess as undertakings develop, whereas pre-committed point finance is more hard to set up with publically traded securities. Information dissymmetries tend to be larger for little houses. This is because of decreased economic systems of graduated table with regard to geting information about little houses. Gertler and Gilchrist ( 1994a and 1994b ) , for illustration, happen that bank-dependent houses with hapless entree to ( non-bank ) capital markets are typically smaller in size for the fabrication sector in the United States. Because of the comparative advantage of fiscal mediators over fiscal markets in footings of roll uping and treating information, states with a big figure of little houses might be expected to be more reliant on fiscal mediators than markets for external finance.

Furthermore, fiscal mediators are better able to diversify aggregative hazard. For illustration, Bankss have a alone ability to fudge against market broad liquidness dazes ( Gatev and Strahan 2003 ) . This is because Bankss are viewed as safe oasiss by investors. Deposits tend to flux in during periods of fiscal hurt ( low liquidness ) , at a clip when borrowers want to pull on backup lines of recognition as external finance from public securities markets has become excessively expensive because of low liquidness. By extinguishing liquidness hazard, Bankss can increase investing in high-return, illiquid assets and accelerate growing. Fiscal markets can cut down liquidness hazard, but do non extinguish it.

In add-on, fiscal mediators can supply intertemporal hazard sharing. Fiscal markets are by and large less good suited to supply this insurance. This is because intertemporal hazard sharing requires the accretion of militias in safe assets whereas investors in fiscal markets would theoretically ( though possibly non practically ) continuously adjust their portfolios to gain the highest rate of return ( Dolar and Meh 2003 ) .

Mediators straight undertake antique station monitoring of house directors and exert corporate control when it is dearly-won for outside investors to verify undertaking returns. In Diamond ‘s ( 1984 ) theoretical account, fiscal mediators are delegated the dearly-won undertaking of supervising loan contracts. A fiscal intermediary must take an inducement contract such that it has inducements to supervise the information, make proper usage of it and do sufficient payments to rescuers to pull deposits.Providing loan contracts and monitoring is dearly-won and variegation can cut down these costs. In Diamond ‘s theoretical account, the fiscal intermediary demand non be monitored because it bears all punishments for any deficit of payments and because the variegation of its portfolio makes the chance of incurring these punishments really little. Furthermore, the optimum size for a fiscal mediator is infinite. This is because costs are lowered indefinitely by variegation, every bit long as the returns to borrowers are non absolutely correlated with each other.

Fiscal markets can besides advance corporate control, for illustration, by structuring compensation such that managerial net incomes are conditioned on houses ‘ public presentation or by easing coup d’etats of ill managed houses ( Jensen and Murphy 1990 ) . With coup d’etats, foreigners buy ill managed houses, fire directors and transform houses into a more productive endeavor. While coup d’etats may non ever better public presentation, in pattern the menace of coup d’etat Acts of the Apostless to train direction and so it is hard to mensurate the full value of this map. Fiscal markets perchance facilitate coup d’etats better than fiscal mediators and therefore heighten the flow of capital to its highest value usage.

Fiscal markets provide an option to mediators and an mercantile establishment to restrict the possible jobs created by powerful Bankss. Fiscal mediators focus on obtaining information that is non available to other loaners. This focal point is important to get the better of information dissymmetry and supply finance, but they may utilize this inside information to pull out rents from houses or to protect houses with close bank ties from competition. Financial mediators may besides conspire with house directors against other loaners and therefore obstruct efficient corporate administration.

For houses able to entree them, fiscal markets may be better suited for covering with uncertainness, invention and new thoughts than fiscal mediators because they allow for diverseness of sentiment. Fiscal mediators such as Bankss may hold a bias towards low hazard undertakings that have a high chance of success. Intermediated funding delegates determinations about investing undertakings to a comparatively little figure of determination shapers. Disagreement and distinct determination devising increases the likeliness of a loan application being rejected and as a consequence, without specialized mediators, intermediated finance may ensue in the underinvestment in new engineerings, for illustration. For houses with such undertakings, and which can non entree fiscal markets, the function of specialized mediators may be pronounced.

Decision

In drumhead, fiscal mediators and fiscal markets can in many instances act as utility beginnings of fiscal services. Lenders/savers in peculiar have a pick between the hazard, return and liquidness offered by both sections of the fiscal system. Each section is able to offer a different scope of investings and offers services to houses that are non complete replacements. Broadly talking, fiscal markets provide lower cost weaponries length debt or equity finance to a smaller group of houses able to obtain such finance, while fiscal mediators offer finance with a higher cost reflecting the disbursal of bring outing information and ongoing monitoring. Fiscal mediators and markets may besides supply complementary fiscal services to many houses.

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