A Financial Comparison Between Two Companies Finance Essay

Find the most recent fiscal statements for two companies of same industry which are listed in KLSE ( Kuala Lumpur Stock Exchange ) . Measure the fiscal place and public presentation for each of these two companies utilizing accounting ratio analysis. 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 include in your decision.

Introduction

Accounting ratio is one figure that expressed in footings of another relationship between two or assorted figures and company that can be compared. Example it can be shown in a position from balance sheet, net income and loss history, and budgetary control system or in any accounting organisation that shows relationship between accounting informations.

The intent of accounting ratio is simplifies the comprehension of fiscal statements and status by successful and unsuccessful house. Other than that it besides helps in the of planning, prediction and assist direction and it helps in instance of investors and imparting determination of bankers.

The 5 facet of concern measured by accounting ratios is: Profitableness that is how far the company earns net income, Liquidity is to mensurate the fiscal position, Asset direction is how far

the company can pull off their finance, Debts direction is how they manage their revenue enhancement, and Market value of investing to ordinary stockholders is how they create their market value book.

FORMULA THAT USED MEASURE EACH ASPECT OR AREA OF BUSINESS

Profitableness of company

A ) Gross net income markup ( % ) = A- 100

Gross net income = Gross saless – Cost of the good / Opening stock + Purchase – Shutting stock

B ) Gross net income border ( % ) = A- 100

Net gross revenues value = Gross saless – Tax return inwards

C ) Operating net income border on gross revenues ( % ) = A-100

D ) Profit border on gross revenues ( % ) =A-100

= Net income after involvement, after revenue enhancement, after penchant dividend & A ; after minority involvement A-100

Net gross revenues value

Tocopherol ) Basic gaining power ( BEP ) = A- 100

Entire plus = Fixed assets + Current plus

F ) Return on Total assets = A- 100

= Net income after involvement, after revenue enhancement, after penchant dividend & A ; after minority involvement A-100

Net gross revenues value

G ) Tax return on common equity = A-100

= Net income after involvement, after revenue enhancement, after penchant dividend & A ; after minority involvement A-100

( Ordinary portion capital + Reserves ) OR ( Entire assets – Entire liabilities )

Liquid of company

A ) Current ratio / Working capital ratio =

B ) Liquid ratio / quick ratio / acid – trial ratio =

Asset direction of company

A ) Inventory Employee turnover or Stock turnover = or

B ) Total Assets Turnover =

Entire plus = Fixed plus + current plus

C ) Debtor Ratio =

D ) Days gross revenues outstanding =

Debts direction

A ) Debts ratio =

Entire Debts = Long clip liabilities + Current liabilities

Entire plus = Fixed assets + Current plus

B ) Debts equity ratio =

C ) Times involvement earned or Interest screen =

Market value of investings to shareholders

A ) Net incomes per portion = =

B ) Price net incomes ratio =

C ) Earnings output = =

D ) Market monetary value per book value ratio = =

Inter-temporal comparings between two periods are the comparing value that happens between old ages in one industry for illustration twelvemonth 2009 and 2010. Inter-firms comparing between two companies is a different accounting policies and regulations and ordinance that they created like in IJM BERHAD and GAMUDA BERHAD. Comparison with industry norm can mensurate that is happen in market value to common shareholders in every each industry.

And there are two companies are selected for concern public presentation measuring that is:

IJM CORPORATION BERHAD & A ; GAMUDA BERHAD

BACKGROUND, INDUSTRY AND BUSINESS TYPE OF THE TWO COMPANY

IJM CORPORATION BERHAD

IJM is a Corporation Berhad is an a international competitory Malayan pudding stone with concern in building, belongingss, industries, plantations and substructure systematic industry. Joining of three company enterprising local building – IGB Construction Sdn Bhd was incorporated in 1981, Jurutama Sdn Bhd was incorporated in 1970 as Soon Tat Construction Sdn Bhd and Mudajaya Sdn Bhd incorporated in 1965 as Chye Hin Construction Co Ltd. IJM go adult in repute and renown internationally in first-class ways of by accomplishing record by legion awards.

GAMUDA BERHAD

Gamuda is a Construction, edifice and technology like chief undertaking on main roads, airdrome tracks, main roads, railroads, tunnels, H2O intervention workss and dikes, to infrastructure want and the development of new townships and besides it is a belongings and substructure company in Malaysia.

The income statements and balance sheets of the two companies information that are required for concern public presentation and it obtain the needed information from the related company fiscal studies via cyberspace.

Formula

Ratio with expression

( Profitableness of Company )

IJM Corporation Berhad

Gamuda Berhad

Gross Profit markup ( % ) =

A- 100

= 31.16 %

Gross net income = Gross saless – Cost of the good

RM2455143000 – RM2032167000

= RM422976000

Cost of the good gross revenues =

RM1580125000 + RM363348000 + RM8595000 + RM19973000 + RM19260000 + RM40866000

= RM2032167000

A- 100

= 20.81 %

Gross net income border ( % ) =

A- 100

= 23.76 %

Net gross revenues value = Gross saless – Return inward

RM2455143000 – 0

=RM 2455143000

A- 100

= 17.23 %

Operating net income border on gross revenues ( % ) =

A-100

= 18.65 %

A- 100

= 10.58 %

Net income border on gross revenues ( % ) =

A-100

= 8.29 %

A- 100

= 11.43 %

Basic gaining power ( BEP ) =

A- 100

Entire assets =

RM6959529000 + RM5598766000

= RM12558295000

= 5.96 %

Entire assets = RM2347737000+RM4203173000

= RM6550910000

A- 100

= 3.97 %

Tax return on Entire assets=

A- 100

Entire assets =

RM6959529000 + RM5598766000

= RM12558295000

= 2.65 %

Entire assets = RM2347737000+RM4203173000

= RM6550910000

A- 100

= 4.28 %

Tax return on common equity=

A-100

= 6.48 %

A- 100

= 8.62 %

Ratio with Formula

( Liquid of Company )

IJM Corporation Berhad

Gamuda Berhad

Current Ratio=

= 2.09:1

= 2.18: 1

Acid-test ratio=

Liquid plus = Current plus -inventory

RM5598760000 -RM 529320000

= RM5069446000

= 1.89:1

Liquid plus = Current asset-inventory

RM4203173000 – RM79738000

= 4123435000

RM4123435000

RM1930241000

= 2.14: 1

Ratio with Formula

( Assets Management of Company )

IJM Corporation Berhad

Gamuda Berhad

Inventory Turnover =

or

= 5.78 times

= 25.49 times

Entire Assetss Turnover=

= 0.32 times

= 0.37 times

Debtor Ratio=

= 0.54: 1

= 0.65: 1

Dayss gross revenues outstanding=

0.54365days

= 197.1days

0.65365days

= 237.25days

Ratio with Formula

( Debts direction of company )

IJM Corporation Berhad

Gamuda Berhad

Debts ratio=

Entire Debts = Long clip liabilities + current Liabilities = RM3303461000 +RM112250000

= RM3415711000

Entire assets = Fix plus + Current plus

RM3415711000 + RM2685225000

= RM6100936000

= 0.49: 1

Entire Debts = Long clip liabilities + current Liabilities = RM1312946000 + RM1930241000 = RM3243187000

Entire assets = Fix plus + Current plus

RM2347737000 + RM4203173000 = RM6550910000

= 0.50: 1

Debts equity ratio=

= 1.19: 1

= 1:1

Timess involvement earned or Interest cover=

= 3.72 times

= 5.93 times

Ratio with Formula

( Market value of investing to stockholder of company )

IJM Corporation Berhad

Gamuda Berhad

Net incomes per share=

=

= RM0.25

= RM0.14

Price net incomes ratio=

OR

= 19.2 times

= 22.86 times

Net incomes yield=

=

100 / 75 X RM 0.25

RM0.48

= 6.94 %

= 5.83 %

Market monetary value per book value ratio=

=

=

= 1.24: 1

=

= 1.99: 1

The Ratio Comparison between two companies for concern public presentation measuring under each of the bold headers

Profitableness of the two companies:

Gross net income markup and gross net income border for the ( Gamuda Berhad ) is lower than ( IJM Corporation Berhad ) because the uneffective and inefficient in buying from provider doing higher purchase cost, uneffective usage of stuff and labour doing higher production cost to cut down gross net income earning. For operating net income border on gross revenues, ( Gamuda Berhad ) have a lower net income earned by company from the gross revenues made for the uneffective control on outgos and involvement cost, incurring higher operating disbursals and higher involvement costs to cut down the net income earning but net income border on gross revenues, ( Gamuda Berhad ) have higher net income earned by company from the gross revenues that is made for the effectual control on its outgos and involvement costs, incurring lower operating disbursals and lower involvement costs to increase the net income earning than the 2nd company.

Liquid of the two companies:

The current ratio is first company is higher than 2nd company because first company has larger sum of current assets can be used to finance its current liabilities and that will indicates the company is financially stable and able to finance its short-run liabilities. For acid-test ratio, first company is besides higher than the 2nd company is because that the first company has a larger sum of liquid assets that can be used to finance its current liabilities and the company has high liquidness to finance its short-run liabilities and financially stable.

Asset Management of the two companies:

The stock list turnover for the first company is higher than the 2nd company because the first company has a fast stock turnover where the goods purchased and kept in the shop are fast taken out for resale so that the stock is non accumulated and money is non tied up with the stock. For entire assets turnover, the first company is besides higher than the 2nd company because first company has a higher gross revenues generated from the assets for the effectual usage of assets in concern activities to increase the production. Other than that, the debitor ratio and DSO, the first company is higher than the 2nd company because the company has given longer recognition clip to let debitor ‘s owing and doing longer clip taken by the company to roll up money easy from debitors so that larger debitor balance is collected to bind up money and conveying it to shortage of money for paying back liabilities and confronting short-run fiscal job.

Debts Management of the two companies:

The debts ratio for the first company is higher than the 2nd company because the first company has a heavy debts load with larger sum of debts and bearing high involvement cost. Company with heavy debts load is hazardous for non able to finance or non able to pay back its debts or maybe it is being forced to dispose or to sell its assets for paying back the debts. But for debts equity ratio, the first company is lower than the 2nd company because the 2nd company has a light debts load with smaller sum of debts and bearing low involvement. And the times involvement earned for the first company is higher than the 2nd company because it has a bearing high involvement charges in relation to its available net income.

Market value of investing to shareholders:

Net incomes per portion and net incomes output for the first company is lower than the 2nd company, this indicates that the company has lower growing in concern net income and ensuing lower net income available to each unit portion and being less attractive and lower value to the common shareholders. Due to take down net incomes per portion, shareholders or stockholders have to utilize more times of net income earning and more times of net hard currency influx and longer period to retrieve back their portion investing. This shows the verification by the monetary value net incomes ratio for the first company is being higher than the 2nd company. Market monetary value per book value for the first company is higher than the 2nd company, this indicates that the company portion monetary value has inequitably risen up above its existent plus value or book value and being non realistic to shareholders.

Decision

In my decision, the first company Gamuda Berhad ‘s public presentation is better than the IJM corporation Berhad, and this indicated ( Gamuda Berhad ) has better public presentation, because first company has a higher rate in the 5 facet of concern that measured by accounting ratio. In information jobs, the base information is out of day of the month and analysis of accounting information, and they will merely place symptoms but non the causes and this will do the company to hold information jobs. For inter-firm jobs, every companies have to choose their industry norms and the utility of norms based on the norms and different company have different concern and fiscal jobs and the impact on analysis. so in this affair they have theur ain manner to work out their jobs.

Question 2

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

ANSWER QUESTION 2

Introduction

Fiscal market means it is a organisation and people who be found to borrow money from those holding some valuable metals to be exchanged at efficient by market monetary value and besides they refer to the stock market, wall street, even markets. In this field there are many different sort of fiscal market each market utilize different sort of matted, footings, types of parts of state and client and the plus banking. By the stoping from the any type of this helps them in concern grown large and investors make money and give them a batch of net income. At the same clip the trading of the stock and bonds that they get in fiscal market take topographic point direct between bargains and Sellerss and besides fiscal market can be a good relationship by domestic or international concern degree in communicating.

There are many assorted of types in fiscal market that is physical plus markets to cover with the touchable, existent and physical merchandises such as computing machine, machinery, existent estate and other assets the fiscal market trade with different types of instruments such as stocks or portions, bonds, notes, mortgage holders and other claims or existent assets with derivative securities whose values derived from alterations in the monetary value of other assets. Topographic point market refer to trades being bought or sold for on the bringing within a few yearss where future market refers future market trades bought or sold future bringing at some future day of the month such six months or a twelvemonth in to the hereafter.

There are some major fiscal markets like money markets who deals plus in short term and extremely liquid debt securities in adoption and loaning with original adulthoods in a short periods between less than one twelvemonth for illustration it involves like certification of sedimentation, federal financess and asset-backed securities. Capital markets is who trades for securities where companies and authoritiess can intercede or long-run debts in a periods of one twelvemonth or more than one old ages and besides it include stock market. Collage market is a market who deals with loans on residential, commercial, industrial existent estate and farming area and the federal authorities has confirmed that a major economic function in the mortgage loan market because existent estate development is a major sector of the U.S. Economy. Consumer recognition market is markets that trades with loans and cars and contraptions, every bit good as loans for instruction and holidaies and supply good services. Primary markets is an market which is corporations raise capital by publishing new securities or new portions like authoritiess or public sector establishments can obtain funding the sale of a new market issue. A secondary market which is the bing and already outstanding securities or fiscal assets are traded among investors after they have been issued by the corporations and besides called as aftermarket where have been issued securities and instruments such are bought and sold. Initial public offering ( IOP ) market that is steadfast by offering securities to the populace for the first clip and frequently frequently issued by smaller, younger companies seeking to spread out, but can besides be done by big private companies looking to go publically traded. Private market is all about minutess that worked in private and straight between two parties without traveling to public by independently and besides they called dissolution value market.

There are three different ways of reassigning capital or financess from rescuers to borrowers in fiscal markets and they are following image:

Transportation OF CAPITAL OR FUND BETWEEN SAVERS ( MONEY LENDRE ) AND THOSE WHO NEED CAPITAL OR FUND ( BORROWERS )

1. Direct transportation from rescuers to borrowers:

When a corporation take topographic point in issues and sells stocks or bonds strata manner to saver without giving any fiscal establishment so the corporation as borrower will present securities to rescuers who in bend give money to the corporation and the capital straight transfersed from rescuers to corporation ( borrower ) .

Business Corporation Issue corporation ‘s securities to Rescuers

( Borrower ) Receive capital or financess from ( Money loaner )

2. Indirect transportation from rescuers to borrowers though investing banking house:

Investment bank is a unwritten the issues of corporations securities as a jobbers to the facilitate the issues by purchase and so resell the same corporation so that the money paid by rescuers for purchase. The investing bank receive money simply pass thought banking house.

Issue corporation’s Resell corporation ‘s

Securities to securities to

Business Investing Rescuers

Corporation Banking ( money

( Borrower ) House Lender )

Receive fund from Receive fund from

3. Indirect intermediately such as a bank or common financess from rescuer by publishing securities or certification of sedimentation to rescuers. Than it used the fund collected to buy and keep the securities as investing and the financess transferred from saver intermediary when wage money to financially interchange for having certification of sedimentation. hereafter than that this fund to other corporation paying money out of merriment because they are safer and more liquid them mortgage and loans.

Issue Corporation’s Issue mediator ‘s

Securities to Securities to

Business Financial Savers

Corporation ( Money

( borrower ) Intermediary Lender )

Receive fund from Receive fund from

Investing Banking House

Can be state that organisation that underwrites and distributes the approaching new issue of latest concern corporation ‘s securities to help corporation that is fund for fiscal. For illustration, a bourgeois who produces places may buy a machine that automatically stitches leather that hopes in the clip saved will let for the production of more places and increased gross revenues or another illustration investing banking house are Merrill Lynch and Morgan Stanley Dean Witter.

Fiscal Mediators

There are some specialized in fiscal house that transportation of financess from rescuers to be demanders of capital or event borrower. The fiscal mediators by and large immense and they gain in economic systems of graduated table in analysing the creditworthiness of possible borrower, in processing and collection loans, and in pooling hazard and for the assisting single rescuers to diversity their financess investings.

Following are major fiscal mediators

Commercial bank is a fiscal mediator which collects recognition from loaners in the signifier of sedimentations and lends in the signifier of loans holds sedimentations for persons and concerns in the signifier of checking and nest eggs histories and certifications of sedimentation of changing adulthoods while a issues loans in the signifier of personal and concern loans every bit good as mortgages and besides they handled look intoing histories and idea which is Federal Reserve System expended or contracted the money supply. They besides provides an ever-widening service, stock securities firm service and insurance and they are different from investing bank they lend out money to borrows and investing Bankss assist concern corporation to raise capital or fund from rescuers.

Salvaging and loan association is a specializes in accepting nest eggs sedimentations and doing mortgage and other loan like cod financess from many little rescuers and impart out the money to house purchasers and other sort of borrowers and it more important economic map of the economy and loan association to make liquidness in capital markets.

Common economy financess is a nest egg that has no shareholders and reinvests all net incomes in itself and the nest eggs Bankss are owned their depositors and borrowers because there are no shareholders to delight, common nest eggs Bankss are frequently really conservative with how they invest sedimentations.

Recognition brotherhoods is a non-profit fiscal establishment that owned and operated wholly by members and besides it provide fiscal services for their members, including nest eggs and loaning. In big organisations and companies may form recognition brotherhoods for their members and employees, severally. They are frequently the chepast beginning of financess available to single to borrowers.

Pension financess is a retirement programs funded by corporation or authorities bureaus for their workers and administered by trust sections of commercial Bankss or by life insurance companies. It besides a financess invest chiefly in bonds, stocks, mortgages and existent estate.

Life insurance companies is a cod economy that signifier or one-year premiums and put in stocks, bonds, existent estate and collage, eventually do payments to the donees of the insured parties. It besides have many sort of revenue enhancement deferred salvaging programs to supply benefits to the participants when they retire.

Common financess collect money from rescuers and usage to purchase stocks, long-run bonds and short-run debt instruments that issued by authorities or concern units and therefore cut down hazard by investing variegation, achieve economic systems of graduated table in analysing securities, pull offing portfolios, purchase and selling securities. They besides designed to run into nonsubjective in different types of rescuers and they used as involvement bearing look intoing history such as money market financess.

July 12, 2017