Liquidity ratio

Liquidity ratio is calculated to show the ability of the Dutch Ladys company to meets
its short term financial obligations. This is important because it is used to know whether the
company can pay its creditors when payments are due. It compares the companys total assets
with total current assets. Generally, the higher the value of liquidity ratio means that, the
easier for the company to pay for its creditor.

There are two types of liquidity ratio that are commonly used which are current ratio
and acid test ratio.

1. Current Ratio

Year 2010 Year 2011

= Current Asset = Current Asset

Current liabilities Current liabilities
= RM 234,244,000 = RM 324,466,000
RM 106,261,000 RM 135,309,000
= 2.20 times = 2.40 times
COMMENT :

2. Acid Test Ratio

Year 2010 Year 2011

= Current Asset Inventory Prepaid expenses = Current Asset Inventory Prepaid expenses
Current Liabilities Current Liabilities
= RM 234,244,000 RM 72,722,000 RM 689,000 = RM 324,466,000 RM 93,448,000 RM1,161,000
RM 106,261,000 RM 135,309,000
= 1.51 times = 1.70 times

COMMENT :
Efficiency Ratio

Efficiency ratio or also called asset management ratios are calculated to measure the
effectiveness of Dutch Ladys company in managing their assets (resources) in generating
sales. These ratios indicate on how many times the stock is sold and replaced in a year.
Besides, it is used to show the efficiencies for the company in collecting debts as well as
turning its stock into sales.

It consists of inventory turnover ratio, average collection period, fixed assets

turnover and total assets turnover.

1. Inventory Turnover Ratio

Year 2010 Year 2011
= Cost of goods sold = Cost of goods sold
Average/closing stock Average/closing stock
= RM 447,961,000 = RM 506,175,000
RM 72,722,000 RM 93,448,000
= 6.16 times = 5.47 times
COMMENT :

2. Average Collection Period

Year 2010
= Account Receivable
Annual credit sales/360 days
= RM 75176,000
(RM 696,625,000/360 days)
= 38.8 days
COMMENT :
Year 2011
= Account Receivable
Annual credit sales/360 days
= RM 36,714,000
(RM810,647,000/ 360 days)
= 16.3 days
3. Fixed Assets Turnover
Year 2010 Year 2011
= Sales = Sales
Net Fixed Assets Net Fixed Assets
= RM 696,625,000 = RM 810,647,000
RM 73,246,000 RM 74,048,000
= 9.5 times = 10.95 times
COMMENT :
4. Total Assets Turnover
Year 2010 Year 2011
= Sales = Sales
Total Asset Total Asset
= RM 696,625,000 = RM 810,647,000
RM 307,490,000 (RM 74,048,000 + RM 324,466,000)
= 2.27 times = 2.03 times
COMMENT :
Leverage Ratio

This ratio measures the level of debt or borrowings in a company. It also provide the
basis on how the company finance its assets and how affordable for the company when the
level of interest are changed. It means that, this ratio can measure the companys ability to
cover its interest charges out of its operating profit.

Two types of leverage ratio; debt ratio, debt to equity ratio and time interest
earned ratio.

1. Debt Ratio
Year 2010 Year 2011
= Total Debt = Total Debt
Total Assets Total Assets
= (RM 3,757,000 + RM 106,261,000) X 100 = (RM 4,051,000 + RM 135,309,000) X 100
RM 307,490,000 (RM 74,048,000 + RM 324,466,000)
= RM 110,018,000 X 100 = RM 139,360,000 X 100
RM 307,490,000 RM 398,514,000
= 35.78% = 34.97%
COMMENT :
2. Debt to Equity Ratio
Year 2010 Year 2011
= Total Debt = Total Debt
Total Equity Total Equity
= (RM 3,571,000 + RM 106,261,000) X 100 = (RM 4,051,000 + RM 135,309,000) X 100
RM 197,472,000 RM 259,154,000
= RM 109,832,000 X 100 = RM 139,360,000 X 100
RM 197,472,000 RM 259,154,000
= 55.71% = 53.77%
COMMENT :
3. Times Interest Earned
Year 2010 Year 2011
= Earnings before interest and tax(EBIT) = Earnings before interest and tax(EBIT)
Interest Expenses Interest Expenses
= (RM 141,553,000 + RM 919,000)
RM 919,000
= RM 142,472
RM 919,000
= 155.03 times

COMMENT :
Profitability Ratio

These ratios measure on how effective the Dutch Ladys company used its assets to
make profits. It indicates effectiveness of profit generation in relation to their sales, assets
employed and shareholder investment.

The profitability ratio that commonly analyzed by the company are gross profit
margin, operating profit margin, net profit margin, return on assets and return on
equity.

1. Gross Profit Margin

Year 2010 Year 2011
= Gross Profit = Gross Profit
Sales Sales
= RM 248,664,000 X 100 = RM 304,472,000 X 100
RM 696,625,000 RM 810,647,000
= 35.70% = 37.56%
COMMENT :
2. Operating Profit Margin
Year 2010 Year 2011
= Earnings before interest and tax = Earnings before interest and tax
Sales Sales
= RM 90,104,000 X 100 = (RM 141,553,000 + RM 919,000)
RM 696,625,000 RM 810,647,000
= 12.93% = RM 142,472 X 100
RM 810,647,000
= 17.58%
COMMENT :
 3. Net Profit Margin
Year 2010 Year 2011
= Net income available to common stockholders = Net income available to common stockholders
Sales Sales
= RM 63,887,000 X 100 = RM 108,082,000 X 100
RM 696,625,000 RM 810,647,000
= 9.17 % = 13.33 %
COMMENT :

4. Return on Asset
Year 2010 Year 2011
= Net income available to common stockholders = Net income available to common stockholders
Total Assets Total Assets
= RM 63,887,000 X 100 = RM 108,082,000 X 100
RM 307,490,000 RM 398,514,000
= 20.78 % = 27.12 %
COMMENT :

5. Return on Equity
Year 2010 Year 2011
= Net income available to common stockholder = Net income available to common stockholder
Common Equity Common Equity
= RM 63,887,000 X 100 = RM 108,082,000 X 100
RM 197,472,000 RM 259,154,000
= 32.35% = 41.71%
COMMENT :
 Market Ratio

Market ratio or investor ratio are the result of the companys overall performance. It
take into account the companys liquidity, asset management, debt management and
profitability ratio. It is also gives indication on what the investor thinking of their companys
past performance and future prospects. If all these ratios are goods, the market value ratios
will be high and the firms stock price will increase.

Market ratios that commonly used; earning per shares, dividend per shares and
price-earnings ratio.

1. Earnings per Shares

Year 2010 Year 2011
= Net income available to common stockholder = Net income available to common stockholder
Number of ordinary shares issued Number of ordinary shares issued
= RM 63,887,000 = RM 108,082,000
RM 64,000,000 RM 64,000,000
= RM 0.998 per share = RM 1.69 per share
COMMENT :

2. Dividend per Shares

Year 2010 Year 2011
= Ordinary dividend = Ordinary dividend
Number of ordinary issued Number of ordinary issued
= RM 46,400,000 = RM 46,400,000
RM 64,000,000 RM 64,000,000
= RM 0.73 = RM 0.73
COMMENT :
3. Price-Earnings ratio
Year 2010 Year 2011
= Market price per shares = Market price per shares
Earnings per shares Earnings per shares
= RM17.38 = RM29.52
RM 0.998 RM 1.69
= RM 17.41 = RM 17.47
COMMENT: