Masteel Bhd RM'000 (2014) RM'000 (2015) RM'000 (2016)

Gross Profit Margin =

Sales - Cost of goods sold 1,456,279-1,357,739 = 0.067 1,143,694 1,098,587 = 0.039 1,206,758-1,109,183 =0.080
Sales 1,456,279 1,143,694 1,206,758

Net Profit Margin =

16,457 = 0.011 (49,900) =-0.043 20,142 = 0.016
Net income after taxes 1,456,279 1,143,694 1,206,758
Sales

Return on Total Asset =

Net income after taxes 16,457 = 0.015 (49,900) = -0.042 20,142 =0.015
Total assets 1,090,933 1,165,843 1,289,502

Return on Equity =
Net income after taxes 16,457 = 0.028 (48,900) = -0.091 20,142 = 0.036
Total Equity 578,435 531,991 551,774

Kinsteel Bhd RM'000 (2014) RM'000 (2015) RM'000 (2016)

Gross Profit Margin =
Sales - Cost of goods sold 709,508-715,359 = -0.992 196,300 203,747 = -0.037 63,588-103,069 = - 0.383
Sales 709,508 196,300 103,069

Net Profit Margin =

(268,360) = -0.378 (148,029) =-0.754 (78,743) = -0.763
Net income after taxes 709,508 196,300 103,069
Sales

Return on Total Asset =

Net income after taxes (268,360) = -0.331 (148,029) = -0.199 (78,743) = -0.114
Total assets 809,737 740,628 685,163

Return on Equity =
Net income after taxes (268,360) = -2.372 (148,029) = 4.238 (78,743) =0.703
Total Equity 113,105 (34,924) (111,939)
Profitability ratios compare income statement accounts and categories to show a companys

ability to generate profits from its operations. Profitability ratios focus on a companys return on

investment in inventory and other assets. These ratios basically show how well companies can

achieve profits from their operations. Investors and creditors can use profitability ratios to judge

a companys return on investment based on its relative level of resources and assets. Profitability

is also important to the concept of solvency and going concern.

The gross profit margin looks at cost of goods sold as a percentage of sales. This ratio looks at

how well a company controls the cost of its inventory and the manufacturing of its products and

subsequently pass on the costs to its customers. The larger the gross profit margin, the better for

the company. Gross Profit Margin ratio of Kinsteel Bhd for Year 2014, 2015 and 2016 shows a

negative value while for Masteel Bhd its ratio is showing a positive figure which means Masteel

have more gross profit margin that show how much of every ringgit of revenues is left over after

paying cost of goods sold (COGS).

Gross profit margins for Kinsteel Bhd shows a negative figure because costs of production

exceed total sales. This could be an indication of a firm's inability to control costs. A negative

gross profit margin occurs when costs exceed revenue. There are a few possible reasons why a

company might experience a negative gross profit margin. For instance due to increase in raw

material cost used in production, technology disruption due to new techniques or technologies

entering the market and damaging the profits of large firms. This is also largely outside of the

control of any individual firm. Finally, due to macroeconomic shock a recession tends to reduce

profits in a number of industries as consumers reduce spending and businesses scale back
operations. It does not necessarily take a recession to reduce profit margin, though. When

interest rates rise quickly, some companies may experience negative gross profit margins.

Reference :

https://bizfluent.com/info-8775139-mean-profit-positive-operating-margin.html