FINANCIAL MANAGEMENT

Analysis of xxxxxxx

Lectured by:

Hadri Kusuma Prof. Dr. MBA

Written by:

Amanda Citra (17312070)

Amalia Widyasningrum (17312328)

Major of Accounting

Economic Faculty of

Universitas Islam Indonesia

2019
 TABLE OF CONTENTS

Introduction…………………………………………………………………………………..
Analysis……………………………………………………………………………………….
Conclusion……………………………………………………………………………………
Table/Figure…………………………………………………………………………………
Reference…………………………………………………………………………………….
 INTRODUCTION

Indonesia have various manufacture companies that specialize in several areas such
as chemical industry (e.g. Holcim Indonesia Tbk), garment industry (e.g. Polychem Indonesia
Tbk), and consumption industry (e.g. Siantar Top Tbk). In this report and analysis, it focuses
on the food and beverage industry. This industry is our biggest concern on how the national
manufacture company defeating competitor in Indonesia and regarding the dynamic of the
massive export products. In this report, it elaborates five different companies in same areas
but with similar products which is snack and fast food. This report’s purpose is to know how
the performance of these companies in order to handling the external parties or suppliers
(Trade creditors), the long-term cash flow of the firm (for long term creditor), the profit and
long-term health if the firm for the owners.

This analysis and report is quite important also to examine these companies:

1. Plan
Focus on assessing the current financial position and evaluating potential firm
opportunities. Current financial statement is a prediction for future financial
statement. It also useful for future position and opportunities.

2. Control
Focus on return on investment for various assets and asset efficiency. It evaluate
planning achieved and meet the expectation or not.

3. Understand
Focus on understanding how suppliers of funds analyze the firm. It understands the
position of company past, present, and future. It can be as a benchmark if there is
something not as what their expected.
 Liquidity Ratio

Liquidity ratios are used to measure a firm’s ability to meet short-term obligations
which compare short-term obligations with short-term (current) resources available in order to
meet these obligations. Further, Liquidity repsresents the ability of an asset to be converted
into cash without significant price concession. There are two types of Liquidity Ratios, namely
Current Ratio as well as Acid (Quick) Ratio.

1. Current Ratio
The above current ratios for PT INDOFOOD SUKSES MAKMUR Tbk (ICBP) shows the
fluctuative trend throughout 2013 until 2018 which reached its peak in 2017 with 2,4282 as
its value, and then decreased significantly in 2018 by 1,9517 as its lowest point, It means
that ICBP has liquidity problem since the current ratio is decreasing. Further, there are two
primary reasons for this. Firstly, the declining amount of Cash and Cash equivalents by
4,069,868. Secondly, the escalating number of its Short-term bank loans and overdraft, Trust
Receipts Payable, Trade Account Payable, and Accrued Expenses by 189,352, 192,701,
447,493, as well as 229,418 respectively. Thus, ICBP’s current ratio is still under acceptable
number due to its ratio is above 1.5 indicates that ICBP may not have difficulty meeting
current obligations. On the contrary, the current ratio for PT MAYORA INDAH Tbk (MYP)
and PT NIPPON INDOSARI CORPINDO Tbk (ROTI) are fluctuated and experienced
increases reach its peak moment in 2018, which value is 2,6545, and 3,5712 respectively.
In addition, in the perspective of MYP’s accounts, there are two principal reasons for these
circumstances such as first of all, the increasing amount of Cash and Cash equivalent, Other
Accounts Receivable, Inventories, Prepaid taxes also expenses by 293,795,548,953,
143,661,466,257, 1,526,529,161,015, 182,243,421,642, 11,377,487,563 respectively.
Secondly, the decreasing number of Non-Trade Account Payable, Taxes Payable, Accrued
Expenses, Current Portion of Long-Term Bank Loans, by 36,968,754,768, 69,988,668,835,
162,212,724,936, also 214,212,402,570. Furthermore, in ROTI’s accounts, the increasing
current ratio is subsequently due to the escalating number of both Trade and Non-Trade
Receivable Accounts by 88,032,323,626, as well as 28,093,325,234, Inventories by
14,863,482,353, Prepaid Taxes by 25,102,974,104, and advances by 1,562,250,129.
Through the lenses of Current Liability is declining significantly because of several causes
such as decreasing amount of Accrued Expenses by 78,794,075,774 and Current Maturities
of long-term loans by 499,505,415,478. Both current Ratios of MYP and ROTI is below
 two, which indicates that their current ratio may be too high then the company may not be
using its current assets or its short-term financing facilities efficiently. This may also
indicate problems in working capital management. All other things being equal, creditors
consider a high current ratio to be better than a low current ratio, because a high current
ratio means that the company is more likely to meet its liabilities which are due over the
next 12 months. In another hand, PT Sekar Bumi Tbk is having fluctuative graph as well.
It From 2013 until 2018, the highest peak at 2017 that amount in 1.635349726 and reach
the lowest numbers at 1.107232679 in 2016. In PT Sekar Bumi Tbk, it also influenced by
the dynamics of the amount in cash and cash equivalent from 2013, it went up and down;
10.333.359, 9.165.691, 9.815.172, 25.398.905 by 2016. In 2017, they reached the highest
peak at amount 69.954.867 but then flew down in 2018 at amount 33.424.054. Then, PT
Siantar Top Tbk having high contrast with PT Sekar Bumi, in PT Sekar Bumi the average
is on 1 but in PT Siantar Top, they obtained highest amount at 3.089050159. In PT Sekar
Bumi, they gained highly cash and cash equivalent, they could reach until 3 digits. Since
2013; 91.980.401, 125.050.843, 107.598.435, 94.527.899 by 2016. They successfully
reached its highest cash in 2017 by 278.614.714 but then flew down in 2018 by 268.820.928.

2. Quick (Acid) Ratio

Quick (Acid) Ratio serves a supplement to the current ratio in analyzing liquidity, this ratio
is the same as the current ratio except that it excludes inventory- presumably the least liquid
portion of current assets- from the numerator. The ratio concentrates primarily on the more
liquid current assets-cash marketable securities, and receivables- in the relation of current
obligation. It is stated that companies with a quick ratio of greater than 1.0 are sufficiently
able to meet their short-term liabilities. Overall, ICBP, MYP, and ROTI are financially
secure in the short-term since most of the yearly quick ratio is higher than 1. These
companies are able to quickly convert its receivables into cash and easily cover their
financial obligations. In addition, a higher ratio is safer than a lower one because the
companies have excess cash. The drawback of maintaining a high quick ratio is that the
company may not be making effective use of their cash to grow the business. Companies
sometimes keep cash safety nets when they can't get short-term loans. Meanwhile, in PT
Siantar Top, the highet amount is at 0.869925705 meaning the security of aset cash
marketable is unsecure because i tis below 1. Then, similar with unsecurity, PT Sekar Bumi
in 2013-2018, they are fluctuated in the numbers of quick ratio. In 2013-2016 and 2018 they
only get below 1, but in 2017 they could reached 1.062314814.
 Financial Leverage (Debt) Ratios
1. Debt to equity ratio
Debt to equity ratio is used in order to assess the extent to which the firm is using borrowed
money. It is a measure of the degree to which a company is financing its operations through
debt versus wholly-owned funds. More specifically, it reflects the ability of shareholder
equity to cover all outstanding debts in the event of a business downturn. As we can see from
the graph, ICBP and ROTI have fluctuative yet shows the declining value of debt to equity
ratio from 2013 to 2018, due to the fluctuated trend specifically for ROTI which kept
declining for the year 2017 in terms of its Liabilities, whereas the total equity shows the
increasing growth throughout the year. ICBP on the other hand, represents a steady growth
for both of its liabilities as well as equity. If a debt to equity ratio is lower — closer to zero
— this often means the business hasn't relied on borrowing to finance operations. Investors
are unlikely to invest in a company with a very low ratio because the business isn't realizing
the potential profit or value it could gain by borrowing and increasing operations. As for
MYP, the company had the highest debt to equity ratio where it could give higher growth
rates. It also indicated that the company used a lot of debts to finance its operations as it had
more earnings potential, from the financial statements shows that it has a significant growth
both for liabilities as well as equity which plays essential role in increasing the number of
debt to equity ratio. Nevertheless, MYP had higher financial risk than other companies
because when the company could not handle its cost of debts or failed to generate cash to
meet its debt obligations, this may lead to bankruptcy and dissatisfied the company’s
shareholders. Thus, it depends on the company’s management goals to determine the optimal
capital structure or proportional mixture of debt and equity. In another hand, in PT Siantar
Top, the debt to equity ratio is decreasing in overall years 2013-2018. The highest amount of
the debt ratio is over 1, but alongside the years it went down until 0.608787144 which means
the company didn’t relied at much at the debt during the following years and it below 1 as
well. Then, in PT Sekar Bumi, is similar with PT Siantar Top, in the beginning of 2 years
(2013-2014) it reached above 1, but in 2015-2018 it decreased below 1, which means during
the following years company decreasing the debt that they used.

2. Debt to total assets ratio

Debt to asset (DTA) ratio indicates the proportion of a company’s assets that are being
financed with debt, rather than equity. According to the data, ICBP’s, MYP’s, ROTI’s,
 Siantar Top’s, and Sekar Bumi’s debt to total assets show decreasing values throughout the
year, which ratio less than 1, translates to the fact that a greater portion of a company's assets
is funded by equity. A ratio greater than one shows that a considerable portion of the debt is
funded by assets. In other words, the company has more liabilities than assets. A high ratio
also indicates that a company may be putting itself at risk of defaulting on its loans if interest
rates were to rise suddenly.

3. Total Capitalization
The total debt-to-capitalization ratio is a tool that measures the total amount of outstanding
company debt as a percentage of the firm’s total capitalization. The ratio is an indicator of the
company's leverage, which is debt used to purchase assets. Companies with higher debt must
manage it carefully, ensuring enough cash flow is on hand to manage principal and interest
payments on debt. Higher debt as a percentage of total capital means a company has a higher
risk of insolvency. According to the data, ICBP, MYP, ROTI, SIANTAR TOP, and Sekar
Bumi have total capitalization below one. Furthermore, ICBP as well as ROTI has lower debt
compare to higher equity levels, which indicates good quality of investment contributed
towards the low value of Total Capitalization. MYP on the other hand, has slightly lower
value of debt than its equity level which associated toward the higher total capitalization ratio
compare to the other companies such as ICBP, ROTI, Siantar Top, and Sekar Bumi. Yet, still
under acceptable level.

Coverage Ratio

Coverage ratio is designed to relate the financial charges of a firm to its ability to service, or
cover, them. One of the most traditional of the coverage ratios is the interest coverage ratio, or
times interest earned.

1. Interest Coverage Ratio

This ratio is simply serves as one of measure of the firm’s ability to meet its interest
payments and thus avoid bankruptcy. According to the presented table, PT Sekar Bumi has
the highest ratio of its interest coverage, which is peaked in 2018. The table denotes the
interest coverage ratio is increasing steadily each year from 2013 until 2015. Thus, it
represents that PT Sekar Bumi has the capability to pay for its interest expense several
times over, without any difficulty. It also sheds some light on the PT Sekar Bumi’s
capacity to take on a new debt. In contrast, MYP and ROTI exhibit the declining value
of interest coverage each year, yet ROTI suffer from the worst downfall by 7.56
throughout the year. ROTI did not acquire any non-operation income until 2018 was
responsible toward the declining value of Interest coverage meanwhile the interest
expense was increasing each year. MYP, conversely received Other Non-Operating
income namely, gain on foreign exchange, gain on the sale of property, plant and
equipment, etc in order to increase its Earning Before Interest and Tax. Hence, MYP
did not suffer as rough as ROTI. Further, a low ratio is a strong indicator that ROTI
may default on its loan payments. In PT Siantar Top, the fluctuation is occured
alongside the period of time. The highest peak is at amount 11.05934985 which means
this company can meet its interest payment and highly avoiding the bankruptcy but not
more than ICB.

Activity Ratios

Activity Ratios, also known as efficiency or turnover ratios, measure the relative efficiency
of a firm based on its use of its assets, leverage, or other similar balance sheet items and are
important in determining whether a company's management is doing a good enough job of
generating revenues and cash from its resources.

1. The receivable Turnover

The receivable turnover provides insight into the quality of the firm’s receivables and
how successful the firm is in its collections. In addition, the ratio presents the number of
times accounts receivable have been turned over (turned into cash) during the year. It is
an important indicator of a company’s financial and operational performance. Many
companies even have an accounts receivable allowance to prevent cash flow issues.
Hence, based on data above, the performance for accounts receivable turnover is charged
to MYP because since 2013 until 2018, the company has an increasing amount of
accounts receivable turnover although in 2016 and 2017 there was a slight decline, but
MYP still remain in positive trend. The decreasing ratio of accounts receivable turnover
marked that MYP was seeing more delinquent clients. However, ICBP as well as ROTI
denoted higher values regardless of the fact that they had fluctuated trend, and
experienced moderate decreasing value each year. This indicates that both ROTI and
ICBP had better condition for the company. The increasing ratio of accounts receivable
turnover, showed both companies were more effectively processing credit. In PT Siantar
 Top, in 2016, they could have reached above 72 which means the successful of firm in
its receivable collection is quite appropriate, but contrary with PT Sekar Bumi that
obtained lower in 2015 which at below 15.

2. Average Collection Period

Number of days in account receivable is the estimation of the length of time required to
turn account receivable into cash. The graph shows that both ICBP as well as ROTI
experienced increases in the number of days in account receivable from 2013 to 2018.
The only firm which shows decreases is MYP. It means that MYP has better ability to
collect cash than other companies which have experienced most likely increases in the
number of days for each year. However, a very low average collection period may not
necessarily be good which is able to predict the symptom of an extremely restrictive
credit policy. The few receivables on books may be of prime quality, yet sales may be
curtailed unduly, and profit less than they might be due to the restrictive of issuance of
credit to customers. In Pt Siantar Top, there is a huge different in the beginning of the
periods in 2013 that obtained more than 22 and the rest period from 2014-2018 could
obtained below 7 which mean the required time of account receivable to cash is good.
Different with PT Sekar Bumi that during the years, it flew above 25 which indicated
the long-time of period in turn account receivables into cash.

3. Account Payable Turnover

Accounts payable are the amounts that the company indebted to suppliers and creditors
for goods and services the company purchased. Accounts payable turnover measures
how long it takes for a company to pay its financial obligation or debt to suppliers and
creditors. As shown in the graph above, ROTI had the lowest account payables turnover
due to the fact that they had lower amount of both current and non-liabilities caused by
the absence of payables except for trade and non-trade payables, taxes payables which
were admittedly lower than MYP. In addition, ICBP had the second lowest accounts
payable turnover which indicates that the company pays its debt slowly, when it also
had the constant ratio along with modest decrease from 2013 to 2018. Meanwhile MYP
had the highest accounts payable turnover and it was pacing up and down in paying its
debt to suppliers and creditors. This means, MYP has the shortest time between purchase
of goods and services and payment compared to four other companies, even though the
turnover was declining from 2014 to 2017, which means the time for MYP to pay off its
 debt becomes longer as well as it may be caused by the declining cost of sales from 2014
to 2015. However, at this point, it is assumed that MYP was paying off its creditors and
suppliers at a faster rate compared to the rest of companies. In PT Siantar Top, the graph
is extremely up and down from lowest peak into highest peak in the last year. That
indicates the ability of the company to finish the payable is quite difficult for company.
In Sekar Bumi, is similar with PT Siantar Top, since 2013 it increase the amount high
but then in 2014 went down and it done retrospectively year by year which mean PT
Sekar Bumi is handling the payable in difficult situation and hardly to pay it.

4. Payable Turnover in days

The number of days payable is closely related with the accounts payable turnover ratio.
It is the amount of days that a company takes, in order to pay its debt to creditors as well
as suppliers. As a means to determine whether the company is efficient in paying off
whatever short-term financial obligations it may have. Since ROTI as well as ICBPs
accounts payable were very low, they did need longer time to pay its debts in comparison
with MYP, meaning that the companies hold liquid assets or cash longer than the
competitors. This could happen because ICBP decided to spend them for short-term
investments. Previously, since MYP had the fastest rate to pay off its debts, it took MYP
less than a month to clear all of its debts. In PT Sekar Bumi and Siantar Top , the ability
of the company in account payable is less efficient, due to the extreme fluctuation of
graph. In addition to that, the data shown PT Sekar Bumi has less obligation to pay than
PT Siantar Top which means PT Sekar Bumi need longer time in order to paying their
debts compared to PT Siantar Top.

5. Inventory Turnover
Inventory or stock turnover ratio, is one of the key figures used in order to evaluate the
efficiency of a company in handling the goods it manufactures or buys to resell. As given
on the table, MYP had the lowest inventory turnover with fluctuated trend marked as
low turnover which is possibly implied that MYP had the excess inventory or
overstocking compared to the other companies. Further ICBP on the other hand,
experienced slight decrease each year. The weak inventory turnover was conceivably
caused due to the products being offered for sale or be a result of too little marketing.
Further, the possible impact of low inventory turnover is the high holding cost because
the longer the items are held, the risk of getting obsoleted, breaking, being stolen, and
 simply going out of style. ROTI in the contrary, in spite of experiencing a decrease value
of Inventory Turnover in 2018, compared to the other rivals, they were prone to be
outperform. The high inventory turnover shows the more efficient as well as profitable
ROTI, thus they were holding a low level of average inventory in relation to sales. In
PT Siantar Top, it obtained the decrease of graph. In 2013-2017 is obtained more than
1, but in 2018 reached below 1 which indicates the weak inventory turnover due to the
less efficiency of marketing. Then, PT Sekar Bumi also reached the decreasing in the
graph. It means, PT Sekar Bumi having weak inventory turnover due to the deescalating
of the numbers.

6. Assets Turnover
The asset turnover ratio is an efficiency ratio that measures a company’s ability to
generate sales from its assets. In other words, this ratio shows how efficiently a company
can use its assets to generate sales. According to the given table, ROTI had the lowest
assets turnover, meanwhile MYP as well as ICBP had slightly higher value. The low
value is an adverse result which indicates that ROTI was unable to utilize its assets
efficiently as well as most likely had management or production problems. On the
contrary, the high value is a favorable result which denotes that MYP as well as ICBP
were using their assets efficiently, resulted to higher sales. PT Siantar Top, it obtained
the decreasing slope in graph. In 2013-2017 is obtained more than 1, but in 2018 reached
below 1 which indicates the company done inefficiency in the generating sales from its
assets. In PT Sekar Bumi, similar with PT Siantar Top, it went decreased but not until
below 1.

Profitability Ratios

Profitability Ratios are used in order to measure as well as evaluate the ability of a company to
generate income (profit) relative to revenue, balance sheet assets, operating costs, and
shareholders’ equity during a specific period of time. The ratios show how well a company
utilizes its assets in order to produce profit and value to shareholders.

1. Gross Profit Margin

Gross profit margin represents the profit of the firm relatives to sales, after being
deducted the cost of producing the goods. It is a measure of the efficiency of the firm’s
 operations, as well as an indication of products are priced. In accordance with the
presented data, ICBP, MYP, and ROTI had the gradual increasing value of gross profit
margin. This information justifies that those companies were able to make a reasonable
profit on sales, as long as it kept overhead costs in control. In addition, in 2014 MYP
experienced dramatic decrease due to the possibility of MYP lowering its price in order
to boost sales by providing routine discounts or promotion, which consequently had an
impact towards the decreasing gross profit margin. In PT Siantar Top, it went fluctuated
in graph from 2013-2018 in the beginning it reached 0.18 and in the last year it went
0.21. In PT Sekar Bumi it went stagnant in the graph, it reached the average at 0.11 in
2013-2018. It means that PT Siantar Top has decreased in gross profit margin due to
lowering its price in order to boost sales. Meanwhile, PT Sekar Bumi could maintained
their gross profit margin by providing routine discounts or promotion even though the
amount went 0.11 in average of 2013-2018.

2. Net Profit Margin

Net profit margin is a measure of the firm’s profitability of sales after taking into account
all expenses as well as income taxes. From the given data, MYP as well as ROTI
experienced slight decrease of their Net profit margin. Further, this was due to the fact
that ROTI had negative balance of income tax expenses resulted from overpaying taxes
from 2017-2018 also had a dramatic increase of other operating expenses from 2013-
2018. MYP on the other hand, had an significant increase of selling and distribution
expenses, as well as general and administrative expenses from 2013-2018 which
increased the deduction toward the net income, in addition MYP also had negative
balance of deferred tax which was referring to the tax owed or overpaid due to the
temporary difference started from 2014-2018. The lower net profit margin marked that
both MYP as well as ROTI were unable to effectively control its costs and or/ provide
goods or services at a price significantly higher than its costs. Therefore, low ratio can
result from the poor cost management. ICBP, by contrast, had steady increase from 2013-
2018, had highest value of net profit margin which predicted that ICBP was pricing its
product correctly, and was exercising good cost control in managing its expenses. In PT
Sekar Bumi, is having decrease of slope in the graph from 2013-2018, it high on the
beginning. It happen due to they unable control its cost. Then, in PT Siantar Top rose
slightly. It means the company able to effectively control the cost and provide goods or
services.
3. Return on Investment
Return on investment is a performance measurement that is utilized in order to evaluate
the efficiency of an investment or compare the efficiency of a number of different
investments. ROI could be used in assessing managerial performance due to the tendency
of the management in using debt, equity, and internal financing in order to acquire
resources in their efforts to maximize shareholders’ wealth. The table projected that ICBP
and MYP had the highest value of ROI indicated that both companies effectively utilized
an investment as well as produced gains. Whereas, ROTI had the lowest ROI, which was
only 0.028 translated that ROTI ineffectively utilized an investment and produced losses
instead and had poor management performance. In PT Siantar Top and Sekar Bumi, it
went dynamic at the graph. It low at the beginning and rose up in the middle years and
went down on 2018. It indicates the decreasing of inefficiency of investment.

4. Return on Equity
Return on equity is profitability ratio that measures the ability of a firm to generate
profits from its shareholders investments in the company. In other words, the return on
equity ratio shows how much profit each dollar of common stockholders’ equity
generates. It also indicates how effective management is at using equity financing to
fund operations and grow the company. From the given table, it projected that MYP
and ICBP had nearly the same value of Return on Equity, were five times higher
compared to ROTI. MYP as well as ICBP had the capability to generate cash internally
without needing as much capital. However, the fallen Return on Equity of ROTI might
be due to the management was making poor decisions on reinvesting capital in
unproductive assets as well as treasury stocks. In PT Siantar Top and PT Sekar Bumi,
it went fluctuation in the graph from the beginning of the year it increases, then went
down, and rose up again at last. It means the instability of the company in managing
the shareholders’ investment. PT Siantar Top and PT Sekar Bumi has to focus more on
the effective management in using equity to finance the fund operations in order to
grow the company and escalate the reputation of its equity.