TABLE OF CONTENTS

1.0 INTRODUCTION 2

1.1 BACKGROUND OF DIGI TELECOMMUNICATION SDN. BHD 2

1.2 BACKGROUND OF MAXIS TELECOMMUNICATION SDN. BHD 3

2.0 ANALYSIS 4

2.1 FINANCIAL RATIO 4

2.1.1 DIGI
2.1.2 MAXIS
2.2 COMPARATIVE ANALYSIS 8

2.2.1 DIGI
2.2.2 MAXIS
2.3 INDEX TREND ANALYSIS FOR DIGI AND MAXIS 12

3.0 COMPARISON USING CROSS SECTIONAL ANALYSIS 14

4.0 CONCLUSION 17

5.0 IMPROVEMENT AND RECOMMENDATION 18

6.0 REFERENCES 19

APPENDICES 20
1.0 INTRODUCTION

1.1 BACKGROUND OF DIGI TELECOMMUNICATION SDN. BHD

Digi Telecommunications Sdn. Bhd. is known as Mutiara Telecommunications Sdn.Bhd. The

company was formerly known as Mutiara Telecommunications Sdn Bhd and changed its
name to Digi Telecommunications Sdn Bhd in January 1999. Digi Telecommunications Sdn
Bhd is a mobile service provider based in Malaysia. DiGi is a mobile communication
company that engaged in the establishment, maintenance and provision of telecommunication
and related services.
The company was founded on 24 May 1995 and headquartered in Shah Alam,
Malaysia. Besides that, Digi is the first telecommunication industry to launch and operate a
fully digital cellular network in Malaysia. So, Digi can be getting more market share on
Malaysia to compete with other competitors. Digi has provided a variety of mobile
communication services including Voice under their prepaid plans & post-paid plans, SMS,
data plans and services, international roaming, international calling card, WAP services and
so on.
1.2 BACKGROUND OF MAXIS TELECOMMUNICATION SDN. BHD

Maxis Communication Berhad is the leading telecommunications service provider that started
in the year 1993. Maxis Communication Berhad is the son Company of Usaha Tegas Group
Holding Berhad, majority stake of the company, 70%, owned by Malaysian tycoon
Tatparanandam Ananda Krishnan (richest man in Malaysia) Maxis have possession of 40%
market share of telecommunication industry which converts to 10 million of users out of 28
million of population of Malaysia.
Since the commencement of commercial operations, Maxis provide varieties of
mobile telecommunication products and services such as broadband, international roaming,
MMS and so on. They started with the phone number starting with the prefix 012. Later they
purchased Timecel which is another mobile services provider and that is when they started
offering phone number starting with prefix of 017.
In 1999, they introduce the prepaid service. As competitors such as Digi, Celcom
Telecommunication which offer lower prices and lots of offers and promotion, this forced
Maxis to sell their prepaid starter pack as low as RM8.
In addition, the company also operates in international gateway services. Its
geographical operations spread across Malaysia, Indonesia and India. In2006, Maxis achieves
prestigious from the public. The readers of the Wall Street Journal Asia have rated Maxis as
Malaysia’s most admired company in The Wall Street Journal Asia 200 survey in 2006.
2.0 ANALYSIS

2.1 FINANCIAL RATIO

2.1.1 DIGI

i. Liquidity
Ratios Formula Calculation Answer
Current Ratio Current Assets / 2089.76 / 2695.16 0.7754 times
Current Liabilities
Net Working Current Assets - 2089.76 - 2695.16 -605.4
Capital Current Liabilities
Acid Test Ratio (Current Assets – (2089.76 - 61.13) / 0.7527
Inventory) / Current 2695.2
liabilities
Working Capital (Sales / Working 6527.11 / -605.4 -10.7815
Turnover Capital)

ii. Activity
Ratios Formula Calculation Answer
Inventory Total revenue / 1797 / 60.135 29.879 times
Turnover Average Inventory
Account Receivable Sales / Average 6527.11 / 1125.255 5.8006 times
Turnover Account Receivable
Average Collection Account 1268.19/ (6527 / 70 days
Period Receivable / (Sales / 360)
360)
Total Asset Total Revenue / 6527.11 / 6206.06 1.051 times
Turnover Total Asset

iii. Profitability
Ratios Formula Calculation Answer
Net Profit Margin Net Income / Sales 1540.79 / 6527.11 24%
Return on Assets Net Income / 1541 / ((6206.1 + 26%
Average Total 5833.6) / 2)
Assets
Return on Equity Net Income / 1541 / ((673.19 + 258.58%
Average Equity 518.72) / 2)
Gross Profit Gross Profit / Sales 4730 / 6527 72%
Margin
iv. Leverage
Ratios Formula Calculation Answer
Debt Ratio Total Debts / Total 2694.1 / 6206.1 43%
Assets
Debt to Equity Total Debt / Total 2694.1 / 673.19 4.0019
Ratio Equity
Equity Ratio Total Equity / Total 673.19 / 6206.1 11%
Asset
Times Interest EBIT / Total Interest 2189 / 109 20.0407 times
Earned Payment
2.1.2 MAXIS

i. Liquidity
Ratios Formula Calculation Answer
Current Ratio Current Assets / 2667.66 / 4542.01 0.5873 times
Current Liabilities
Net Working Current Assets - 2667.66 - 4542.01 -1874.35
Capital Current Liabilities
Acid Test Ratio (Current Assets – (2667.66 - 15.92) / 0.5838
Inventory) / Current 4542.01
liabilities
Working Capital (Sales / Working 9192.44 / -1874.35 -4.9043
Turn Over Capital)

ii. Activity
Ratios Formula Calculation Answer
Inventory Total revenue / 4139.29 / ((4.49 + 405.6139 times
Turnover Average Inventory 15.92) / 2)
Account Receivable Sales / Average 9192.44 / (1510.83 + 5.7060 times
Turnover Account Receivable 1711.22) / 2
Average Collection Account 1711.22 / (9192.44 / 67 days
Period Receivable / (Sales / 360)
360)
Total Asset Total Revenue / 9192.44 / 19806.56 0.4641 times
Turnover Total Asset

iii. Profitability
Ratios Formula Calculation Answer
Net Profit Margin Net Income / Sales 1779.72 / 9192.44 19%
Return on Assets Net Income / 1779.72 / (19134.44 9%
Average Total + 19806.56)/2
Assets
Return on Equity Net Income / 1779.72 / (6946.01 + 25.25%
Average Equity 7149.73)/2
Gross Profit Gross Profit / Sales 5053.15 / 9192.44 55%
Margin
iv. Leverage
Ratios Formula Calculation Answer
Debt Ratio Total Debt / Total 7640.22 / 19806.56 39%
Assets
Debt to Equity Total Debt / Total 7640.22 / 7149.73 1.0686
Ratio Equity
Equity Ratio Total Equity / Total 7149.73 / 19806.56 36%
Asset
Times Interest EBIT / Total Interest 2713 / 337.29 8.0435 times
Earned Payment
2.2 COMPARATIVE ANALYSIS

2.2.1 DIGI

a) Income Statement
Digi Digi
2018 2017 (changes) (percent)
Total Revenue 6527.11 6340.47 186.64 2.94
Revenue 6527.11 6340.47 186.64 2.94
Other Revenue, Total - - - -
Cost of Revenue, Total 1796.78 1762.03 34.75 1.97
Gross Profit 4730.33 4578.44 151.89 3.32
Total Operating Expenses 4338.46 4246.4 92.06 2.17
Selling/General/Admin. Expenses, Total 961.81 1085.14 -123.33 -11.37
Research & Development - - - -
Depreciation / Amortization 804.79 785.61 19.18 2.44
Interest Expense (Income) - Net Operating 0.51 4.8 -4.29 -89.38
Unusual Expense (Income) - - - -
Other Operating Expenses, Total 775.09 613.62 161.47 26.31
Operating Income 2188.65 2094.07 94.58 4.52
Interest Income (Expense), Net Non-Operating -109.21 -108.72 -0.49 0.45
Gain (Loss) on Sale of Assets - - - -
Other, Net - - - -
Net Income Before Taxes 2079.44 1985.35 94.09 4.74
Provision for Income Taxes 538.65 508.65 30 5.90
Net Income After Taxes 1540.79 1476.7 64.09 4.34
Minority Interest - - - -
Equity In Affiliates - - - -
U.S GAAP Adjustment - - - -
Net Income Before Extraordinary Items 1540.79 1476.7 64.09 4.34
Total Extraordinary Items - - - -
Net Income 1540.79 1476.7 64.09 4.34
 b) Balance Sheet
Digi
2018 2017 Digi (changes) (percent)
Total Current Assets 2089.76 1885.86 203.9 10.81204
Cash and Short-Term Investments 433.12 575.04 -141.92 -24.68
Cash 86.02 102.96 -16.94 -16.453
Cash & Equivalents 433.12 575.04 -141.92 -24.68
Short Term Investments 347.1 472.08 -124.98 -26.4743
Total Receivables, Net 1268.19 982.32 285.87 29.10151
Accounts Receivables - Trade, Net 562.61 399.07 163.54 40.98028
Total Inventory 61.13 59.14 1.99 3.364897
Prepaid Expenses 111.18 89.56 21.62 24.14024
Other Current Assets, Total 216.14 179.81 36.33 20.20466
Total Assets 6206.06 5833.61 372.45 6.384554
Property/Plant/Equipment, Total - Net 2881.17 2908.97 -27.8 -0.95566
Property/Plant/Equipment, Total - Gross 7123.29 6504.27 619.02 9.517133
-
Accumulated Depreciation, Total 4242.12 -3595.3 -646.82 17.99071
Goodwill, Net - - - -
Intangibles, Net 981.68 937.1 44.58 4.75723
Long Term Investments 0.08 0.16 -0.08 -50
Note Receivable - Long Term 112.03 - - -
Other Long-Term Assets, Total 141.33 101.52 39.81 39.21395
Other Assets, Total - - - -
Total Current Liabilities 2695.16 2281.86 413.3 18.11242
Accounts Payable 200.09 255.6 -55.51 -21.7175
Payable/Accrued 2144.07 - - -
Accrued Expenses 1545.66 1392.63 153.03 10.98856
Notes Payable/Short Term Debt - - - -
Current Port. of LT Debt/Capital Leases 181.37 12.88 168.49 1308.152
Other Current liabilities, Total 768.03 620.75 147.28 23.72614
Total Liabilities 5532.87 5314.9 217.97 4.101112
Total Long-Term Debt 2512.68 2691.44 -178.76 -6.6418
Long Term Debt 2510.6 2683.1 -172.5 -6.42913
Capital Lease Obligations 2.08 8.34 -6.26 -75.06
Total Debt 2694.05 2704.32 -10.27 -0.37976
Deferred Income Tax 276.06 297.52 -21.46 -7.21296
Minority Interest - - - -
Other Liabilities, Total 48.96 44.08 4.88 11.07078
Total Equity 673.19 518.72 154.47 29.77907
2.2.2 MAXIS

a) Income Statement
Maxis Maxis
2018 2017 (changes) (percent)
Total Revenue 9192.44 9419.29 -226.85 -2.40836
Revenue 9192.44 9419.29 -226.85 -2.40836
Other Revenue, Total - - - -
Cost of Revenue, Total 4139.29 4101.48 37.81 0.921862
Gross Profit 5053.15 5317.81 -264.66 -4.97686
Total Operating Expenses 6479.44 6156.82 322.62 5.240043
Selling/General/Admin. Expenses, Total 1407.31 1172.17 235.14 20.06023
Research & Development - - - -
Depreciation / Amortization 1067.7 1033.44 34.26 3.315142
Interest Expense (Income) - Net Operating - - - -
Unusual Expense (Income) - - - -
Other Operating Expenses, Total -134.87 -150.27 15.4 -10.2482
Operating Income 2713 3262.47 -549.47 -16.8421
Interest Income (Expense), Net Non-
Operating -337.29 -379.05 41.76 -11.017
Gain (Loss) on Sale of Assets - - - -
Other, Net -6.99 -5 -1.99 39.8
Net Income Before Taxes 2368.72 2878.42 -509.7-17.7076
Provision for Income Taxes 589 698.38 -109.38 -15.662
Net Income After Taxes 1779.72 2180.04 -400.32 -18.363
Minority Interest - - - -
Equity In Affiliates - - - -
U.S GAAP Adjustment - - - -
Net Income Before Extraordinary Items 1779.72 2180.04 -400.32 -18.363
Total Extraordinary Items - - - -
Net Income 1779.72 2180.04 -400.32 -18.363
 b) Balance Sheet
Maxis Maxis
  2018 2017 (changes) (percent)
Total Current Assets 2667.66 2470.2 197.46 7.993685
Cash and Short Term Investments 560.46 602.13 -41.67 -6.92043
Cash 190.18 162.76 27.42 16.84689
Cash & Equivalents 560 602 -42 -6.97674
Short Term Investments 370.27 439.37 -69.1 -15.7271
Total Receivables, Net 1711.22 1510.83 200.39 13.26357
Accounts Receivables - Trade, Net 1111.88 1104.94 6.94 0.628088
Total Inventory 15.92 4.49 11.43 254.5657
Prepaid Expenses 159.33 156.34 2.99 1.912498
Other Current Assets, Total 220.73 196.41 24.32 12.38226
Total Assets 19806.56 19134.44 672.12 3.512619
Property/Plant/Equipment, Total - Net 5189.39 4841.26 348.13 7.190897
Property/Plant/Equipment, Total - Gross 12063.81 10951.83 1111.98 10.15337
Accumulated Depreciation, Total -6874.42 -6110.56 -763.86 12.50065
Goodwill, Net 219.09 219.09 0 0
Intangibles, Net 10707.38 10707.38 0 0
Long Term Investments 3.62 - 0 0
Note Receivable - Long Term 1018.06 886.33 131.73 14.86241
Other Long Term Assets, Total 1.38 10.19 -8.81 -86.4573
Other Assets, Total - - - -
Total Current Liabilities 4542.01 3944.8 597.21 15.13917
Accounts Payable 5.03 24.88 -19.85 -79.783
Payable/Accrued 2183.94 2094.77 89.17 4.256792
Accrued Expenses - - - -
Notes Payable/Short Term Debt 200.53 200.37 0.16 0.079852
Current Port. of LT Debt/Capital Leases 0.56 4.99 -4.43 -88.7776
Other Current liabilities, Total 2151.95 1619.79 532.16 32.85364
Total Liabilities 12656.83 12188.43 468.4 3.842989
Total Long Term Debt 7439.12 7439.94 -0.82 -0.01102
Long Term Debt 7439.12 7439.18 -0.06 -0.00081
Capital Lease Obligations - 0.76 0 0
Total Debt 7640.22 7645.29 -5.07 -0.06632
Deferred Income Tax 195.77 405.97 -210.2 -51.7772
Minority Interest - - - -
Other Liabilities, Total 479.93 397.72 82.21 20.67032
Total Equity 7149.73 6946.01 203.72 2.932907
2.3 INDEX TREND ANALYSIS FOR DIGI AND MAXIS

a) Income Statement
  Digi (Index) Maxis (Index)
Total Revenue 102.9436304 97.59164438
Revenue 102.9436304 97.59164438
Other Revenue, Total - -
Cost of Revenue, Total 101.9721571 100.9218624
Gross Profit 103.3175055 95.02313922
Total Operating Expenses 102.167954 105.2400427
Selling/General/Admin. Expenses, Total 88.63464622 120.0602302
Research & Development - -
Depreciation / Amortization 102.441415 103.3151417
Interest Expense (Income) - Net Operating 10.625 -
Unusual Expense (Income) - -
Other Operating Expenses, Total 126.3143313 89.75178013
Operating Income 104.5165634 83.15785279
Interest Income (Expense), Net Non-Operating 100.450699 88.98298378
Gain (Loss) on Sale of Assets - -
Other, Net - 139.8
Net Income Before Taxes 104.7392147 82.29236873
Provision for Income Taxes 105.8979652 84.33803946
Net Income After Taxes 104.3400826 81.63703418
Minority Interest - -
Equity In Affiliates - -
U.S GAAP Adjustment - -
Net Income Before Extraordinary Items 104.3400826 81.63703418
Total Extraordinary Items - -
Net Income 104.3400826 81.63703418
 b) Balance Sheet
  Digi (Index) Maxis (Index)
Total Current Assets 110.8120433 107.9936847
Cash and Short-Term Investments 75.31997774 93.07956754
Cash 83.54700855 116.8468911
Cash & Equivalents 75.31997774 93.02325581
Short Term Investments 73.52567361 84.27293625
Total Receivables, Net 129.1015148 113.2635704
Accounts Receivables - Trade, Net 140.9802791 100.6280884
Total Inventory 103.3648969 354.5657016
Prepaid Expenses 124.1402412 101.9124984
Other Current Assets, Total 120.2046605 112.3822616
Total Assets 106.3845543 103.5126191
Property/Plant/Equipment, Total - Net 99.04433528 107.1908966
Property/Plant/Equipment, Total - Gross 109.5171326 110.1533716
Accumulated Depreciation, Total 117.9907101 112.5006546
Goodwill, Net - 100
Intangibles, Net 104.7572298 100
Long Term Investments 50 0
Note Receivable - Long Term - 114.8624102
Other Long-Term Assets, Total 139.213948 13.54268891
Other Assets, Total - -
Total Current Liabilities 118.1124171 115.1391706
Accounts Payable 78.28247261 20.2170418
Payable/Accrued - 104.2567919
Accrued Expenses 110.9885612 -
Notes Payable/Short Term Debt - 100.0798523
Current Port. of LT Debt/Capital Leases 1408.152174 11.22244489
Other Current liabilities, Total 123.7261377 132.8536415
Total Liabilities 104.101112 103.8429888
Total Long-Term Debt 93.3582023 99.98897841
Long Term Debt 93.57086952 99.99919346
Capital Lease Obligations 24.94004796 0
Total Debt 99.62023725 99.93368466
Deferred Income Tax 92.78703953 48.22277508
Minority Interest - -
Other Liabilities, Total 111.0707804 120.6703208
Total Equity 129.7790716 102.9329068
3.0 COMPARISON USING CROSS SECTIONAL ANALYSIS

i. Liquidity

Ratios Digi Maxis

Current Ratio 0.7754 times 0.5873 times
Net Working Capital -605.4 -1874.35
Acid Test Ratio 0.7527 0.5838
Working Capital Turn Over -10.7815 -4.9043

Liquidity ratios asses a business’s liquidity, i.e. its ability to convert its assets to cash and pay
off its obligations without any significant difficulty (i.e. delay or loss of value).
We see that Digi has higher current ratios than Maxis which means that Digi is in a better
position to meet short-term liabilities with short-term assets. Then, Digi has an acid test ratio
of 0.75 as compared to 0.58 in case of Maxis. While Maxis’s acid test ratio is quite safe, Digi
has better overall liquidity particularly in a crunch situation. Analysed together with its high
growth rate and high inventory turnover ratio, Digi’s high acid test ratio does not indicate
inefficiency either. Also, Maxis is clearly using its investment in working capital more
efficiently as indicated by its higher working capital turnover ratio when compared to Digi's
ratio.
This was proved in the comparative analysis which are current assets increase by 10.81%
and inventory increase by 3.36% for Digi and at the same time for Maxis only 7.99% for
current assets but 254.57% for inventory. For current liabilities, it stated that Digi increased
by 18.11% meanwhile Maxis increased by 15.14% only. Other than that, for the index trend
Digi stated 103.36% while Maxis 354.57% for inventory. And for current liabilities and
current assets, 118.11% and 110.81% for Digi meanwhile 115.14% and 107.99% for Maxis
respectively.

ii. Activity

Ratios Digi Maxis

Inventory Turnover 29.879 times 405.6139 times
Account Receivable Turnover 5.8006 times 5.7060 times
Average Collection Period 70 days 67 days
Total Asset Turnover 1.051 times 0.4641 times
Activity ratios assess the efficiency of operations of a business. For example, these ratios
attempt to find out how effectively the business is converting inventories into sales and sales
into cash, or how it is utilizing its fixed assets and working capital, etc.
The analysis shows that Digi has most efficiently used its assets. It generated $1.05 of
revenue per $1 dollar of its assets over the year. Maxis on the other hand, has a total asset
turnover ratio of 0.46, which means $0.46 of revenue per $1 of investment in total assets. In
addition, Digi is better than Maxis. in inventory management as evident from their inventory
turnover ratio. Next, a high value of accounts receivable turnover of Digi is favourable and
lower figure of Maxis may indicate inefficiency in collecting outstanding sales. Since it is
profitable to convert sales into cash quickly, which means that a lower value of average
collection period in Maxis’s ratio is favourable whereas a higher value in Digi’s ratio is
unfavourable.
This also proven in the comparative analysis when the sales for Digi increased by
2.94% while Maxis dropped by -2.40%. Next, for account receivables Digi increased by
29.10% but Maxis only increased by 13.26%. For the index trend, Digi shows 102.94% as
compared to 97.59% for Maxis in sales. Meanwhile, account receivables for Digi is 129%
and Maxis is 113% which means Digi is better than Maxis.

iii. Profitability

Ratios Digi Maxis

Net Profit Margin 24% 19%
Return on Assets 26% 9%
Return on Equity 258.58% 25.25%
Gross Profit Margin 72% 55%

Profitability ratios measure the ability of a business to earn profit for its owners. While
liquidity ratios and solvency ratios explain the financial position of a business, profitability
ratios and efficiency ratios communicate the financial performance of a business.
The table above shows that Digi is the most profitable compared to Maxis based on net
profit margin. It managed to convert 24% of its sales into net income while Maxis earned $19
net income per $100 of revenue. Also, gross margin ratio measures profitability. Higher
values on Digi’s ratio compared to Maxis’s ratio indicate that more cents are earned per
dollar of revenue which is favourable because more profit will be available to cover non-
production costs. Next, higher values in return on equity which is 258.58% for Digi
compared to only 25.25% in case of Maxis are generally favourable meaning that the
company is efficient in generating income on new investment. After that, a high return on
assets is generally better than a low ratio. This shows from the figure stated that Digi is far
higher than Maxis which is Digi recorded 26% and Maxis only recorded 9%.
This shows in the comparative analysis which are net income for Digi increases by
4.34% and sales increase by 2.94% while Maxis dropped -18.36% for net income and also
-2.41% for sales. For the trend index, net income for Digi is 104.34% which is better as
compared to 81.64% in case of Maxis while sales Digi stated 102.94% as compared to
97.59% for Maxis.

iv. Leverage

Ratios Digi Maxis

Debt Ratio 43% 39%
Debt to Equity Ratio 4.0019 1.0686
Equity Ratio 11% 36%
Times Interest Earned 20.0407 times 8.0435 times

Solvency ratios assess the long-term financial viability of a business i.e. its ability to pay off
its long-term obligations such as bank loans, bonds payable, etc. Information about solvency
is critical for banks, employees, owners, bond holders, institutional investors, government,
etc.
The ratios indicate that Maxis has better financial position than Digi, because
currently 39% of its total assets are financed by debt (as compared to 43% in case of Digi).
Further, Digi is better at paying off its interest expense as indicated by its times interest
earned ratio of 20.04 (as compared to 8.04 in case of Maxis), which means that the Digi can
bear an interest expense 20.04 times its current interest expense while Maxis can barely pay
off its current interest expense. Next, higher debt-to-equity ratio on Digi is unfavourable
because it means that the business relies more on external lenders thus it is at higher risk,
especially at higher interest rates.
This also stated in the comparative analysis for total debt when Digi dropped by
-0.38% and also -0.07% for Maxis which means that Digi is better than Maxis. For total
equity and total assets, Digi recorded 29.78% and 6.38% while Maxis recorded 2.93% and
3.51% respectively. Meanwhile for index trend, total debt, total assets and total equity for
Digi is 99.62%, 106.38% and 129.78% at the same time Maxis is 99.93%, 103.51% and
102.93% respectively. Hence, this shows Digi is better than Maxis.

4.0 CONCLUSION

Telecommunication industry is very market driven in nature and all telecommunication

players must stay alert and must be able to respond to market fast to ensure business
continuity. Based on our analysis, we find out that Digi is better than Maxis in the
telecommunication industry. After making a comparative of trend analysis, it shows that
company Digi is good in profitability ratio. Profitability ratios consist of a group of metrics
that assess a company's ability to generate revenue relative to its revenue, operating costs,
balance sheet assets, and shareholders' equity. Profitability ratios also show how well
companies use their existing assets to generate profit and value for shareholders. Higher ratio
results are often more favorable, but ratios provide much more information when compared
to results from other, similar companies, the company's own historical performance, or the
industry average.
Other than that, Digi is better compared to Maxis. It can be proved by activity ratio
that we compared of. Activity ratios measure company sales per another asset account which
the most common asset accounts used are accounts receivable, inventory, and total assets.
Activity ratios measure the efficiency of the company in using its resources. Since Digi invest
heavily in accounts receivable or inventory, these accounts are used in the denominator of the
most popular activity ratios. Activity 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.
5.0 IMPROVEMENT AND RECOMMENDATION

After analyzing 2018 for profitability ratio of two companies, I find out that Digi has higher
net profit margin than Maxis with 24 percent compared to 19 percent. Digi is good because
they gain more profit. For return on asset, Digi has higher return than Maxis with 26 percent
for Digi and 9 percent for Maxis. The return on asset figure gives investors an idea of how
effective the company is in converting the money it invests into net income. The higher the
return on asset number, the better because the company is earning more money on less
investment. For gross profit margin, Digi gain more than Maxis with 72 percent, while Maxis
only gain for 55 percent. So, Digi has to improve low gross profit margin by increasing
customer demand and revenue or reduce the cost of goods sold. For overall, Digi is better
than Maxis for profitability ratio.
Next, activity ratio. In inventory turnover, Maxis is 405.6139 times and Digi is 29.879
times. It shows that Maxis is better compared to Digi. Higher turnover ratios mean the
company is using its assets more efficiently. So, Digi must have more stocks to make sure
that they gain more profits in future. Next, account receivable turnover. Account receivable
for Digi is 5.800560762 times, while Maxis is 5.705957387 times. It shows that Digi is
higher than Maxis. Digi is better because account receivable is asset. So, the more the asset,
the more the income of company. Maxis must provide more account receivable to the
customer to gain more asset. Furthermore, based on total asset turnover, Digi can gain more
asset turnover with 1.051 times compared Maxis with only 0.4641 times. It proved that Digi
is better than Maxis because higher turnover ratios mean the company is using its assets more
efficiently. For overall, Digi is better in activity ratio compared to Maxis.
6.0 REFERENCES

1) AccountingTools. (n.d.). Retrieved from http://www.accountingtools.com/.

2) Harbour, S. (2016, October 26). How to Increase Accounts Receivable Turnover.

Retrieved from https://smallbusiness.chron.com/increase-accounts-receivable-

turnover-32323.html.

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6)
APPENDICES

Income Statement Digi

  2018 2017
  31-Dec 31-Dec
Total Revenue 6527.11 6340.47
Revenue 6527.11 6340.47
Other Revenue, Total - -
Cost of Revenue, Total 1796.78 1762.03
Gross Profit 4730.33 4578.44
Total Operating Expenses 4338.46 4246.4
Selling/General/Admin. Expenses, Total 961.81 1085.14
Research & Development - -
Depreciation / Amortization 804.79 785.61
Interest Expense (Income) - Net Operating 0.51 4.8
Unusual Expense (Income) - -
Other Operating Expenses, Total 775.09 613.62
Operating Income 2188.65 2094.07
Interest Income (Expense), Net Non-Operating -109.21 -108.72
Gain (Loss) on Sale of Assets - -
Other, Net - -
Net Income Before Taxes 2079.44 1985.35
Provision for Income Taxes 538.65 508.65
Net Income After Taxes 1540.79 1476.7
Minority Interest - -
Equity In Affiliates - -
U.S GAAP Adjustment - -
Net Income Before Extraordinary Items 1540.79 1476.7
Total Extraordinary Items - -
Net Income 1540.79 1476.7
Balance Sheet Digi
  2018 2017
  31-Dec 31-Dec
Total Current Assets 2089.76 1885.86
Cash and Short-Term Investments 433.12 575.04
Cash 86.02 102.96
Cash & Equivalents 433.12 575.04
Short Term Investments 347.1 472.08
Total Receivables, Net 1268.19 982.32
Accounts Receivables - Trade, Net 562.61 399.07
Total Inventory 61.13 59.14
Prepaid Expenses 111.18 89.56
Other Current Assets, Total 216.14 179.81
Total Assets 6206.06 5833.61
Property/Plant/Equipment, Total - Net 2881.17 2908.97
Property/Plant/Equipment, Total - Gross 7123.29 6504.27
Accumulated Depreciation, Total -4242.12 -3595.3
Goodwill, Net - -
Intangibles, Net 981.68 937.1
Long Term Investments 0.08 0.16
Note Receivable - Long Term 112.03 -
Other Long-Term Assets, Total 141.33 101.52
Other Assets, Total - -
Total Current Liabilities 2695.16 2281.86
Accounts Payable 200.09 255.6
Payable/Accrued 2144.07 -
Accrued Expenses 1545.66 1392.63
Notes Payable/Short Term Debt - -
Current Port. of LT Debt/Capital Leases 181.37 12.88
Other Current liabilities, Total 768.03 620.75
Total Liabilities 5532.87 5314.9
Total Long-Term Debt 2512.68 2691.44
Long Term Debt 2510.6 2683.1
Capital Lease Obligations 2.08 8.34
Total Debt 2694.05 2704.32
Deferred Income Tax 276.06 297.52
Minority Interest - -
Other Liabilities, Total 48.96 44.08
Total Equity 673.19 518.72
Income Statement Maxis
  2018 2017
  31-Dec 31-Dec
Total Revenue 9192.44 9419.29
Revenue 9192.44 9419.29
Other Revenue, Total - -
Cost of Revenue, Total 4139.29 4101.48
Gross Profit 5053.15 5317.81
Total Operating Expenses 6479.44 6156.82
Selling/General/Admin. Expenses, Total 1407.31 1172.17
Research & Development - -
Depreciation / Amortization 1067.7 1033.44
Interest Expense (Income) - Net Operating - -
Unusual Expense (Income) - -
Other Operating Expenses, Total -134.87 -150.27
Operating Income 2713 3262.47
Interest Income (Expense), Net Non-Operating -337.29 -379.05
Gain (Loss) on Sale of Assets - -
Other, Net -6.99 -5
Net Income Before Taxes 2368.72 2878.42
Provision for Income Taxes 589 698.38
Net Income After Taxes 1779.72 2180.04
Minority Interest - -
Equity In Affiliates - -
U.S GAAP Adjustment - -
Net Income Before Extraordinary Items 1779.72 2180.04
Total Extraordinary Items - -
Net Income 1779.72 2180.04
Balance Sheet Maxis
  2018 2017
  31-Dec 31-Dec
Total Current Assets 2667.66 2470.2
Cash and Short-Term Investments 560.46 602.13
Cash 190.18 162.76
Cash & Equivalents 560 602
Short Term Investments 370.27 439.37
Total Receivables, Net 1711.22 1510.83
Accounts Receivables - Trade, Net 1111.88 1104.94
Total Inventory 15.92 4.49
Prepaid Expenses 159.33 156.34
Other Current Assets, Total 220.73 196.41
Total Assets 19806.56 19134.44
Property/Plant/Equipment, Total - Net 5189.39 4841.26
Property/Plant/Equipment, Total - Gross 12063.81 10951.83
Accumulated Depreciation, Total -6874.42 -6110.56
Goodwill, Net 219.09 219.09
Intangibles, Net 10707.38 10707.38
Long Term Investments 3.62 -
Note Receivable - Long Term 1018.06 886.33
Other Long-Term Assets, Total 1.38 10.19
Other Assets, Total - -
Total Current Liabilities 4542.01 3944.8
Accounts Payable 5.03 24.88
Payable/Accrued 2183.94 2094.77
Accrued Expenses - -
Notes Payable/Short Term Debt 200.53 200.37
Current Port. of LT Debt/Capital Leases 0.56 4.99
Other Current liabilities, Total 2151.95 1619.79
Total Liabilities 12656.83 12188.43
Total Long-Term Debt 7439.12 7439.94
Long Term Debt 7439.12 7439.18
Capital Lease Obligations - 0.76
Total Debt 7640.22 7645.29