PAF3093 - AMALAN DALAM PERAKAUNAN KEWANGAN

GROUP A
GROUP 8
PAF3093 GROUP ASSIGNMENT

ANALYSIS AND INTERPRETATION OF

FINANCIAL RATIOS

HUP SENG INDUSTRIES BERHAD & HWA TAI INDUSTRIES BERHAD

NAME STUDENT ID NUMBER

NUR AMIRAH SYUHADA BINTI MOHD SUIB D20221102984

VITHYA A/P GUNASEGARAN D20221103001

MAYTHINEE A/P EH CHIUM D20221103002

PROFESSOR MADYA DR. ROHAILA BINTI YUSOF

 TABLE OF CONTENTS

NO CONTENTS PAGES

1. 1.0 BACKGROUND OF HUP SENG INDUSTRIES BERHAD

2. 2.0 BACKGROUND OF HWA TAI INDUSTRIES BERHAD

3. 3.0 TREND ANALYSIS OF COMPANY PERFORMANCE USING

FIVE MAIN RATIOS

3.1 LIQUIDITY

3.2 PROFITABILITY

3.3 EFFICIENCY

3.4 SHAREHOLDER

3.5 CAPITAL STRUCTURE

4. CONCLUSION

5. APPENDICES

6. REFERENCES
1.0 BACKGROUND OF HUP SENG INDUSTRIES BERHAD

Hup Seng Industries Bhd. (HSIB) is one of the crackers and biscuits manufacturers in
Malaysia that was incorporated on 4 October 1991 and later on 2 November 2000 was listed on
the Main Board of Bursa Malaysia Securities Berhad. HSIB has three (3) subsidiaries companies
namely, Hup Seng Perusahaan Makanan (M) Sdn. Bhd. (HSPM), Hup Seng Hoon Yong
Brothers Sdn. Bhd. (HSHY), and In-Comix Food Industries Sdn. Bhd. (In-Comix). HSIB is an
investment holding company, in which its subsidiary companies engaged in the manufacture and
sale of crackers/biscuits and confectionery food items.

Back in 1958, Hup Seng ( 合 成 ) which translate to "Success with

Teamwork" in Chinese, was established as Hup Seng Co., a partnership
by the four founding Directors of the Group who are brothers. Due to
business expansion and increased capital requirements, Hup Seng Co.
was dissolved in 1974 and HSPM was then founded with all the assets
and liabilities of the partnership transferred thereto. 3 years later
in 1977, HSHY was incorporated to manage trading and in 2005, HSIB
acquired 100% equity interest in In-Comix. Today, Hup Seng is one of
the leading crackers/biscuits manufacturers in Malaysia.
2.0 BACKGROUND OF HWA TAI INDUSTRIES BERHAD

Hwa Tai Industries Berhad is one of the premier and longest-established biscuit
manufacturers in Malaysia that was established in 1962 and listed on the Stock Exchange
Malaysia back in 1992. Since then, Hwa Tai has grown to be one of the largest players in the
biscuits industry in the country and produce a fine, wide range of superior quality biscuits; a fast
expanding company. Hwa Tai’s products have been successfully marketed both domestically and
internationally through their own vast and comprehensive distribution network. All of Hwa Tai’s
biscuits are marketed under the brand name or trademark of "HWA TAI" and "LUXURY".

Hwa Tai has successfully established a strong presence in Malaysia and has built up a
wide international market. Today, Hwa Tai’s products can easily be found locally from small
shops to big hypermarkets, fast-food chains, airlines and other mass consumption industries. A
total of 40% of their production is exported internationally to countries such as China, Taiwan,
Hong Kong, Singapore, Brunei, USA and 33 other countries. Until this day, Hwa Tai is still
growing with support facilities that are constantly being upgraded, with our continuous goal of
producing the finest product ranges possible.
3.0 TREND ANALYSIS OF COMPANY PERFORMANCE USING FIVE MAIN
RATIOS

3.1 LIQUIDITY
Liquidity refers to the ability of assets that can be converted into ready cash without
affecting the market price. Example of the liquid asset is cash itself. To measure the liquidity;
current and quick ratios are used.

Analysis Hup Seng Hwa Tai Explanations

Industries Industries
Berhad Berhad

Current ratio This analysis shows that

= Current assets Hup Seng Industries Berhad
Current liabilities 126,997,765 45,345,993 has a higher ability to repay
short-term debt than Hwa
60,890,186 43,804,953 Tai. It's because Hup Seng's
= 2.09 times = 1.04 times current ratio was 2.09 times
higher in 2021 than Hwa
Tai's was, at 1.04 times.

Quick ratio/ Acid test ratio This analysis indicates that

= Cash + Current receivables Hup Seng Industries Berhad
(66,693,256 + (12,001,495 +
Current liabilities is able to finance debt
31,614,935) 21,353,722)
quicker than Hwa Tai’s in
2021. It’s because Hup
60,890,186 43,804,953
Seng’s quick ratio in 2021
= 1.61 times = 0.76 times
was 1.61 times while Hwa
Tai was 0.76 times.
 3.2 PROFITABILITY
Profitability is a measure of a company’s profit relative to their expenses. It is a situation
where the amount of revenue is greater than expenses’ amount in a reporting period. The
profitability’s measurements of a company are shown below;

Analysis Hup Seng Hwa Tai Explanations

Industries Berhad Industries Berhad

Profit Margin Ratio Based on analysis,

= Net income compared to Hwa
Net sales Tai’s net profit
margin Hup Seng’s
net margin in 2021 is
the highest, which is
27,240,004 (1,912,513)
0.33%. Hwa Tai’s is
less with -0.10%.
81,673,532 18,897,819
This indicates that
= 0.33% = -0.10%
for every RM1.00
sales can contribute a
profit of RM0.01
better than the Hwa
Tai company with a
loss of RM0.

Return on total assets The return on assets

= Net income of Hwa Tai’s was -
Average total assets 0.03% lesser than the
Hup Seng’s company
27,240,004 (1,912,513) of 0.12%. This
represents that for
(207,153,461+ (66,981,076+ each RM1.00
228,779,958)/2 63,500,743)/2 investment on assets
= 0.12% = -0.03% can contribute a
profit of RM0.01
better than the Hwa
Tai company with a
loss of RM0.

Return on common 27,240,004 - 0 (1,912,513) - 0 The analysis

stockholders’ equity replicates that Hup
= Net income - preference (29,742,236+ (9,258,286- Seng’s return on
dividends equity of 0.61% in
2021 is higher than
Average ordinary Hwa Tai’s company
shareholders’ equity 20,345,979+ 6,660,136+ of -0.17%. It
28,211,902+ 11,002,121+ concludes Hup Seng
(Beginning Common Stock + 11,171,607)/2 8,578,802)/2 can contribute
Beginning Retained Earnings = 0.61% = -0.17 % RM0.61 of profit
+ Ending Common Stock + compared to Hwa
Ending Retained Earnings) / 2 Tai which made a
loss of RM0.
 3.3 EFFICIENCY
Efficiency in the trend analysis is the usage of certain ratios and measurements to the
company’s effectiveness. It is used to assess a company's financial condition on how they
manage their assets. The measurements are shown below as;

Analysis Hup Seng Hwa Tai Explanations

Industries Berhad Industries Berhad

Total asset turnover This analysis

= Net sales indicates Hup Seng
Average total assets has a higher ratio of
81,673,532 18,897,819 0.37% than Hwa
Tai’s company of
(207,153,461+228 (66,981,076 + 0.29%. Comparably
,779,958)/2 63,500,743)/2 Hwa Tai’s revenue
= 0.37% = 0.29% is RM2.90 which is
lesser than Hup
Seng’s company of
RM3.70.

Inventory turnover Hup Seng had a

= Cost of good sold higher inventory
turnover ratio of
Average Inventory 7.39% than Hwa Tai
214,159,313 54,480,590 company of 5.38%.
This shows Hup
(28,211,902 (11,002,121+ Seng company with
+29,742,236)/2 9,258,286)/2 a high ratio can
= 7.39% = 5.38% perform in a strong
position and
effectively with
their inventory and
stocks.

Accounts receivable turnover 81,673,532 18,897,819 Based on the

= Net sales analysis, the
(31,614,935 + (21,353,722 + accounts receivable
Average account receivable, 32,036,856 /2) 16,916,608/2) turnover of Hup
net = 2.57% = 0.99 % Seng company is
2.57% which is
higher than Hwa Tai
 company of 0.99%.
It concludes as Hwa
Tai might indicate
insufficient stocking
that is costing the
company sales.

Day’s sales in inventory Hup Seng has high

= Ending inventory X 365 days of sales in
inventory value
Cost of good sold which is
approximately 48
days and Hwa Tai
company inventory
28,211,902 X 365 11,002,121 X 365
requires
approximately 73
214,159,313 54,480,590
days. It shows high
= 48.1 days = 73.7 days
days of sales in
inventory value
which Hwa Tai can
have difficulties
converting its stocks
into sales compared
to Hup Seng.

Day’s sales uncollected This analysis

= Account receivable, net X indicates, Hup Seng
365 had collected its
receivable within
Net sales 31,614,935 X 365 21,353,722 X 365
141 days while Hwa
Tai company took
81,673,532 18,897,819
412 days. The
= 141.3 days = 412.4
higher turnover ratio
can affect and be
reliable on their
clients.

Day’s purchase in accounts (56,341,109×365) (17,476,529×365) This analysis

payable 214,159,313 54,480,590 explains Hup Seng
= Account payable x 365 = 96 days = 117 days company took 96
days to pay its
Cost of goods sold supplier while Hwa
Tai company took
117 days. The
longer to pay, Hwa
Tai company’s cash
 flow will help be
beneficially stable
compare to Hup
Seng company has
lesser days to pay to
their suppliers.

3.4 SHAREHOLDER
The shareholder equity ratio indicates a company’s assets that have been generated by
issuing equity shares rather than by taking on debt. This ratio is expressed as a percentage by
dividing shareholder equity by total assets, as shown below:

Analysis Hup Seng Hwa Tai Explanations

Industries Industries
Berhad Berhad

Shareholder Equity ratio The analysis shows Hwa

= Shareholder’s equity Tai company has financed
207,153,461 66,981,076 0.32% of its assets with
Total assets - 68,133,625 - 45,299,418 shareholder equity while
Hup Seng has financed
207,153,461 66,981,076 0.67% of its. It concludes
= 0.67 = 0.32 Hup Seng liquidated more
assets than Hwa Tai
company to pay off its debt.
 3.5 CAPITAL STRUCTURE
A company's capital structure is a combination of debt and equity used to finance its
overall operations and growth. In this analysis; equity ratio, debt ratio, and debt-to-equity ratio
are used as below:

Analysis Hup Seng Hwa Tai Explanations

Industries Industries
Berhad Berhad

Equity ratio The analysis shows Hup

139,019,836 21,681,658
= Total equity Seng’s ratio of assets to
invested is 0.67% which is
207,153,461 66,981,076
Total assets higher than Hwa Tai’s
= 0.67% = 0.32%
company of 0.32%.

Debt ratio Based on analysis, it was

= Total liabilities found out that Hup Seng
68,133,625 45,299,418 has a debt ratio of 0.33%
Total assets which is less than Hwa
207,153,461 66,981,076 Tai’s company's 0.68%.
= 0.33% = 0.68% This indicates that Hup
Seng has low financial
leverage

Debt - to - equity ratio This analysis’s result shows

= Total liabilities Hup Seng had 0.49% of
68,133,625 45,299,418
debt for every ringgit of
Total equity equity while Hwa Tai had
139,019,836 21,681,658
2.09% ratio which is higher.
= 0.49% = 2.09%
The higher the ratio can put
the company into risk.
4.0 CONCLUSION
In conclusion, Hup Seng Industries Berhad is better than Hwa Tai Industries Berhad.
From the analysis, it can be concluded that Hup Seng Industries Berhad has better liquidity than
Hwa Tai Industries Berhad. This can be seen from the current ratio and quick ratio of Hup Seng
Industries Berhad, which are higher than Hwa Tai Industries Berhad. A higher current ratio
shows that Hup Seng has more assets than liabilities, which can pay off its current liabilities,
while a greater quick ratio indicates that a business can produce cash swiftly in an emergency.

Besides, Hup Seng Industries Berhad also has better profitability than Hwa Tai Industries
Berhad. This can be seen from the profit margin ratio, return on total assets, and return on
common stockholders’ equity of Hup Seng Industries Berhad, which are higher than Hwa Tai
Industries Berhad. This shows that Hup Seng is successful at converting revenue into profit.

Moreover, Hup Seng Industries Berhad is also doing better in terms of efficiency than
Hwa Tai Industries Berhad. This can be seen from the total asset turnover, inventory turnover,
and accounts receivable turnover of Hup Seng Industries Berhad, which are higher than Hwa Tai
Industries Berhad. The higher the asset turnover ratio, the more efficient a company is at
generating revenue from its assets. A high inventory turnover ratio suggests strong sales. The
higher the accounts receivable turnover, the better the business is at managing customer credit.
However, the lower day’s sales in inventory, day’s sales uncollected, and day’s purchases in
accounts payable are better. This is because it indicates that Hup Seng sells its inventory, gets its
payments, and pays its bills quickly.

In addition, Hup Seng Industries Berhad is also doing better for shareholders than Hwa
Tai Industries Berhad. This is because higher stockholders' equity indicates more stable finances
and more flexibility in case of an economic or financial downturn.

Lastly, Hup Seng Industries Berhad’s capital structure is better than Hwa Tai Industries
Berhad's. This can be seen from the debt ratio and debt-to-equity ratio of Hup Seng Industries
Berhad, which are lower than Hwa Tai Industries Berhad. The lower the debt ratio of Hup Seng,
the lower its financial leverage. A low debt-to-equity ratio indicates that Hup Seng has a small
amount of debt compared to its equity.
APPENDICES

Hup Seng Industries Berhad’s Financial Position

Hup Seng Industries Berhad’s Statement of Comprehensive Income
Hwa Tai Industries Berhad’s Financial Position
 Hwa Tai Industries Berhad’s Statement of Comprehensive Income
REFERENCES
Hup Seng Industries Berhad (HSIB) official website https://www.hsib.com.my/
Hwa Tai Industries Berhad
https://www.hwatai.com/ourcompany/live/about.htm