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TABLE OF CONTENTS

Bil Details Page

1.0 INTRODUCTION 00

1.1 Background of Company: Dutch Lady Industries Bhd 00

1.2 Background of Company: Nestle (Malaysia) Berhad 00

2.0 FINANCIAL RATIO 00

2.1 Introduction of Financial Ratio 00

2.2 Liquidity Ratio 00

2.3 Activity Ratio 00

2.4 Leverage Ratio 00

2.5 Profitability Ratio 00

2.6 Market Ratio 00

3.0 FINANCIAL RATIO ANALYSIS 00

3.1 Liquidity Ratio 00

3.2 Activity Ratio 00

3.3 Leverage Ratio 00

3.4 Profitability Ratio 00

3.5 Market Ratio 00

4.0 CONCLUSION AND RECOMMENDATION 00

4.1 Conclusion 00

4.2 Recommendation 00

5.0 REFERENCE 00
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1.0 INTRODUCTION

1.1 Dutch Lady Industries Berhad

Dutch Lady Malaysia is a subsidiary of Dutch Lady Milk Industries Berhad, a leading dairy
company in Malaysia. The company was founded in 1963 and is headquartered in Shah
Alam, Selangor. Dutch Lady Malaysia produces a wide range of dairy products, including
milk, yogurt, and desserts. They are known for their high-quality products and use of natural
ingredients. The company also places a strong emphasis on sustainability, with initiatives
such as their "Green Steps" program which aims to reduce their environmental impact.
Dutch Lady Malaysia has been a trusted brand in the country for decades and continues to
be a popular choice among consumers.

Dutch Lady Malaysia is a well-established dairy company that has been operating in
the country for over 50 years. The company's product portfolio includes a variety of milk
products such as full cream milk, skimmed milk, sterilized milk, and flavored milk.
Additionally, they have a range of yogurt products, including Greek yogurt and probiotic
yogurt, as well as desserts such as custard and pudding.

Dutch Lady Malaysia prides itself on using high-quality, natural ingredients in its
products. They source their milk from local farmers and work closely with them to ensure the
milk is of the highest quality. The company also has strict quality control measures in place
to ensure that their products meet the highest standards.

Dutch Lady Malaysia is also committed to sustainability and has implemented a

number of initiatives to reduce its environmental impact. For example, their "Green Steps"
program focuses on reducing energy and water consumption, as well as reducing waste.
Additionally, they have invested in renewable energy sources such as solar power to reduce
their carbon footprint.

The company is a well-known brand in the country and has a strong reputation for
providing high-quality, healthy dairy products. Dutch Lady Malaysia also has a strong
commitment to corporate social responsibility and is active in various community
development programs.

In addition to its dairy products, Dutch Lady Malaysia also has a strong presence in
the food and beverages industry through its other subsidiaries, such as Dutch Lady Food
Services and Dutch Lady Professional. The company is committed to meeting the diverse
needs of customers and providing them with quality products and services.
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1.2 Nestle (Malaysia) Berhad

Nestle Malaysia Berhad is a subsidiary of Nestle S.A., a Swiss multinational food and
beverage company. Nestle Malaysia was founded in 1912 and has its headquarters in
Petaling Jaya, Selangor, Malaysia. It is one of the largest food and beverage companies in
Malaysia and produces a wide range of products, including milk, coffee, chocolate, and
confectionery. The company is also involved in the production of baby food and pet food.
Nestle Malaysia employs over 7,000 people and operates a number of factories and
distribution centers throughout the country.

Nestle Malaysia Berhad is one of the largest food and beverage companies in
Malaysia and a subsidiary of Nestle S.A, a Swiss multinational food and beverage company.
Nestle Malaysia was founded in 1912 and has its headquarters in Petaling Jaya, Selangor,
Malaysia. The company operates a number of factories and distribution centers across
Malaysia, and employs over 7,000 people.

Nestle Malaysia produces a wide range of products, including milk, coffee, chocolate,
and confectionery. Some of the popular brands of Nestle Malaysia include Nescafe, Milo,
KitKat, and Maggi. The company is also involved in the production of baby food, pet food,
and pharmaceutical products. Nestle Malaysia is committed to providing high-quality
products that meet the needs and wants of consumers. The company is also committed to
sustainable practices, such as reducing its environmental impact and promoting healthy
living.

In addition to its manufacturing operations, Nestle Malaysia is also involved in a

number of social and community initiatives, such as promoting healthy living, supporting
education, and improving access to clean water. The company is also committed to
responsible sourcing of its raw materials, ensuring that they are of high quality and obtained
from suppliers who meet Nestle's strict standards for sustainability.

Nestle Malaysia is a well-established and respected company in Malaysia and its

products are widely consumed by Malaysians. The company's commitment to high-quality
products, sustainability, and social responsibility has helped it to maintain a strong reputation
and build a loyal customer base.
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2.0 FINANCIAL RATIO

2.1 Introduction of Financial Ratio

A financial ratio is a calculation where the financial values taken from a company’s financial
statements. There are many standard ratios used to try to evaluate the overall financial
condition of a corporation or other organization. Financial ratios are a tool used by managers
within a company, by current and potential shareholders (owners) of a company, and by a
company's creditors to analyse and gain information about the finance of company’s history
or the entire business sector. Financial analysts use financial ratios to compare the strengths
and weaknesses in various companies. If shares in a company are traded in a financial
market, the market price of the shares is used in certain financial ratios.

Ratio analysis is to assess the financial health of companies by scrutinizing past and current
financial statements. The comparative data can demonstrate how a company is performing
over time or otherwise and can be used to estimate possible future performance. This data
from financial ratio analysis can also compare a company's financial standing with industry
averages while measuring how a company stacks up against others within the same sector.
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2.2 Liquidity Ratio

The liquidity ratio is defined as the ability of a company to meet its financial obligations as
they come due. Other than that, the liquidity ratio is a computation that is used to measure a
company's ability to pay its short-term debts. There are three common calculations that fall
under the category of liquidity ratios. The current ratio is the most liberal of the three. It is
followed by the quick ratio and the net working capital. These three ratios are often grouped
together by financial analysts when attempting to accurately measure the liquidity of a
company.

i. Current ratio

The current ratio indicates a company's ability to pay its current liabilities from its current
assets. This ratio is one used to quickly measure the liquidity of a company. The formula for
the current ratio is:

Current Assets
Current ratio=
Current Liablities

This current ratio formula considers all current assets and current liabilities. Current assets
are assets that are expected to turn into cash within one year. For examples, current assets
are cash, cash equivalents, short-term investments, accounts receivable, inventory, supplies,
and prepaid expenses. Indirectly, it included in this category which are marketable securities
such as government bonds and certificates of deposit. The Current liabilities are debts that
are expected to be paid or have to be paid within a year. For examples, the current liabilities
are accounts payable, payroll liabilities and short-term notes payable.

ii. Quick ratio

The quick ratio is to measure how a company can meet its short-term obligations with its
most liquid assets. Remember, liquid assets are those that can be quickly turned into cash.
Most of the current assets are highly liquid with the exception of inventory, which often takes
a longer amount of time to turn into cash. The formula for the quick ratio is:

Current Asset−Inventory −Prepaid Expenses

Quick Ratio(QR)=
Current Liabilities
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iii. Net Working Capital (NWC)

Working capital is also a measure of a company's efficient operations and short-term

financial health. If a company has a large positive net working capital. It may have the
potential to invest in expansion and expand the company. If a company's current assets do
not exceed its current liabilities, then it may have trouble expanding or repaying creditors.
The formula for the net working capital ratio is:

Net WorkingCapital ( NWC)=Current Asset−Current Liabilities

If the net working capital is positive, this means the company's current assets are greater
than its current liabilities. The company has more than enough resources to cover its short-
term debt, and there is residual cash should all current assets be liquidated to pay this debt.
Contrastively, when a net working capital is negative, this means the company's current
assets are not enough to pay for all of its current liabilities. The company has more short-
term debt than it has short-term resources. The negative net working capital is an indicator
of poor short-term health, low liquidity, and potential problems paying its debt obligations as
they become due.
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2.3 Activity Ratio

The activity ratio is to measure the efficiency of the business in using and managing its
resources to generate maximum income and profit. The different types of activity ratios
indicate a company's ability to convert the different accounts in the balance sheet such as
capital and assets into cash or sales. This activity ratio is most useful when used to compare
two businesses competing in the same industry or another competitor to determine how a
particular company stacks up among its peers. In addition, the activity ratio can also be used
to track the company's fiscal progress over several recording periods to detect changes over
time. These numbers can be mapped to present a forward-looking picture of the company's
prospective performance.

i. Inventory Turnover (ITO)

Inventory Turnover is to measure how effectively the company is using its inventory to
generate sales. If the company get low inventory turnover ratio indicates that the company is
holding excess and unproductive stocks, or that it has a very high sales service level to
avoid out of stock. This is a low-risk strategy as there is a low chance of stock out to meet
the production and sales need. The formula for the inventory turnover ratio is:

Cost of goods sold

Inventory Turnover ( ITO)=
Inventory

ii. Total Asset Turnover (TATO)

Total asset turnover is to measures the company effectiveness in using all of its assets. The
higher of asset turnover ratio, means the company has more efficient at generating revenue
from its assets. If a company has a low asset turnover ratio, it indicates it is not efficiently
using its assets to generate sales. Similar to total asset turnover, higher ratio is preferable.
The formula for the total asset turnover is:

Sales
Total Asset Turnover (TATO)=
Total Asset
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iii. Average Collection Period (ACP)

Average collection period is used to appraise the company's accounts receivable and its
credit policy. It represents that average length of time that the company must wait after
making credit sales before receiving the cash. The average collection period can also be
compared to the company's sales terms to see if customers are paying their credit on time.
The shorter period is preferred as the cash cycle is lower and more cash is available in the
company to meet cash requirements. The formula for the average collection period is:

Account Recevieable
Average Collection Period ( ACP )= × 365 Days
Sales

iv. Fixed Asset Turnover (FATO)

The fixed asset turnover is also measuring the company’s utilization of its plant, equipment,
and machines. The higher ratio is better as it indicates that more revenues can be generated
per Ringgit of investment in fixed asset. The formula for the fixed asset turnover is:

Net Sales
¿ Asset Turnover(FATO)= Asset ¿
Net ¿
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2.4 Leverage Ratio

The leverage ratios are measure the ability of the company to meet its long-term debt
obligations (one year or longer). The company’s debt obligations must include interest
payments on debt, the final principal payment on the debt, and any other fixed obligations
like lease payments the extent to which the company uses debt to finance its investment,
how well the firm can meet its interest payment obligations, and the financial risks related to
the financing used.

i. Times Interest Earned (TIE)

The interest earnings ratio measures a company's ability to continue paying its debts. It is an
indicator to know whether the company has faced financial problems or not. A high ratio
means that the company is able to meet its interest obligations because the income is much
greater than the annual interest obligation. However, a high ratio can also mean that the
company has a very low level of leverage or is paying off too much debt with earnings that
could be used for other investment opportunities to get a higher rate of return. The formula
for the times interest earned ratio is:

Earning Before Interest ∧Taxes(EBIT )

¿ Interest Earned (TIE)=
Annual Interest Expenses

A lower times interest earned ratio means fewer earnings are available to meet interest
payments. Failing to meet these obligations could force a company into bankruptcy. It is
used by both lenders and borrowers in determining a company’s debt capacity.
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ii. Debt to Equity Ratio (DER)

It is a measure the relative funds provided by creditors as compared to owners or net worth
in the company’s capital structure. Net worth is defined as total assets minus total debt
minus preferred stock. The higher ratio indicates that creditors provided more funds
compared to owners. If the ratio is lower, indicates more funds provided by owners. The
formula for the debt to equity ratio is:

Total Liabilities
Debt ¿ Equity Ratio(DER)= '
Shareholder s Equity

iii. Debt Ratio (DR)

It measures the percentage of total funds provided by creditors as compared to funds

provides from owner’s capital. Total debt consists of current liabilities and long-term debt.
Thus, the net of debt ratio is the percentage of funds provided by owners. The higher ratio,
normally indicates higher financial risk, and vices versa. The formula for the debt ratio is:

Total Liabilities
Debt Ratio (DR)=
Total Assets❑
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2.5 Profitability Ratio

The profitability ratios measure the combined effects of liquidity, asset management, and
debt management on overall operating results of the company. It relates to the company's
ability to satisfy the company's goal to maximize the owners' wealth, to attract new capital
and to grow over time.

i. Net Profit Margin (NPM)

This ratio measures the after-tax profit per Ringgit of sales after deducting all expenses
including interest and taxes. The ability of the company to get higher returns indicates a
better growth prospect, and therefore higher margin is preferable. The formula for the net
profit margin is:

Net Income
Net Profit Margin(NPM )= ❑
Sales

ii. Gross Profit Margin (GPM)

This measures the firm's ability to control cost of goods sold relative to its sales revenue; the
relative contribution margin from sales. The formula for the gross profit margin is:

Gross Profits
Gross Profit Margin(GPM )= ❑
Sales

iii. Operating Profit Margin (OPM)

It is also known as basic earnings power ratio. OPM measures the productivity of assets in
providing returns to both creditors and stockholders. Higher ratio indicates better
productivity. The formula for the operating profit margin is:

Earning Before Interest∧Taxes

Operating Profit Margin(OPM )= ❑
Sales
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vi. Return on Total Asset (ROA)

This ratio measures a firm's overall return on all of its asset investment. ROA indicates the
productivity of assets in producing revenues and the firm's ability to control costs in its
operations. Therefore, higher ratio is better. The formula for the return on total asset is:

Net Income
Return on Total Asset ( ROA)=
Total Asset ❑

vii. Return on Equity (ROE)

It is a measure of the rate of return on the investment of the common stockholders or net
worth. Higher return is better as it indicates higher return for the owners of the firm. The
formula for the return on equity is:

Net Income
Return on Equity ( ROE)= ' ❑
Shareholder s Equity
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2.6 Market Ratio

The market ratios measure how investors view the company's past performance and its
future prospects. Indirectly, the company will have relatively good market ratios given that
liquidity, asset management, debt management, and profitability ratios are good. The actual
market performance also directly influenced by the external factors as presented in chapter
1, at which the firm has no direct control.

The outcomes are however, important as it provides feedback of the firm's decision making
and should not be ignored in developing plans and strategies in an effort to enhance the
firm's growth and performances. Details of this set of ratios will not to be covered in this
syllabus, as it is part of higher finance courses, such as Investment Management.

i. Dividend Payout Ratio (DPR)

The dividend payout ratio is measuring the percentage of net income that is issued to
shareholders in the form of dividends during the year. In other words, this ratio shows the
portion of profits the company decides to keep to fund operations and the portion of profits
that is given to its shareholders. The formula for the dividend payout ratio is:

Total Dividend
Dividend Payout Ratio ( DPR ) %= ❑
Net Income

It’s company to declare the dividends to shareholders was increase for one year, a single
high ratio does not mean that much. This is because, investors are mainly concerned with
sustainable trends. For instance, investors can assume that a company has a payout ratio of
35 percent for the last three years and will continue giving 35 percent of its profit to the
shareholders at next year. Conversely, a company that has a downward trend of payout is
alarming to investors. For example, if a company’s ratio has fallen a percentage each year
for the last three years might indicate that the company can no longer afford to pay such
high dividends. This could be an indication of poor operating performance.
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ii. Dividend Per Shares (DPS)

The Dividend per share is a measure of the dividend payout per share of a company
common stock. This measure is used to estimate the amount of dividends an income
investor might expect to receive if he buys a company's common stock. The measure is
especially effective when tracked on a trend line, since a consistent amount per share
indicates management's willingness to make consistent payout to investors. In addition, the
increasing trend in dividends paid indicates management's belief that the business has a
steady enough cash flow to support dividend payments. The formula for the dividend per
shares ratio is:

Ordinary Dividend
Dividend Per Shares ( DPS )=
Number of Ordinary Share Issued

iii. Earning Per Shares (EPS)

The earning per shares is also measures the amount of net income earned per share of
stock outstanding. In other words, this is the amount of money each share of stock would
receive if all of the profits were issued to the outstanding shares at the end of the year. This
ratio shown how profitable a company is on a shareholder basis. So, a larger company’s
profits per share can be compared to smaller company’s profits per share. Obviously, this
calculation is heavily influenced on how many shares are outstanding. Thus, a larger
company will have to split its earning among many more shares of stock compared to a
smaller company.

Net Income−Dividend on Preferred Stock

Earning Per Shares( EPS)=
Number of Shares Outstanding
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3.0 FINANCIAL RATIO ANALYSIS

Dutch Lady Industries Berhad

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Nestle (Malaysia) Berhad

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3.1 Liquidity Ratio

Ratio Formula DUTCH LADY NESTLE

31 DECEMBER 2021 31 DECEMBER 2021

Current Ratio Current Asset 482,151,000.00 1,139,938,000.00

306,032,00.00 1,928,428,000.00
Current Liabilities
= 1.58 = 0.59

Quick (Current Asset-Inventory) 482,151,000.00- 1,139,938,000.00

161,055,000.00 -744,987,000.00
Ratio Current Liabilities 306,032,000.00 1,928,428,000.00

= 1.05 = 0.20

Net Working Current Asset-Current Liability 482,151,000.00 - 1,139,938,000.00-

Capital 306,032,000.00 1,928,428,000.00

=179,119,000.00 =788,490,00.00

Interpretation:

The Liquidity Ratio for Nestle

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3.2 Activity Ratio

Ratio Formula DUCTH LADY NESTLE

31 DECEMBER 2021 31 DECEMBER 2021

Inventory Cost Of Goods Sold 734,030,000.00 3,775,581,000.00

161,055,000.00 744,987,000.00
TURNOVER
Inventory
= 4.56 = 5.07

Average Account Receivable 76,381,000.00 377,050,000.00 -

1,133,733,000.00 5,733,816,000.00
Collection
Net Sale
Period X 360 X 360
X 360
= 24 =23

Fixed Asset Net Sales 1,133,733,000.00 5,733,816,000.00

219,081,000.00 1,844,893,000.00
Turnover
Net Fixed Asset
= 5.17 = 3.11

Total Asset Net Sales 1,133,733,000.00 5,733,816,000.00

701,232,000.00 701,232,000.00
Turnover
Total Asset
= 1.62 = 8.18

Interpretation:

The Activity Ratio for Nestle

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3.3 Leverage Ratio

Ratio Formula DUTCH LADY NESTLE

31 DECEMBER 2021 31 DECEMBER 2021

Debt Ratio Total Liabilities 318,652,000.00 2,402,134,000.00

701,232,000.00 2,984,831,000.00
Total Assets
= 0.45 = 0.80

Debt To Total Debt 306,032,000.00 1,928,428,000.00

382,580,000.00 582,697,000.00
Equity
Equity X 100% X 100% X100%

= 3.31
= 0.80

Time Operating profit 284,525,000.00 751,817,000.00

1,417,000.00 569,811,00.00
Interested
Interest
Earned = 2.0 = 1.32

Interpretation:

The Leverage Ratio for Nestle

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3.4 Profitability Ratio

Ratio Formula DUTCH LADY NESTLE

31 DECEMBER 2021 31 DECEMBER 2021

Gross Profit Gross Profit 399,703,000.00 1,958,235,000.00

1,133,733,000.00 5,733,816,000.00
Margin
Net Sales
= 0.35 = 3.42

Net Profit Earning After Tax 248,000,000.00 569,811,000.00

1,133,733,000.00 5,733,816,000.00
Margin
Net Sales
= 0.22 = 0.10

Return On Earning After Tax 248,000,000.00 569,811,000.00

701,232,000.00 2,984,831,000.00
Assets
Total Assets
= 0.35 = 0.19

Return On Earning After Tax 248,000,000.00 569,811,000.00

382,580,000.00 582,697,000.00
Equity
Total Equity
= 0.65 = 0.98

Interpretation:

The Profitability for Nestle

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3.5 Market Ratio

Ratio Formula DUTCH LADY NESTLE

31 DECEMBER 2021 31 DECEMBER 2021

Earnings Per Net income – Preferred dividends 248,000,000.00 569,811,000.00

64,000,000.00 1,056,403,000.00
Share
Number of shares outstanding
= 3.88 = 0.54

Price To Market Price Per share 183,458,000.00 134,000,000.20

387,000,000.50 242,000,000.90
Earning
Earnings Per Share
= 0.47 = 0.55

Interpretation:

The Market Ratio for Nestle

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4.0 CONCLUSION AND RECOMMENDATION

4.1 Conclusion

4.2 Recommendation
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5.0 REFERENCE

Dutch Lady :
https://www.bursamalaysia.com/trade/trading_resources/listing_directory/company-
profile?stock_code=3026

Nestle : https://www.bursamalaysia.com/trade/trading_resources/listing_directory/
company-profile?stock_code=4707