COLLEGE OF BUSINESS AND ACCOUNTING

SULTAN HAJI AHMAD SHAH CAMPUS

BACHELOR OF ACCOUNTANCY AND FINANCE

SEMESTER 2, 2022/2023

FINANCIAL MANAGEMENT (FNNB113)

SECTION: 02M

PREPARED BY:
BIL. STUDENT NAME STUDENT ID
1. MOHAMAD SHAFIQ IKMAL BIN MOHAMED AC01082743
NORDIN

2. SITI KHADIJAH BINTI SHEIKH NORAZMIRA AC01082709

3. FARRA NADIA BINTI HARYADI AC01082563

4. NUR ZAFIRAH BINTI KUNJU MARAKAR BF01082570

PREPARED FOR : MADAM NOR HASHIMAH BINTI JOHARI

DATE OF SUBMISSION : 18 APRIL 2023

 FNNB 113: FINANCIAL MANAGEMENT
SEMESTER 2 YEAR 2022/2023

GROUP:

ID STUDENT’S NAME

AC01082743 MOHAMAD SHAFIQ IKMAL BIN MOHAMED NORDIN

AC01082709 SITI KHADIJAH BINTI SHEIKH NORAZMIRA

AC01082563 FARRA NADIA BINTI HARYADI

BF01082570 NUR ZAFIRAH BINTI KUNJU MARAKAR

No. Items Mark Actual

Marks

1. Table Of Content 5 Marks

2. Provide a brief introduction of the companies 5 Marks

selected
• Name of the organizations
• Nature of business of the organizations
• Background of the organizations.

3. The students are required to summarize the TWO 10 Marks

(2)consecutive years (2019-2020) of Income
statement and balance sheet based on the annual
report for both companies
4. Based on the information in annual report 25 Marks
(2020-2021),measure/calculate the liquidity position
for both companies (both years) by using the following
ratios:

● Net working capital

● Current ratio
● Average Collection Period
● Inventory Turnover
● Inventory conversion period
● Account payable deferral period
● Operating cycle
● Cash conversion cycle

5. a) Based on calculation in (4), discuss, explain and 40 Marks

analyze both companies liquidity position with a
diagram (Graph, pie chart or etc.) from 2020-2021.

b) Compare and analyze the liquidity position between

companies that have been selected based on the
financial statement of the year 2021.

c) construct a diagram to visualize the operating cycle

and cash conversion cycle for both companies in year
2021.

6. Do a conclusion 5 Marks

7. 1. Do a recommendation based on the results in part 4 10 Marks

and 5.
2. In recommendations part, students must include the
following comments:
3. From the point of view of a banker, does the
company deserve additional working capital loan?
Justify your recommendation.
4. From the point of view of an investor, is this
company considered as a good investment? Justify your
recommendation.

TOTAL 100 Marks

TABLE OF CONTENTS

CONTENTS PAGES

1.0 INTRODUCTION 1
1.1 WCT HOLDING BERHAD
1.2 MGB BERHAD

2.0 FINANCIAL STATEMENT 3

2.1 WCT HOLDING BERHAD
2.2 WCT HOLDING BERHAD

3.0 MEASUREMENT ON COMPANY LIQUIDITY POSITION 11

3.1 WCT HOLDING BERHAD
3.2 MGB BERHAD

4.0 ANALYSIS ON COMPANY LIQUIDITY POSITION 13

4.1 EXPLANATION ON DIAGRAM
4.2 EXPLANATION AND ANALYZATION
4.2.1 STUDY BETWEEN 2020 & 2021 : WCT HOLDINGS BERHAD
4.2.2 STUDY BETWEEN 2020 & 2021 : MGB BERHAD
4.3 COMPARISON AND ANALYZATION
4.4 OPERATING CYCLE AND CASH CONVERSION CYCLE DIAGRAM
4.4.1 WCT HOLDINGS BERHAD
4.4.2 MGB BERHAD

5.0 CONCLUSION 30

6.0 RECOMMENDATION 31
6.1 BANKER POINT OF VIEW
6.2 INVESTOR POINT OF VIEW

7.0 BIBLIOGRAPHY 34
1.0 INTRODUCTION

1.1 WCT HOLDINGS BERHAD

WCT Holdings Berhad is a Malaysian investment holding company that provides

management services to its subsidiaries, joint ventures and associates. The company was
incorporated in 1981 as WCT Earthworks & Building Contractor Sdn Bhd and has since
expanded its operation to other countries. Nevertheless, the company’s three main business
management are engineering and construction, property development and property investment
and management. The company is primarily engaged in civil and structural engineering,
including buildings, roads, highways and other infrastructure projects. Wct Holdings Berhad has
also expanded outside its core industries into engineering and construction management.

Over the years, WCT Holdings Berhad har earned a reputation delivering quality projects
in Malaysia and abroad. The company has completed numerous prestigious projects including
highways, bridges, commercial and residential buildings, hotels and stadiums. Some of the
company’s notable projects include Kuala Lumpur International Airport, Kuala Lumpur
Convention Centre and Dubai Mall in the United Arab Emirates.

With a diverse portfolio of projects and strong presence in various countries, WCT
Holdings Berhad has established itself as a major player in the civil engineering and construction
business in Malaysia and internationally.

1
 1.2 MGB BERHAD

MGB Berhad is a Malaysian publicly listed company that operates in the real estate
industry. The organization's full name is "MGB Berhad," and it was founded in 1995.

MGB Berhad is a Malaysian company that offers construction and property development
operations. From planning and designing to construction, development, project management,
innovative financing, and investment solutions, the company offers a wide range of services.
MGB Berhad has worked on a variety of residential, commercial, and industrial properties, as
well as infrastructure projects.

The company has a strong business history, having worked on numerous notable projects
over the years. The award-winning Bandar Springhill township project in Port Dickson, which
covers over 1,300 acres of land and includes residential, commercial, and industrial components,
is one of MGB Berhad's most significant developments. Other projects developed by the
company include the Taman Perling residential and commercial development in Johor Bahru, the
MGB Square commercial project in Kuala Lumpur, and the iconic MGB Tower in Penang.

With more than two decades of experience, the company has worked on a variety of
residential, commercial, and industrial properties, as well as infrastructure projects. MGB Berhad
has a strong industry reputation for its innovative designs, high-quality construction, and
dedication to customer satisfaction. The company is a reputable provider of construction and
property development services, making it a safe bet for both investors and clients. MGB Berhad
is poised for continued growth and success in the real estate industry, owing to its strong track
record and ongoing commitment to excellence.

2
 2.0 FINANCIAL STATEMENT

2.1 WCT HOLDINGS BERHAD

WCT HOLDINGS BERHAD

Statement of Profit and Loss For the Financial Year Ended 31 December

2020 2021

RM’000 RM’000

Revenue 1,704,580 1,699,668

Cost of Sales (1,421,508) (1,579,600)

Gross Profit 283,072 120,068

Other Income 56,795 556,614

Administrative Expenses (107,699) (162,372)

Other Expenses (144,573) (84,016)

Operating Profit 87,595 430,294

Finance Costs (119,761) (118,133)

Share of Result of Associates 5,019 4,341

Share of Result of Joint Venture (177,733) (38,627)

Profit/(Loss) Before Tax (144,880) 277,875

Income Tax Expense (34,757) (137,907)

Profit/(Loss) For The Year (179,637) 139,698

Other Comprehensive Income/(Loss) (14,346) (12,187)

TOTAL COMPREHENSIVE INCOME/(LOSS) (193,983) 127,781

3
 WCT HOLDINGS BERHAD

Statement of Financial Position as at 31 December

2020 2021

RM’000 RM’000

NON-CURRENT ASSETS

Property, plant and equipment 334,471 339,812

Right-of-use assets:

Property, plant and equipment 44,388 40,350

Investment properties 129,109 124,204

Intangible asset 117,639 110,275

Inventory properties under development 1,747,525 1,618,027

Investment properties 1,730,366 1,722,515

Investments in associates 153,580 155,914

Investments in joint ventures 239,619 262,838

Trade receivables 459,665 245,849

Contract assets 224,669 -

Other receivables 319,241 281,467

Deferred tax assets 10,384 6,394

5,510,656 4,907,645

CURRENT ASSETS

Inventory properties under development 207,462 365,775

Inventories 463,260 422,673

Trade receivables 651,549 869,305

4
Contract assets 440,904 411,128

Other receivables 208,208 409,366

Due from related parties 552,781 516,798

Tax recoverable 24,254 31,633

Cash and bank balances 526,495 283,691

3,074,913 3,310,369

Assets Classified as Held for Sale 14,584 10,956

CURRENT LIABILITIES

Trade payables 780,274 703,012

Contract liabilities 101,473 81,708

Other payables 260,394 210,565

Lease commitment payable 4,067 4,401

Hire-purchase and lease liabilities 30,349 23,521

Due to related parties 743 273

Borrowings 1,209,783 1,741,318

Income tax payable 3,048 99,987

2,390,131 2,864,785

NET CURRENT ASSETS 699,366 456,540

6,210,022 5,364,185

FINANCE BY,

EQUITY

5
Share capital 3,212,796 3,212,796

Reserves (1,512,183) (1,529,998)

Retained earnings 1,209,562 1,307,339

Treasury shares, at cost (5,336) (381)

Perpetual Sukuk 818,081 818,765

Non-controlling interests (42,150) (47,299)

TOTAL EQUITY 3,680,770 3,761,222

Non-current liabilities

Trade payables 116,543 98,562

Other payables 200,082 25,267

Contract liabilities 69,127 8,525

Lease commitment payable 97,949 93,549

Hire-purchase and lease liabilities 188,042 167,284

Borrowings 1,747,270 1,097,057

Deferred tax liabilities 110,239 112,719

2,529,252 1,602,963

6,210,022 5,364,185

6
 2.2 MGB BERHAD

MGB BERHAD

Statement of Profit and Loss For the Financial Year Ended 31 December

2020 2021

RM’000 RM’000

Revenue 563,274,102 593,758,902

Cost of Sales (485,582,564) (496,780,600)

Gross Profit 77,691,538 96,978,302

Other Income 4,815,051 1,895,448

Administrative Expenses (45,782,051) (49,092,712)

Net Gain/(Loss) on Impairment of Financial Assets (113,569) 58,879

Other Expenses (5,339,569) (4,573,979)

Finance Costs (8,084,857) (5,525,585)

Share of Profit of Associates 187,034 247,042

Profit/(Loss) Before Tax 23,372,820 39,977,425

Income Tax Expense (9,369,778) (13,399,705)

Profit/(Loss) For The Year 14,003,042 26,577,720

TOTAL COMPREHENSIVE INCOME/(LOSS) 14,003,042 26,577,720

7
 MGB BERHAD

Statement of Financial Position as at 31 December

2020 2021

RM’000 RM’000

NON-CURRENT ASSETS

Property, plant and equipment 25,179,774 23,981,733

Right-of-use assets: 87,319,226 85,597,512

Intangible asset 347,177 -

Investment properties 39,871,623 38,989,836

Investments in associates 337,892 434,964

Goodwill on consolidation 254,694,909 254,694,909

407,750,601 403,698,954

CURRENT ASSETS

Inventories 10,828,502 67,431,209

Contract assets 62,937,183 80,742,982

Trade receivables 46,570,321 41,840,982

Other receivables 17,380,020 17,085,763

Amount due from related companies 345,938,636 280,433,271

Amount due from an associates company 7,200 7,200

Tax recoverable 2,002,537 3,059,504

Fixed deposits with licensed banks 3,636,839 5,669,801

Cash held under Housing Development Accounts 34,618,910 23,774,651

8
Cash and bank balances 31,811,217 13,653,502

555,731,365 533,698,865

TOTAL ASSETS 963,481,966 937,397,819

EQUITY AND LIABILITIES

CURRENT LIABILITIES

Contract liabilities 52,617,409 40,471,014

Trade payables 210,668,059 260,426,798

Other payables 37,752,598 41,686,304

Lease liabilities 11,425,934 12,276,702

Amount due from related companies 13,104,058 5,276,573

Amount due from an associates company 69,283 65,834

Loans and borrowings 123,316,482 40,454,243

Tax payable 180,018 2,952,091

449,133,841 403,609,559

NON-CURRENT LIABILITIES

Loan and borrowings 19,651,058 17,272,881

Lease liabilities 21,091,717 16,578,851

Deferred tax liabilities 2,295,134 2,048,562

43,037,909 35,900,294

TOTAL LIABILITIES 492,171,750 439,509,853

9
EQUITY

Share capital 388,185,706 388,185,706

Reserves 2,632,012 2,481,215

Retained earnings 79,800,697 107,035,062

Equity Attributable to Owners of the Parents 470,618,415 497,701,983

Non-controlling interests 691,801 185,983

TOTAL EQUITY 471,310,216 497,887,966

TOTAL LIABILITIES AND EQUITY 963,481,966 937,397,819

10
3.0 MEASUREMENT OF COMPANY LIQUIDITY POSITION

3.1 WCT HOLDING BERHAD

Calculation 2020 Calculation 2021

Net Working 3,089,497,000 - 3,321,325,000 - RM

RM
Capital 2,390,131,000 2,864,785,000 456,540,000
699,366,000

Current Ratio 3,089,497,000 / 1.29 3,321,325,000/ 1.16

2,390,131,000 2,864,785,000

Average 651,549,000 / 869,305,000/ 187 Days

140 Days
Collection (1,704,580,000/3 (1,699,668,000/3
Period 65) 65)

Inventory 1,421,508,000/4 3.07 1,579,600,000 / 3.74

Turnover 63,260,000 422,673,000

Inventory 365/3.07 119 Days 365 / 3.74 98 Days

Conversion
Period

Account Payable 365/ 200 Days 365/ (1,579,600 162 Days

Deferral Period (1,421,508/780,2 / 703,012)
74)

Operating Cycle 119+140 259 Days 98 + 187 285 Days

Cash Conversion 259-200 59 Days 285 - 162 123 Days

Cycle

11
 3.2 MGB BERHAD

Item Calculation 2020 Calculation 2021

Net Working 555,663,457 - RM 533,698,865 - RM

Capital 449,133,841 106,529,616 403,609,559 130,089,306

Current ratio 555,663,457 / 1.24 533,698,865 / 1.32

449,133,841 403,609,559

Average 46,570,321 / 30 Days 41,840,982 / 26 Days

Collection (563,274,102 / (593,758,902 /
Period 365) 365)

Inventory 487,010,259 / 45.26 496,780,600 / 7.37

Turnover 10,760,594 67,431,209

Inventory 365 / 45.26 8 Days 365 / 7.37 50 Days

Conversion
Period

Account Payable 365 / 158 Days 365 / 191 Days

Deferral Period (487,010,259 / (496,780,600 /
210,668,059) 260,426,798)

Operating Cycle 8 + 30 38 Days 50 + 26 75 Days

Cash Conversion 38 - 158 -120 Days 75 - 191 -116 Days

Cycle

12
4.0 ANALYSIS ON COMPANY LIQUIDITY POSITION

4.1 EXPLANATION ON DIAGRAM

Line Chart 1.0 : Net Working Capital

Line Chart 2.0 : Current Ratio

13
Line Chart 3.0 : Average Collection Period

Line Chart 4.0 : Inventory Turnover Ratio

14
 Line Chart 5.0 : Inventory Conversion Period

Line Chart 6.0 : Account Payable Deferral Period

15
 Line Chart 7.0 : Operating Cycle

Line Chart 8.0 : Cash Conversion Cycle

16
 4.2 EXPLANATION AND ANALYZATION

4.2.1 STUDY BETWEEN 2020 & 2021 : WCT HOLDINGS

Net Working Capital

● When a working capital calculation 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. Based on the calculation above, we can see that the Net Working Capital
in 2020 is higher than in the year 2021 which amounted to RM699,366,000 and
RM456,540,000. The higher a company's working capital is, the more efficiently it
functions. High working capital signals that a company is shrewdly managed and
suggests that it harbors the potential for strong growth. Therefore, this company’s
working capital decreases thus showing that the efficiency of the company is declining in
2021.

Current Ratio

● A company with a current ratio of less than 1.00 does not have the capital on hand to
meet its short-term obligations if they were all due at once, while a current ratio greater
than 1.00 indicates that the company has the financial resources to remain solvent in the
short term. Thus, WCT Holding has a good liquidity ratio since the ratio is more than
1.00 in both years. In 2020, the current ratio is 1.29 which is higher than in 2021 which is
1.16. This shows that the company’s liquidity is decreasing in 2021 which will lead to a
conclusion that the company's ability to pay short-term obligations or those due within
one year is declining.

17
Average Collection Period

● The average collection period is an indicator of the effectiveness of a firm’s AR

management practices and is an important metric for companies that rely heavily on
receivables for their cash flow. A lower average collection period is generally more
favorable than a higher one. A low average collection period indicates that the
organization collects payments faster. Based on our calculation, in 2020 the collection
period is 140 days which is 47 days lower than in 2021. It shows that the firm’s AR
management practices are more effective in 2020 than in 2021.

Inventory Turnover Ratio

● The inventory turnover ratio is the number of times a company has sold and replenished
its inventory over a specific amount of time. Inventory turnover is the rate that inventory
stock is sold, or used, and replaced. A higher ratio tends to point to strong sales and a
lower one to weak sales. Conversely, a higher ratio can indicate insufficient inventory on
hand, and a lower one can indicate too much inventory in stock. However, based on the
calculation of WCT Holdings turnover, it shows that the ratio in year 2021 is higher
which is 3.74 than in year 2020 which is 3.07. Thus, the skills the company had to sell
their inventories is increases every year.

Inventory Conversion Period

● The inventory conversion period is the time required to obtain materials for a product,
manufacture it, and sell it. This period is essentially the period during which a company
must invest cash while it converts materials into a sale. The high conversion period
determines the slow cash conversion cycle and block of money in inventory. In contrast, a
decreased conversion period reduces cash conversion cycles and unnecessary money
blockage. In 2020, there are 119 days required for the company to convert their product
into cash while in 2021 it will take a shorter time which is only 98 days. Therefore, we

18
 can make the conclusion that the company has enhanced their effectiveness in handling
their stocks and turning them into sales in 2021.

Account Payable Deferral Period

● Account payable deferral period or known as Days Payable Outstanding (DPO) is a

financial ratio that indicates the average time (in days) that a company takes to pay its
bills and invoices to its trade creditors, which may include suppliers, vendors, or
financiers. The ratio is typically calculated on a quarterly or annual basis, and it indicates
how well the company’s cash outflows are being managed. A company with a higher
value of DPO takes longer to pay its bills, which means that it can retain available funds
for a longer duration, allowing the company an opportunity to use those funds in a better
way to maximize the benefits. A high DPO, however, may also be a red flag indicating an
inability to pay its bills on time. In this analysis, we can see that in 2020, it will take
longer to pay its bills than in 2021. Thus, the company has been making progress by
paying their creditors on time. A low DPO indicates that a company is paying its bills to
suppliers quickly, which may suggest that the company is managing its cash flow
effectively. A low DPO is a positive sign for a company's financial health, as it shows
that the company can pay its bills in a timely manner. This also helps maintain good
relationships with suppliers.

Operating Cycle

● An operating cycle refers to the time it takes a company to buy goods, sell them and
receive cash from the sale of said goods. In other words, it's how long it takes a company
to turn its inventories into cash. The length of an operating cycle is dependent upon the
industry. Understanding a company's operating cycle can help determine its financial
health by giving it an idea of whether it'll be able to pay off any liabilities. By referring to
the calculation above, the operating cycle in 2020 is 259 days which is longer than in
2021 which is 285 days. The year 2021 is better because it has a shorter operating cycle,
this means it’ll be receiving payment at a steady rate. The faster the company generates

19
 cash, the more it’ll be able to pay off any outstanding debts or expand its business
accordingly.

Cash Conversion Cycle

● The cash conversion cycle (CCC) is a metric that expresses the length of time (in days)
that it takes for a company to convert its investments in inventory and other resources
into cash flows from sales.This metric takes into account how much time the company
needs to sell its inventory, how much time it takes to collect receivables, and how much
time it has to pay its bills. The shorter the cash conversion the better thus, the cash
conversion cycle in 2020 is better because it is shorter than in 2021.

20
 4.2.2 STUDY BETWEEN 2020 & 2021 : MGB BHD

Net Working Capital

● Net working capital for year 2020 is lower than net working capital for year 2021. We
can conclude that for year 2021, MGB Bhd had manage their liquidity in 2021 better than
2020. In future if MGB Bhd wants to make their net working capital better they can
minimize the firm’s use of current assets by efficiently managing its inventories and
accounts receivable, by seeking out the most favorable accounts payable terms, and by
monitoring its use of short-term borrowing. High working capital signals that a company
is shrewdly managed and also suggests that it harbors the potential for strong growth.

Current Ratio

● A corporation with a current ratio of less than 1.00 would not have enough cash on hand
to cover all of its short-term commitments at once, while a current ratio of more than 1.00
shows that the company has enough cash on hand to maintain its short-term solvency.
Current ratio for the year 2021 is higher than the current ratio for the year 2021. We can
conclude that for the year 2021, MGB Bhd had managed their liquidity in 2021 better
than 2020. The current ratio and net working capital are measured the same which is
liquidation of the firm. However, the current ratio is more widely used because it allows
for comparison across firms of varying sizes.

Average Collection Period

● A shorter average collecting time often outperforms a longer one. A short average
collection period shows that the company gets paid quickly. Average collection period for
the year 2021 is less than average collection period for the year 2020. We can conclude
that for the year 2021, MGB Bhd had collected their receivables frequently in that year
compared to year 2020.

21
Inventory Turnover Ratio

● The number of times a business has sold and restocked its inventory over a predetermined
period of time is known as the inventory turnover ratio. The rate at which inventory stock
is sold, used up, and replaced is known as inventory turnover. A greater ratio typically
denotes good sales while a lower ratio generally denotes dismal sales. In contrast, a
greater ratio can signify having too little inventory on hand, while a lower one would
signify having too much. Inventory turnover ratio for the year 2020 is more than
inventory turnover ratio for the year 2021. We can conclude that for the year 2021 have
greater liquidity because when the shorter inventory cycles the items in inventory are
converted to cash more quickly.

Inventory Conversion Period

● The time needed to acquire resources, create, and market a product is known as the
inventory conversion phase. Essentially, this is the time when a business must invest
money while turning raw supplies into sales. The delayed cash conversion cycle and
money block in inventory are based on the high conversion period. On the other hand, a
shorter conversion duration results in fewer cash conversion cycles and unneeded money
blockages. Inventory conversion period for the year 2020 is less than inventory
conversion period for the year 2021. We can conclude that in the year 2020 MGB Bhd
not hold the inventory for a long term before being sold compared to 2021.

Account Payable Deferral Period

● Days Payable Outstanding (DPO), also known as the account payable deferral period, is a
financial statistic that shows the typical time (in days) that a business takes to pay its
trade creditors, which may include suppliers, vendors, or financiers. The ratio, which is
normally measured on a quarterly or annual basis, shows how effectively the organization
is managing its cash outflows. When a company with a higher DPO value takes longer to

22
 pay its bills, it can keep its available cash on hand for a longer period of time, giving it
the chance to use them more effectively to optimize the benefits. Yet, a high DPO could
also be a warning sign of a company's failure to make on-time bill payments. Account
payable deferral period for the year 2020 is less than account payable deferral period for
the year 2021. We can conclude that in the year 2020 MGB Bhd had managed to pay its
supplier who provided the firm with the trade credit that is the source of accounts payable
better than in the year 2021. Lower account payable deferral period can help company to
maintain a good relationship with suppliers.

Operating Cycle

● The time it takes for a business to purchase items, sell them, and get payment for those
sales is referred to as an operating cycle. It is, in other words, the time it takes for a
business to convert its inventories into cash. Depending on the sector, an operational
cycle can be any length. Knowing a company's operational cycle can help assess its
financial health by providing insight into its ability to settle any debts. Operating cycle
for the year 2020 is lower than the operating cycle for the year 2021. We can conclude
that in the year 2020, MGB Bhd days they purchase inventory until the firm collects the
cash from its sale is better than in year 2021. If an item is sold on credit, the date is when
the accounts receivable is collected.

Cash Conversion Cycle

● The cash conversion cycle (CCC) is a metric that measures how long it takes a business
to turn its investments in inventory and other resources into cash flows from sales,
expressed in days. This metric accounts for the amount of time required by the business
to sell its inventory, the length of time needed to collect receivables, and the amount of
time required to pay its debts. Cash conversion cycle for the year 2020 is lower than cash
conversion cycle for the year 2021 and both of the years had a negative cash conversion

23
cycle. A negative cash conversion cycle means that it takes you longer to pay your
suppliers or bills than it takes you to sell your inventory and collect your money, which,
de-facto, implies that your suppliers finance your operations. As a result, MGB Bhd does
not need operating cash to grow. The shorter the cycles, the more efficient is the firm’s
working-capital management.

24
 4.3 COMPARISON AND ANALYZATION

STUDY BETWEEN COMPANY YEAR 2021: WCT HOLDINGS AND MGB BHD

As Shown in the calculation table above, there are differences between WCT Holdings and MGB
Bhd. Based on the calculation table above:

Net Working Capital

● Net working capital for WCT Holdings is higher than net working capital for MGB Bhd.
In conclusion, the current assets for WCT Holdings is higher than its current liabilities
and lead to better liquidation. For MGB Bhd, it is suggested to minimize the firm’s use of
current assets by efficiently managing its inventories and accounts receivable, by seeking
out the most favorable accounts payable terms, and by monitoring its use of short-term
borrowing. High working capital signals that a company is shrewdly managed and also
suggests that it harbors the potential for strong growth.

Current Ratio

● Current ratio for MGB Bhd is higher than current ratio WCT Holdings. In conclusion, for
the year 2021 MGB Bhd managed to get better liquidation for more widely such as
comparison across firms of varying sizes. Current ratio is a better measure of comparison
of liquidity among firms. WCT Holdings has higher net working capital but lower current
ratio compared to MGB Bhd.

Average Collection Period

● Average collection period for MGB Bhd is better than the average collection period for
WCT Holdings. In conclusion, the lower average collection period, the shorter times the
company takes to collect their receivables. For WCT Holdings, the firm needs to manage

25
 to make the average collection period lower to make sure there are no receivables
uncollected.

Inventory Turnover Ratio

● The inventory turnover ratio measures how frequently a company has sold and refilled its
goods over a specified time period. Inventory turnover is the rate at which inventory
stock is purchased, used up, and replaced. Good sales are normally indicated by a higher
ratio, whereas poor sales are typically indicated by a lower ratio. A higher ratio, however,
can indicate having too little inventory on hand, and a lower one, conversely, would
indicate having too much. Inventory turnover ratio for WCT Holdings is greater than
inventory turnover ratio MGB Bhd. In conclusion, WCT Holdings has greater liquidation
because the lower inventory turnover ratio the items in inventory are converted to cash
more quickly.

Inventory Conversion Period

● Less inventory conversion period is better because more fastly, we will convert our
inventory into sales, there will be less chance of obsolescence and paying off
over-stocking costs. Based on the line chart 5.0, we can see that the inventory conversion
period for MGB Bhd is lower than WCT Holdings. Thus, the inventory conversion period
for MGB Bhd is better.

Account Payable Deferral Period

● Payable deferral is the length of time a business waits to reimburse its creditors or
vendors for purchased goods. Businesses having a long payment deferral period can take
advantage of the time value of money by using the available cash for other short-term
investments. On the other side, a low payable deferral period shows that a business is
paying its suppliers' invoices promptly, which may indicate that the business is

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 effectively managing its cash flow. A low payable deferral period is viewed as an
indicator of a company's financial health because it indicates that the company can pay its
payments on time. Also, it fosters positive relationships with suppliers. Hence, the Line
Chart 6.0 already showed that the company that has lower account payable deferral is
WCT Holdings which is 62 days lower than MGB Berhad. Thus, WCT Holdings is
better.

Operating Cycle

● The operating cycle provides information about a company's operational effectiveness. A

shorter cycle is preferable and is a sign of a more leading organization. A faster cycle
shows that a business can swiftly recoup its inventory investment and has sufficient cash
on hand to meet obligations. A corporation may experience cash flow issues if its
operating cycle is too long. Consequently, based on the data provided, MGB Berhad has a
more desirable operating cycle than WCT Holdings since it has a shorter cycle.

Cash Conversion Cycle

● The life cycle of cash utilized for business operations is tracked by CCC. It tracks the
cash as it is initially transformed into inventory and accounts payable, then into costs
associated with the creation of new goods or services, on to sales and receivables, and
finally back into the current amount of cash. CCC basically measures how quickly a
business can turn its invested money into profit from beginning to end (investment)
(returns). The finer, the smaller the CCC. In this analysis, MGB Berhad has smaller value
of CCC which is a negative value of -116 days, thus, making the company has a finer
CCC than WCT Holdings. Inventory is sold before you have to make a payment for it
when there is a negative cash conversion cycle. Or to put it another way, your suppliers
are paying for your company's activities.For many organizations, a negative cash
conversion cycle is ideal. This happens due to when a company takes a full advantage of
the credit term given and delays payment until the last possible date.

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 4.4 OPERATING CYCLE AND CASH CONVERSION CYCLE DIAGRAM

4.4.1 WCT HOLDINGS

2020

2021

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 4.4.2 MGB BHD

2020

2021

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5.0 CONCLUSION

In a nutshell, after going through the analysis, we can briefly get the idea which is
from 2020 to 2021 both WCT Holdings and MGB Bhd show a good trend in improving
or maintaining the liquidity of their company despite there were few items from the
analysis that contribute directly to a decreasing trend which relates closely with the
efficiency of their operation management. Few issues that may relate or have the
possibilities with these issues could be due to lack of skilled personnel who can manage
and optimize the company's resources effectively, inadequate technology or still using
outdated technology,poor operational planning which can lead to delays, wastage and
increased costs. The lack of agility can also lead to poor management,this situation is
when the business is constantly evolving so the operations management needs to be agile
to respond to these changes effectively. Thus, it is super vital for a company to make sure
their businesses succeed, all these matters should be taken care of and must be addressed
as soon as possible and come out with a good and also effective solution without causing
major loss for their companies.

There are also few items from the analysis strongly proving that WCT Holdings and
MGB Bhd can be classified as a cash-rich company. It is a clear call since the current
ratio for both years of WCT Holdings and MGB Bhd is greater than 1 which means they
are very liquid. In general, the term ‘ cash-rich’ suits the company which has enough or
significant amounts of cash, and has a strong volume of liquid assets on hand. Both
companies can be entitled as a good company at making sure that the liquidity ratios of
their company are steady enough to cover any short-term obligations and cash flows.
Hence, these companies may have a financial advantage over their competitors as they
have the ability to invest in growth opportunities, buy back shares, pay higher dividends
to their shareholders, or weather economic downturns more effectively than companies
that are short on cash.

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6.0 RECOMMENDATION

6.1 BANKER POINT OF VIEW

As a banker usually the current ratio is one of the essential aspects of every
company that will be looked at by banks when determining whether they need additional
working capital or when approving loans to businesses. Following with the analysis of
WCT Holdings and MGB Bhd, it can be said that both companies are not really in need
for the additional working capital loan due to the stability of their liquidity position which
were determined after acknowledging the fact that the current ratio for both companies is
more than 1 which definitely can be considered good in terms of both companies has
enough current assets to pay of its current liabilities .Starting with WCT Holdings which
recorded 1.29 in 2020 to 1.16 in 2021,although it is slightly decreasing but then it can
still be classified as a good company. The MGB Bhd set at 1.24 in 2020 and increased to
1.32 in 2021 which is undoubtedly crystal clear that the company can afford any short
term financial obligations.

Moreover, looking at the current ratio for both companies within that particular year
shows how cash rich these companies are and give an idea about the company's operating
cycle which is they both are good in managing their current assets include cash,
inventory, and accounts receivable as they can quickly to convert those into cash within a
year so they can optimize any other overhead costs. Overall, although we know in general
that by simply looking at a high company’s net working capital indicate that the
company has more liquid assets than current liabilities, which indicates that it has the
ability to cover its short-term debts and invest in growth opportunities but usually the
correct figure and appropriate net working capital may be differ by industry and firm
company so it's crucial to find a balance between having enough liquidity to meet costs
and not keeping too much stock or cash that may be invested for greater profits. In short,
WCT Holdings and MGB Bhd are still going good with a stable liquidity position and are
not really desperate in requiring any additional working capital loan.

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 6.2 INVESTOR POINT OF VIEW

As an investor, MGB Bhd can be said as a better choice to do an investment due to a

few matters based on the analysis for the year 2021 that had been made between both
companies previously. The net working capital is quite high comparing from the previous
year so they face less possibilities for any financial risk , the inventory turnover ratio is
also greater which means the company has strong sales and has higher demand from the
customers and this directly relates with the lower inventory conversion period comparing
to WCT Holdings.This prove the fact that MGB Bhd were definitely able to make sure
they sell its inventory quickly and being efficient in managing the inventories,this
contributes to a positive signal for investors since the company generates higher
profitability. This also depicts that the company can reduce working capital requirements,
has a strong cash flow and can open up the chances for even more funds for investment in
other areas since they can manage their financial obligation well.By investing in MGB
Bhd, it will be very beneficial since they generate strong cash flow and may be more
resilient during economic downturns.

Furthermore, if we take a look at MGB Bhd’s current ratio it is higher which means
the company is very liquid and having less risk for any bigger financial debts even much
better than WCT Holdings. In addition to that, in general we know that the lower the CCC
is, the better. A lower cash conversion cycle means that the company needs fewer days to
recover money spent on materials. But then,the cash conversion cycle of MGB Bhd shows
a negative figure, which is actually not something that is very bad or should be feared by
any investors because this situation may happen because this company is very active in
investment activities. There is also a statement that states that ‘a negative cash conversion
cycle indicates that a company needs less time to sell its inventory or produce it from raw
materials and collect payment from its clients than it does to make payments to the
suppliers of that inventory or raw materials. MGB Bhd also has a shorter operating cycle
which dictates that they can swiftly recoup its inventory investment and has sufficient cash
on hand to meet obligations without having any insufficient cash flow issues.

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Meanwhile,WCT Holdings records a higher number of days for its cash conversion cycle
period and operating cycle.Upon completion of the analysis, MGB Bhd will be the ideal
one to go for investment.

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7.0 BIBLIOGRAPHY

WCT Holdings Berhad. (n.d.). WCT Holdings Berhad. https://www.wct.Home - MGB Berhad.
(2023, January 16). MGB Berhad. https://mgbgroup.com.my/

Home - MGB Berhad. (2023, January 16). MGB Berhad. https://mgbgroup.com.my/

Hayes, Adam. “Cash Conversion Cycle (CCC): What Is It, and How Is It Calculated?” 15 June
2022, https://www.investopedia.com/terms/c/cashconversioncycle.asp.

Hayes, Adam. “Days Payable Outstanding (DPO) Defined and How It's Calculated.” 13
February 2023, https://www.investopedia.com/terms/d/dpo.asp.

Hayes, Adam. “Understanding Liquidity Ratios: Types and Their Importance.” 19 March 2019,
https://www.investopedia.com/terms/l/liquidityratios.asp.

“Inventory Conversion Period.”

https://www.svtuition.org/2011/11/inventory-conversion-period.html.

Kibet, Lydia. “Current Ratio: A liquidity measure that assesses a company's ability to sell what it
own to pay off debt.” 9 July 2022,
https://www.businessinsider.com/personal-finance/current-ratio.

“Problems with the Inventory Conversion Period.” 9 April 2023,

https://www.accountingtools.com/articles/what-is-the-inventory-conversion-period.html.

“What is a Cash Conversion Cycle? How to Shorten Your Cash Conversion Cycle.”
https://www.cashanalytics.com/cash-conversion-cycle/#:~:text=What%20Does%20a%20Negativ
e%20CCC,desirable%20situation%20for%20many%20businesses.

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