Part 1

i) Cash Conversion Cycle

Inventory
Inventory Conversion Period = ×365 days
Cost of good sold

RM 96,457
= ×365 days
RM 157,026

= 224.21 days

Trade Receivables
Debtor’s Collection Period = × 365 days
Sales

26,429
= ×365 days
344,960

= 27.96 days

Trade Payables
Payables Credit Period = ×365 days
Cost of goods sold

9,765
= ×365 days
157,026

= 22.70 days

Cash Conversion Cycle = Inventory Conversion Period + Debtors Collection Period –

Payables Credit Period

= 224.21 days + 27.96 days – 22.70 days

= 229.47 days

ii) Working capital cycle = Inversion Conversion Period + Debtor’s Collection Period

= 224.21 days + 27.96 days

= 252.17 days

Part 2

New trade creditors period = 22.70 days – 20 days

 = 2.7 days

New cash conversion cycle = 224.21 days + 27.96 days – 2.7 days

= 249.47 days

The cash conversion cycle is used to calculate the liquidity or effectiveness of the company's
working capital management. In the beginning, the money was used in the working capital of
Bonia Corporation berhad within 229.47 days. When the payables credit period reduced by
20 days on cash conversion cycle, the amount of working capital change to 249.47days. The
cycle become longer and the profitability of Bonia decreased because cash conversion cycle
carrying out cost. In most cases, the company needs to use the overdraft line to repay the
amount due. Therefore, the longer the cash conversion cycle, the interest will cost higher. Ti
means the length of the cash conversion cycle will affect the company's liquidity and
profitability.

Part 3

I would not invest in the Bonia Corporation Berhad. Bonia company's liquidity current ratio
from 2019 to 2020 is RM3.06 decrease to RM2.79 and the quick ratio from 2019 to 2020 is
RM2.00 decrease to RM1.72. The current ratio is to compare the ratio of current assets to
current liabilities, the quick ratio is to measure the firm’s ability to pay off short-term
obligations without relying on the sale of inventories. High current ratio generally indicates a
very strong, safe liquidity position. Both of them decreased from 2019 to 2020, which means
the current ratio and the quick ratio of Bonia company have not been improved in 2020 but
worsened. The liquidity ratio in 2019 is better than 2020. In addition, Bonia company’s
inventory turnover ratio from 2019 to 2020 is 2.278 times decrease to 1.628 times. Inventory
turnover rate shows the number of times a company sells and replaces inventory in a period
of time. A high inventory turnover rate usually indicates effective inventory management. In
contrast, low inventory turnover ratio the inventory is not being sold easily and the company
is likely carrying obsolete inventory. The inventory turnover ratio decreased from 2019 to
2020, which means the inventory turnover ratio in 2020 has not been improved and also
being worse in 2020. Besides, Bonia company’s debt ratio from 2019 to 2020 is 25.66%
increase to 31.63%. Debt ratio is to measure the percentage of funds provided by creditors.
The debt ratio increased from 2019 to 2020, which means the debt management of Bonia
company has not been improved in 2020 and also become worse. Moreover, Bonia
company’s net profit margin from 2019 to 2020 is RM0.0506 decrease to RM0.0098. The net
profit margin refers to the remaining income after deducting all operating expenses, company
loan interest and the company's corporate tax expenses. The net profit margin decreased from
2019 to 2020, which means the profitability of Bonia company was unimproved and also
being worse in 2020.

Even though the day sales of outstanding has a good performance in the Bonia company, I
will also not invest in the Bonia company. Because the Bonia company not only needs to
have an efficiency in collecting debt, it also needs to have good performance in others. If the
Bonia company did not have any other good performance, it may cause investor to loss a big
amount of money in investing in the Bonia company. In this case, I would like to invest in
other companies that perform better than Bonia company.

Part 4

In my opinion if we give more points and explanations, the analysis will be better, because it
can help us understand more clearly what we are doing. Besides, group members can initiate
more online meetings, to discuss how to do the group assignment. So that it will allow us to
discuss with each other and discuss what to do when we don’t understand, so as to save time
and help us complete the assignment quickly.

(629 words)
Turnitin Similarity Report

Digital Receipt
Originality Report