KOLEJ PROFESIONAL MARA SERI ISKANDAR

DIPLOMA IN INTERNATIONAL BUSINESS

DIPLOMA IN MARKETING
DIPLOMA IN BUSINESS INFORMATION TECHNOLOGY

COURSE NAME : BUSINESS FINANCE

COURSE CODE : FIN 2603
ACADEMIC SESSION : 3 2023/2024
TYPE OF ASSESSMENT : ASSIGNMENT
DATE OUT : 29/12/2023
DATE IN : 12/1/2024
DURATION : 2 WEEKS

CLO 3: Demonstrate communication skills in task related to business finance. (A3, PLO5)

INSTRUCTION TO CANDIDATES:
1. This is group assignment (Maximum 4 members)
2. All group are advised to read each instruction and question carefully before attempting to
answer.
3. All group must submit the report before 12 January 2024.
4. Any cheating or misconduct or plagarism be severely penalized.

Personal Details
1. AHMAD HAKHIMEE BIN ZUL (SMK2207-0123)
TASKS Marks
2. MUHAMMAD NAFIZ BIN AZWAN HUZAIMI
Written
(SMK2207-0132) 37.5
Presentation
Name & 3. MUHAMMAD AFIQ AIMAN BIN MOHD HAMER Verbal
ID 22.5
(SMK2207-0275) Presentation

4. NURUL AIN BINTI MOHAMAD ZAINI (SMK2203- Total /60

0031)
DMK 5 B
Class
PUAN YASMIN BINTI ISHAK
Lecturer
I/We hereby confirmed that this assignment is my/our own work and not copied or plagiarized from any
source. I/We have referenced the sources from which the information is obtained by me for this assignment.

Signature_____________________ Date________________
ACKNOWLEDGEMENT
We want to take this opportunity to show our sincere appreciation to everyone who helped us
complete this assignment report, both directly and indirectly.

Our heartfelt appreciation goes out to Yasmin Binti Ishak, our Business Finance lecturer, for her
outstanding help, direction, and the wide range of knowledge she gave. We are extremely
appreciating of her constant commitment to making sure every student understood the subject
matter completely, especially during this challenging semester. Without her guidance, we would
not have been able to get over the challenges we ran across along the way, eventually preventing
us from finishing our report successfully.

Last but not least, we would also want to take this time to thank our friends for their help and
suggestions, which were essential to the accomplishment of this FIN 2603 assignment report.
TABLE OF CONTENTS
ACKNOWLEDGEMENT ..................................................................................................................... 3
TABLE OF CONTENTS ....................................................................................................................... 4
QUESTION 1 .................................................................................................................................... 5
1.1 Calculate the ratios for Sri Meru Sdn Bhd. ....................................................................... 5
1.2 Identify and briefly explain areas of the firm’s liquidity, leverage, profitability and asset
management ratios. .................................................................................................................... 8
1.3 Provide possible reasons for the weaknesses and recommend appropriate actions to be
taken to improve shareholders wealth ..................................................................................... 10
QUESTION 2 .................................................................................................................................. 12
2.1 Choose a company and analyze (based on figure) the trend of revenue, net income, and
expenses over the last three years for the selected company.................................................. 12
2.2 What factors do you think contributed to any significant changes in these financial metrics?
................................................................................................................................................... 18
QUESTION 3 .................................................................................................................................. 20
3.1 To determine whether the performance of the firm is improving or deteriorating, it is crucial
for the financial manager to undertake both trend analysis and inter-firm comparison. Explain
the distinctions between these two analyses. .......................................................................... 20
3.2 Ratio analysis is said to provide useful information concerning a company’s operations and
financial condition. However, it has several potential problems that require care and
judgement. Explain some inherent problems and constraints of ratio analysis using examples.
................................................................................................................................................... 21
REFERENCES .................................................................................................................................. 23
Appendices.................................................................................................................................... 24
QUESTION 1
1.1 Calculate the ratios for Sri Meru Sdn Bhd.

RATIOS SERI MERU SDN BHD (2020) INDUSTRY

AVERAGES

CURRENT RATIO 𝐶𝑈𝑅𝑅𝐸𝑁𝑇 𝐴𝑆𝑆𝐸𝑇

𝐶𝑈𝑅𝑅𝐸𝑁𝑇 𝐿𝐼𝐴𝐵𝐼𝐿𝐼𝑇𝐼𝐸𝑆
= 2.5𝑥
142,890
=
37,480

= 3.81𝑥

INVENTORY 𝐶𝑂𝑆𝑇 𝑂𝐹 𝐺𝑂𝑂𝐷 𝑆𝑂𝐿𝐷

TURNOVER RATIO 𝐴𝑉𝐸𝑅𝐴𝐺𝐸 𝐼𝑁𝑉𝐸𝑁𝑇𝑂𝑅𝑌
= 4.5𝑥
149,800
=
56,370

= 2.66𝑥

AVERAGE 𝐴𝐶𝐶𝑂𝑈𝑁𝑇 𝑅𝐸𝐶𝐸𝐼𝑉𝐴𝐵𝐿𝐸

COLLECTION 𝐶𝑅𝐸𝐷𝐼𝑇 𝑆𝐴𝐿𝐸𝑆/360
PERIOD = 80 𝐷𝐴𝑌𝑆
71,870
=
254,500/360

= 101.66@101 𝐷𝐴𝑌𝑆

NON-CURRENT 𝑆𝐴𝐿𝐸𝑆
ASSET TURNOVER 𝑁𝐸𝑇 𝑁𝑂𝑁 − 𝐶𝑈𝑅𝑅𝐸𝑁𝑇 𝐴𝑆𝑆𝐸𝑇
= 4.1𝑥
254,500
=
47,800

= 5.36𝑥
TOTAL ASSETS 𝑆𝐴𝐿𝐸𝑆 = 1.5𝑥
TURNOVER 𝑇𝑂𝑇𝐴𝐿 𝐴𝑆𝑆𝐸𝑇

254,500
=
190,370

= 1.34𝑥

DEBT RATIO 𝑇𝑂𝑇𝐴𝐿 𝐷𝐸𝐵𝑇

𝑇𝑂𝑇𝐴𝐿 𝐴𝑆𝑆𝐸𝑇
= 22%
55,380
= 𝑥100
190,370

= 29.09%

TIMES INTEREST 𝐸𝐵𝐼𝑇

EARNED 𝐼𝑁𝑇𝐸𝑅𝐸𝑆𝑇 𝐸𝑋𝑃𝐸𝑁𝑆𝐸𝑆
= 9.6𝑥
35,000
=
2,500

= 14𝑥

NET PROFIT 𝑁𝐸𝑇 𝐼𝑁𝐶𝑂𝑀𝐸 𝐴𝑉𝐴𝐼𝐿𝐴𝐵𝐿𝐸 𝑇𝑂 𝐶/𝑆

MARGIN 𝑆𝐴𝐿𝐸𝑆
= 10%
24,000
= 𝑥100
254,000

= 9.43%

RETURN ON ASSET 𝑁𝐸𝑇 𝐼𝑁𝐶𝑂𝑀𝐸 𝐴𝑉𝐴𝐼𝐿𝐴𝐵𝐿𝐸 𝑇𝑂 𝐶/𝑆

𝑇𝑂𝑇𝐴𝐿 𝐴𝑆𝑆𝐸𝑇
= 15%
24,000
= 𝑥100
190,370

= 12.6%
RETURN ON EQUITY 𝑁𝐸𝑇 𝐼𝑁𝐶𝑂𝑀𝐸 𝐴𝑉𝐴𝐼𝐿𝐴𝐵𝐿𝐸 𝑇𝑂 𝐶/𝑆
𝐶𝑂𝑀𝑀𝑂𝑁 𝐸𝑄𝑈𝐼𝑇𝑌
= 19.23%
24,000
= 𝑥100
134,990

= 17.78%
1.2 Identify and briefly explain areas of the firm’s liquidity, leverage, profitability and
asset management ratios.

Liquidity

Seri Meru Sdn Bhd exhibits lower liquidity levels in comparison to the industry average. For every
RM 1 in current liabilities, Seri Meru Sdn Bhd supports this with RM 3.81 in current assets,
surpassing the industry average.

Leverage

In assessing Seri Meru's leverage, it is evident that the company utilizes a debt ratio of
approximately 30%, with the funds sourced through debt financing, while the remainder is
covered by shareholder equity. However, it is noteworthy that Seri Meru exhibits a higher debt
ratio compared to the industry average.

On the positive side, the Times Interest Earned ratio for Seri Meru surpasses the industry average,
indicating a robust ability to cover interest expenses. With a Times Interest Earned ratio of 14
times the industry average, Seri Meru demonstrates a significant capacity to meet its interest
obligations and highlights a favorable position in terms of financial solvency.
Profitability

In assessing Seri Meru's financial performance, Seri Meru has lower profit margin than Indurtry
Average due to high operating and other expenses.

Furthermore, Seri Meru exhibits a lower efficiency in generating returns on assets when
compared to the industry average. The company struggles to capitalize in making profit. This
inefficiency in asset management is a notable concern for the overall financial health of the
organization.

Similarly, the return on equity for Seri Meru is lower than Industry average. The lower ratio implies
that the profitability of the company in relation to shareholders' equity is not optimal, suggesting
a need for strategic adjustments to enhance the returns on equity.

Asset Management Ratios

For asset management ratios, in terms of inventory turnover, Seri Meru lags behind the industry
average, managing to sell and restock goods only twice a year. This indicates a slower pace of
inventory movement compared to peers.

Concerning the average collection period, Seri Meru takes more days than the industry average
to collect debts from clients.

On the non-current asset turnover front, Seri Meru excels, surpassing the industry average. This
highlights the company's proficiency in utilizing non-current assets to generate sales effectively.

However, in terms of total asset turnover, Seri Meru falls short of the industry average, signaling
inefficiency in using all assets to generate sales. There is room for improvement in optimizing the
utilization of total assets for revenue generation.
1.3 Provide possible reasons for the weaknesses and recommend appropriate actions
to be taken to improve shareholders wealth

Liquidity : Seri Meru has a slow-moving inventory, it may tie up a significant portion of current
assets, impacting liquidity. This could be due to issues such as overstocking, changes in demand,
or inefficiencies in the supply chain.

Leverage : Seri Meru might have intentionally chosen to use debt financing as a strategy for
expansion or investment opportunities. While this can boost growth, it also increases the debt
ratio. It's essential to evaluate whether the returns from these investments justify the increased
leverage.

Profitability : Intense competition within the industry may exert pressure on pricing and profit
margins. Seri Meru need to explore strategies to differentiate its products or services, allowing
for premium pricing and improved profitability.

Asset Management Ratios : Inefficiencies in operations may lead to underutilization of total

assets, impacting both total and non-current asset turnover ratios. Streamlining processes and
optimizing resource utilization could enhance overall asset efficiency.
Recommendations :

Liquidity: To improve liquidity, Seri Meru could consider implementing a more efficient inventory
management system to avoid overstocking and reduce tied-up assets. They could also look into
diversifying their product range to cater to changing demands, or enhancing their supply chain
management to ensure timely and cost-effective sourcing and delivery of goods.

Leverage: While debt financing can be a strategic move, it's important for Seri Meru to ensure
that the returns from their investments are worth the increased risk. They might want to consider
alternative financing options, such as equity financing or reinvesting profits, to reduce their debt
ratio.

Profitability: Given the intense competition, Seri Meru could focus on creating a unique selling
proposition that sets their products or services apart from competitors. This could allow them to
command higher prices and improve profitability. They could also look into cost-saving measures
to improve their profit margins.

Asset Management Ratios: To improve asset utilization, Seri Meru could consider streamlining
their operations to increase efficiency. This could involve automating certain processes,
outsourcing non-core tasks, or investing in technology that can help optimize resource use. They
should also regularly review and adjust their asset management strategies to ensure they're in
line with their business goals.
QUESTION 2
2.1 Choose a company and analyze (based on figure) the trend of revenue, net income,
and expenses over the last three years for the selected company.

EXPENSES
YEAR TOTAL EXPENSES (RM)
2020 660,568,281
2021 726,124,531
2022 813,710,755

APEX HEALTHCARE EXPENSES (RM)

900000000
800000000
700000000
600000000
500000000
400000000
300000000
200000000
100000000
0

2020 2021 2022

PERCENTAGE OF EXPENSES FOR 2020/2021

EXPENSES (2021) – EXPENSES (2020)

X 100% = 9.92%
EXPENSES (2020)

PERCENTAGE OF EXPENSES FOR 2021/2022

EXPENSES (2022) – EXPENSES (2021)

X 100% = 12.06%
EXPENSES (2021)

Based on the information and calculations conducted, it has been determined that Apex
Healthcare's expenses in 2021 increase by 9.92% compared to those in 2020. Additionally, the
expenses for 2022 experienced a further increase of 12.06% compared to the preceding year,
2021.
REVENUE
YEAR TOTAL REVENUE (RM)
2020 698,729,097
2021 770,756,174
2022 877,741,873

APEX HEALTHCARE REVENUE (RM)

1E+09
900000000
800000000
700000000
600000000
500000000
400000000
300000000
200000000
100000000
0

2020 2021 2022

PERCENTAGE OF REVENUE FOR 2020/2021

REVENUE (2021) – REVENUE (2020)

X 100% = 10.31%
REVENUE (2020)

PERCENTAGE OF REVENUE FOR 2021/2022

REVENUE (2022) – REVENUE (2021)

X 100% = 13.88%
REVENUE (2021)

After careful analysis and calculations, it has been determined that Apex Healthcare experienced
a 10.31% increase in revenue from 2020 to 2021. Furthermore, the company witnessed a
substantial 13.88% growth in revenue from 2021 to 2022.
NET INCOME

YEAR NET INCOME (RM)

2020 56,011,179
2021 59,435,465
2022 100,971,155

APEX HEALTHCARE NET INCOME (RM)

120000000

100000000

80000000

60000000

40000000

20000000

0
NET INCOME

2020 2021 2022

PERCENTAGE OF NET INCOME FOR 2020/2021

NET INCOME (2021) –NET INCOME (2020)

X 100% = 6.11%
NET INCOME (2020)

PERCENTAGE OF NET INCOME FOR 2021/2022

NET INCOME (2022) – NET INCOME (2021)

X 100% = 69.88%
NET INCOME (2021)

After conducting thorough analysis and calculations, it has been determined that Apex
Healthcare experienced a 6.11% increase in net income for the year 2021 compared to the
previous year, 2020. Furthermore, the net income for Apex Healthcare in 2022 witnessed a
substantial surge, growing by 69.88% in comparison to the net income reported in 2021.
2.2 What factors do you think contributed to any significant changes in these financial
metrics?

Based on our research we find the factor based on the internet which is Bursa Malaysia. We make
the research using the past 3 years annual report from Apex Healthcare. What factors that
contributed to any significant changes in financial metrics.

Pricing Strategy

Price strategy can be used by Implementing effective pricing strategies, such as optimizing fee
schedules or negotiating favorable contracts with payers. By reviewing and adjusting fee
schedules for services can ensure that prices align with market standards covering costs while
remaining competitive.

Cost Containment

Cost containment can manage operational costs without compromising patient care is crucial.
Efficient resource allocation and expense control contribute to higher net revenue. By monitoring
and controlling expenses, healthcare organizations can optimize their financial performance and
increase net revenue, all while maintaining the quality of patient care.

Technological Investments

By Adopting and maintaining advanced healthcare technologies, electronic systems, and

infrastructure can result in increased expenses. This includes the costs associated with
purchasing or upgrading equipment, implementing electronic health records (EHR) systems, and
investing in cybersecurity measures to protect patient data.
Regulatory Environment.

Positive changes in regulations or policies, such as favorable reimbursement rates, can have a
significant impact on both revenue and net income. When reimbursement rates increase,
healthcare providers receive higher compensation for the services they deliver to patients. This
means that Apex Healthcare would receive more funds for the healthcare products or services
they provide. The increase in reimbursement rates directly contributes to a surge in revenue for
the organization.

Increasing Sales Volume

A boost in the quantity of healthcare products or services sold by Apex Healthcare can lead to
higher revenue and, subsequently, increased net income. When Apex Healthcare sells more
healthcare products or services, it directly impacts their revenue. Each sale contributes to the
total revenue generated by the company. By increasing the quantity of products or services sold,
Apex Healthcare can multiply the number of transactions and, consequently, increase their
overall revenue.
QUESTION 3
3.1 To determine whether the performance of the firm is improving or deteriorating, it
is crucial for the financial manager to undertake both trend analysis and inter-firm
comparison. Explain the distinctions between these two analyses.

Two essential analytical techniques used in financial management to evaluate a company's

performance are trend analysis and inter-firm comparison.

As the name implies, trend analysis examines the financial data of an organisation over an
extended period of time in order to spot trends and forecast future results. In order to
comprehend market trends and make wise judgements, it mostly makes use of a company's
financial statements (Vena Solutions, Wall Street Mojo, Indeed). For example, it can highlight
discrepancies and patterns in a business's financial records (One Advanced).

Contrarily, an inter-firm comparison compares two or more comparable business units in order
to determine a firm's competitive position as well as the expenses, profitability, and efficiency of
those businesses within the industry. A business can identify inefficiencies or efficiencies through
this comparison and increase profits (Tutorials Point, Geek Tonight, Scribd).

Apex Healthcare Company has shown consistent growth. The company's earnings have been
expanding at an average annual rate of 31.5%, per the financial statistics (Simply Wall Street).
Furthermore, according to Yahoo Finance, the company's profitability margin is 45.03%. These
numbers point to increased performance. However, using the company's specific financial data,
trend analysis and inter-firm comparison should be done for a more thorough study.
3.2 Ratio analysis is said to provide useful information concerning a company’s
operations and financial condition. However, it has several potential problems that
require care and judgement. Explain some inherent problems and constraints of ratio
analysis using examples.

Ratio analysis is an effective method for comprehending the operations and financial state of a
business. But it's crucial to keep in mind that there are some restrictions and possible hazards.
The following are some general and particular ratio analysis challenges, with examples from Apex
Healthcare

Historical Information since ratios are frequently derived from historical data, their future
performance may not be predicted. This constraint is apparent in Apex Healthcare's situation, as
the business's profitability ratios have dropped throughout the previous three years.
Nevertheless, this does not always mean that the business will continue to lose money in the
future (CliffsNotes).

Accounting Procedures the application of certain accounting procedures by various businesses

may have an impact on how ratios are calculated. For example, disparities in the way two
companies depreciate their assets could lead to disparate ratios, which would complicate
comparisons.

Impact of Market Conditions, a number of ratios can be greatly impacted by market conditions.
For instance, market conditions may have an impact on a company's quick ratio, which gauges its
capacity to pay short-term obligations. In December 2018, Apex Healthcare's quick ratio fell to a
5-year low, potentially as a result of poor market conditions (Finbox).
Ignoring Qualitative Aspects, qualitative factors that might have a big impact on a company's
performance, such managerial calibre, the competitive landscape, or the regulatory environment,
are not taken into account by financial ratios (Xelonic).

These are only a few instances of the limitations and possible issues with ratio analysis. Ratio
analysis should be used as one tool among many to help comprehend the operations and financial
state of a company. The results of ratio analyses should also be interpreted with caution and
judgement.
REFERENCES

Hung, D. N., Van, V. T. T., & Archer, L. (2023). Factors affecting the quality of financial
statements from an audit point of view: A machine learning approach. Cogent Business &
Management, 10(1). https://doi.org/10.1080/23311975.2023.2184225

8 pricing strategies to maximize your profits. (n.d.). Brex. https://www.brex.com/journal/pricing-

strategies

Edgeinvest. (2023, December 29). Apex Healthcare posts 54% jump in 1Q net profit on strong
demand. I3investor. https://klse.i3investor.com/web/blog/detail/ceomorningbrief/2023-
05-25-story-h-269695721
Apex_Healthcare_Posts_54_Jump_in_1Q_Net_Profit_on_Strong_Demand

Assefa, E. (2023, May 7). Five factors affecting revenue growth. SOMAmetrics.
https://www.somametrics.com/five-factors-affecting-revenue-growth/

The complete toolbox for investors | Finbox.com. (n.d.).

https://finbox.com/KLSE:AHEALTH/explorer/quick_ratio/

Müller, M. (2023, June 26). Financial Ratio Analysis: Strengths & Limitations | xelonic. Medium.
https://blog.xelonic.com/why-financial-ratios-analysis-is-essential-for-investors-part-2-
651b288c6c28
Appendices