EBF1323/GroupProject/Oct2023
FACULTY OF ECONOMICS AND BUSINESS
DEPARTMENT OF ACCOUNTING AND FINANCE
SUBMISSION OF ASSIGNMENT
Course Code: EBF1323
Course Name: Principles of Accounting
Lecturers:
Date:
_______________________
By submitting this form and signing below, we declare that:
The attached assignment is our own work. Any material copied verbatim is
properly cited.
We have complied with the rules of ethical conduct in completing this assignment.
We have taken all reasonable precautions to ensure that our work has not been
copied by other students, including the protection of our files from access by other
students.
Submitted by:
No.
Group Members’ Name
Matric No.
1
DIAFASHA DINANTY BT MUBRAN
98725
2
STEPHENIE ANAK NIVENLY
102192
3
SHARMILA ANAK ALEXANDER AMIT
102157
4
NUR AMIRAH BINTI ABDUS SALAM
101974
5
NUR FAIRUZ ATHIRAH BINTI NASIR
101995
1
Signature
EBF1323/GroupProject/Oct2023
TABLE OF CONTENTS
NO
CONTENT
PAGES
1.
EXECUTIVE SUMMARY
3
2.
INTRODUCTION
4
3.
METHODOLOGY
5
4.
ORGANIZATIONAL PROFILE
5.
FINDING AND ANALYSIS
6.
INTERPRETATION AND COMMENTS OF THE RATIOS
7.
CONCLUSION
8.
APPENDIX
9.
REFERENCES
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1.0 EXECUTIVE SUMMARY
The title of our report is “Financial Ratio Analysis.” Our report also refers as an analytical report
of accounting. We include both quantitative and qualitative analysis in our report. We have
made the report on the listed companies and choose one of the listed companies with the annual
report analysis as you had given us to analyse by help of your suggestions. The report includes
the financial activity of the company, solvency, liquidity, profitability, and valuation financial
ratios that helps to indicate the future of the company. We have selected the Tropicana
Corporation Berhad. We have discussed the ration in the analysis and analyse the result of the
ration.
We hope that the knowledge and experience we gathered and gained during the report will be
helpful in the future of our academic purpose. We will be grateful if you accept the assignment.
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2.0 INTRODUCTION
We analyse the current (2021-2022) financial situation of Tropicana Corporation Berhad
company and discuss how to turn their financial condition into satisfactions. This report helps
us to learn how to prepare a report. We can get a result so that we can analyse and solve the
financial problems of the company.
We used 3 categories of financial ratios so that we can analyse the financial statements
of the company based on their current annual report of Tropicana Corporation Berhad. These
categories are:
1. Profitability ratio which includes gross profit and net profit ratio - these ratios measure
the performance of a business during an accounting period.
2. Liquidity ratio which includes current ratio and quick ratio – these ratios measure the
ability of a business to meet its current obligations when they become due.
3. Activity ratio which includes inventory turnover ratio and inventory holding period –
these ratios measure the efficiency of a business in managing its assets to regenerate
revenue.
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We tried to focus analysing the results of each of the financial ratios so that we can predict the
and helps in the decision-making process in the financial of the company.
The objective of our report is to interpret analysis of our findings based on the annual
report of financial statements of the Tropicana Corporation Berhad. Firstly, we collected data
from the annual report of Tropicana Corporation Berhad company that available in their official
website. We tried to calculate the financial ratios accurately in order to achieve our objectives.
From the analysing process, we can find the weak and strong point of the financial position of
the company. We analysed 3 categories of financial ratios which is profitability ratios, liquidity
ratios, and activity ratios.
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3.0 METHODOLOGY
Methodology is a specific technique used to identify, analyse and gather information about a
topic that the researcher is looking for.
3.1 Secondary Data
Information that has been gathered, examined, and published by others for objectives unrelated
to the ongoing study effort is referred to as secondary data. It is information that was first
gathered by a different researcher, organization, or entity, or for a different reason. Although
secondary data is not directly collected by researchers, they utilize it to analyse, interpret, or
supplement their own work. We have collected the secondary data from textbooks and lecture’s
slides.
3.1.1 Analysing Document
Information is collected by analysing existing documents. Sources of documents in form of
writing include books, journals, newspapers, magazines, and records related to the
administration
3.1.2 Internet Access
Information is obtained through the articles, blogs, documents such as .pdf and .doc, educational
and research websites are more extensive due to the unlimited area of information search and
not concentrated in an area.
3.1.3 Database Access
Some institutions or organizations provide databases for storing collected data for future use.
There are two types of databases which are internal data, which means that the data can only be
accessed by certain individuals because this data is confidential. The second type of database is
external data, this data is accessible to the public as it is more general in nature. The data that
the researcher use to do the research is external data.
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4.0 ORGANIZATIONAL PROFILE
Incorporated in 1979, Tropicana Corporation Berhad ("Tropicana") debuted on Bursa Malaysia
Securities Berhad's Main Market in 1992 and underwent a rebranding in 2013. Since then, we
have grown to become one of the top conglomerates in Malaysia, with a variety of commercial
ventures including investment holdings, property development and management, recreation &
resorts, and more.
Picture 1: shows the corporate building of Tropicana Corporation Berhad in Petaling Jaya,
Selangor
The vision of Tropicana Corporation Berhad is they strive to be the leading property group,
that delivers innovative and quality products that enhance stakeholders' value.
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5.0 FINDINGS AND ANALYSIS
5.1 Current Ratio of Tropicana Corperation in Year 2021 and 2022
The current ratio is a measure of company’s near-term liquidity position, or more specifically,
the short-term obligations coming due within one year. The formula of current ratio as given
below
Current Ratio = __Current Assets__
Current Liabilities
2021
1 620 929 000
411 134 000
= 3.9426
2022
1 651 396 000
539 167 000
=3.0629
Table 1: Shows the calculation for current ratio
5.2 Quick / Acid Test Ratio of Tropicana Corperation in Year 2021 and 2022
A measure of a company’s short-term liquidity is the quick ratio. Determines and quantifies the
extent to which a business can use its most liquid assets to satisfy its short-term obligations. A
company’s “quick assets” (cash and accounts receivable) are compared to its current obligations
to get the acid test ratio.
Current Assets - Iventory
Quick Ratio =
Current Liabilities
Year
Quick Ratio
2021
1 620 929 000 - 375 723 000
=
411 134 000
= 3.03
2022
1 651 396 000 - 2 930 00
=
539 167 000
= 3.06
Table 2: Shows the calculation for quick ratio
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5.3 Net Profit Margin or Return on Sales
Net profit measures how much net income or profit is generated as a percentage of revenue. It
is the ratio of net profits to revenues for a company or business segment. It usually represented
as percentage and to let the investors assess if a company generating enough profit to survive
in the market. Net profit margin is one of the most important indicators of a company's financial
health.
Net profit margin =
Net profit
100%
Sales
2021
=
=
- 30073
896000000
2022
100%
=
-0.04%
=
- 410 597
968000000
100%
-0.003%
Table 3: Shows the calculation for net profit margin
The ratio reveals how far costs are covered by the revenue and what is available to the owner
of a business after considering all expenses incurred for a particular accounting period. Hence,
the negative value indicates that the company had loss.
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5.4 Return on Assets
Return on assets is calculated by dividing a firm’s net income by the average of its total assets.
It is them expressed as a percentage. Net profit can be found at the bottom of a company’s
income statement and assets are found on its balance sheet. Average total assets are used in
calculating ROA because a company’s asset total can change over time due to the purchase or
sale of vehicles, land, equipment, inventory changes, or seasonal sales fluctuations. As a result,
calculating the average total assets for the period in questions is more accurate than the total
assets for one period.
Formula Return on Assets:
Return on Assets = _Net Income_ x100%
Total assets
2021
39 410 000 x 100%
6 165 377 000
= 0.63921%
2022
16 810 000 x 100%
6 316 511 000
= 0.26613%
Table 4: Shows the calculation for return on assets
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5.5 Inventory Turnover
Inventory turnover counts how often a business sells and replaces its stock over a given time
frame, usually a year. The computation involves dividing the average inventory value by the
Cost of Goods Sold (COGS). A higher inventory turnover ratio typically denotes efficient
product sales and rapid stock replenishment for a business. On the other hand, a lower ratio
could indicate slow sales, overstocking, or outdated inventory. It aids in evaluating how well a
business controls its inventory to produce revenue and cash flow.
The formula is: Average Inventory / COGS equals inventory turnover.
2021
Inventory turnover: Cost of good sale /
Average inventory
2022
Inventory turnover: Cost of good sale /
Average inventory
: 513,618 / 7071,745
: 492,830 / 6293,893
: 0.73
: 0.78
Table 5: Shows the calculation for inventory turnover
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5.6 Average Collection Period
Average collection period represents the length of time a firm undertakes to collect money from
its accounts receivable. The shorter the period, the better it is for the business in terms of its
liquidity. If the debts are not collected on time, the business may not have enough cash resources
to operate. It is calculated by dividing the average accounts receivable by the net credit sales
for a specific period, then multiplying the result by 365 days. If the collection period of the
company is high, it indicates that the company is collecting the payments at a slow rate. A high
collection period could also mean that the customers are taking their own time to pay their bills.
Average collection period for Tropicana Corporation Berhad:
Average Collection Period = Average Account Receivable x 365
Credit Sales
2021
2022
1 573 914 000_____
______2 232 448 000________
(1 300 000 000 – 46 548 000)
(2 000 000 000 – 199 198 000)
= 1.25566 x 365
= 1.23970 x 365
= 458 days
= 452 days
Table 6: Shows the calculation for average collection period
5.7 Debt Ratio
Debt ratio is a financial ratio that measures the extent of a company leverage. It is calculated by
total liabilities divided by total assets of the company. Debt ratio shows the proportion of
company's assets that are financed by the debt. The debt ratio formula includes the company’s
short and long-term liabilities. A debt ratio of less than 1 means that the company has greater
assets than liabilities. In some cases, a debt ratio of less than 1 means greater stability, and if
the ratio is more than 1, it indicates a heavy reliance upon debt to continue company operations.
Debt Ratio of Tropicana Corporation Berhad:
Debt Ratio = Total Liabilities
Total Assets
2021
2 277 271 000
6 165 377 000
= 0.36936
2022
2 279 125 000
6 316 511 000
= 0.36082
Table 7: Shows the calculation for debt ratio
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5.8 Time Interest Earned
A financial measure called Times Interest Earned (TIE) is used to assess if a business can use
its earnings before interest and taxes (EBIT) to pay for its interest costs. It gauges how easily
a business can settle its outstanding debt obligations, including interest payments. A greater
TIE ratio suggests that a business has sufficient earnings to pay interest on its debt, reducing
the likelihood that it will default. On the other hand, a lower TIE ratio may indicate that a
business may have trouble making its interest payments and may be more vulnerable to
default. When creditors and investors evaluate a company's financial standing and the risk
attached to it, TIE is essential.
The formula is: EBIT / Interest Expense
2021
Times interest earned: EBIT/
Interest Expense
2022
Times interest earned: EBIT /
Interest Expense
: 155,580 / 200
: 256,726 /193
: 13.30
: 7.80
Table 8: Shows the calcuation for time interest earned
5.9 Earnings per Share
The profit of a business is divided by the number of outstanding shares of its common stock to
get at earnings per share, or EPS. The resulting figure is used to determine how profitable a
company is. Investors frequently take it into account when making decisions about their
investments because it is a commonly used measure of a company's profitability. EPS divided
into two types which are basic EPS and diluted EPS.
2021
=
2022
16 810 000 – 22 029 974.8
=
39 410 000 – 82 964 006
1 449 993
=
1 761 181
-3.6
= -24.73
Table 9: shows the calculation for earnings per share
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One commonly used statistic for determining corporate value is earnings per share (EPS), which
shows how much money a firm produces for each share of its stock because investors will pay
more for a company's shares if they believe it has larger earnings relative to its share price, a
higher EPS is indicative of greater value has higher profits relative to its share price.
5.10 Dividend Payout Ratio
The dividend payout ratio measures the percentage of net income that is distributed to
shareholders in the form of dividends during a particular period (quarterly, half-yearly or
yearly). In other, this ratio shows the portion of profit the company decides to keep funding
operations and the portion of profits given to its shareholders in the form of dividends
Formula Dividend Payout Ratio:
Dividend Payout Ratio = Dividend Paid
Net Income
2021
53 829 000
39 410 000
= 1.36587
2022
44 933 000
16 810 000
2.67992
Table 10: shows the calulation for dividend payout ratio
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6.0 INTERPRETATION AND COMMENTS OF THE RATIOS
A ratio is a comparison of two or more numbers that indicates their sizes in relation to each
other. A ratio compares two quantities by division, with the dividend or number being divided
termed the antecedent and the divisor or number that is dividing termed the consequent. From
this research, the researcher concludes that there are four ratios in this research, which are
current ratio, quick/acid test ratio, debt ratio and dividend payout ratio.
Based on this research, if the current ratio is more than 1, it means that when current debts
come to due, the company can pay the debts if the current ratio is more than 1. It also considered
a desirable situation to be in and it means that the company has less risk because it could
liquidate its current assets more easily to pay down short-term liabilities. Furthermore, if the
current ratio is less than 1, it means that the company has sufficient capital to meet it short- term
debts because it has a larger proportion of liabilities relative to the value of its current assets. A
current ratio below 1 indicates that the company does not have enough liquid assets to cover its
short-term liabilities. The researcher can conclude that the current ratio of the company
Tropicana Corporation Berhad decreases from the year 2021 to 2022. This can be proven when
the calculation that had been made in Table 1, from the table above the current ratio for the year
2021 is 3.942 and for 2022 is 3.0629. The number decreases by 0.8761, which means that the
trend for Tropicana Corporation Berhad’s is negative. Tropicana Corporation Berhad’s current
ratio has been more volatile, jumping from 3.942 to 3.0629 in a single year, which could indicate
increased operational risk and a likely drag on the company’s value.
Secondly, based on the research, the quick/acid test ratio indiacates that companies with
higher quick/acid test ratios are more financially stable than those with a lower quick ratio. An
acid test ratio greater than 1 is considered healthy. If it's less than 1.0, then companies do not
have enough liquid assets to pay their current liabilities and should be treated with caution.
From the research that had been done, the researcher can conclude that the quick/acid test ratio
increases from year 2021 to 2022. This can be proven in Table 2 above, it shown that in the
year 2021 the quick/acid test ratio is 3.03 and for the year 2022 it is 3.06. The number increases
by 0.03, which means that the trend of quick/acid test ratio for Tropicana Corporation Berhad
is positive.
Thirdly, a debt ratio of less than one is considered ideal as it indicates that the total
number of assets is more than the amount of debt a company acquires. A ratio of less than 1
depicts a lower debts ratio, which means that the company has more assets than liabilities. A
ratio approaching 1 is an extremely high proportion of debt financing and can be problematic.
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If the ratio is above 1, it shows that a company has more debts than assets and may be at a
greater risk of default. Based on the calculation that had been done in Table 7, the debt ratio for
the year 2021 is 0.36936 and for the year 2022 is 0.36082. The debt ratio decreases from the
year 2021 to the year 2022 by 0.00854, this means that the trend of debt ratio for Tropicana
Corporation Berhad is positive because in the year 2022 there is less debt than 2021.
Lastly, companies with the best long-term records of dividend payments have stable
payout ratios over many years. But a payout ratio greater than 100% suggests a company is
paying out more in dividends than its earnings can support and might be cause for concern
regarding sustainability. A low payout ratio can signal that a company is reinvesting the bulk
of its earnings into expanding operations. Based on the calculation that had been made in Table
10, it shows the dividend payout ratio for the year 2021 is 1.36587 and for the year 2022 it is
2.67992. The dividend payout ratio increases by 1.31405, which indicates the trend of dividend
payout ratio for Tropicana Corporation Berhad is positive because the company can sustain the
company.
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7.0 Conclusion
In conclusion, by doing research on Tropicana Corporation Berhad, the researcher can make a
few hypotheses. Current ratio, which is also liquidity ratio, measures the company’s ability to
pay short-term liabilities or current liabilities (debts and payable) when it is current, or shortterm, assets (cash, inventory, and receivable). The current ratio for 2021 is higher than 2022
which is 3.9426 and 3.0629, so the trend is negative, it also indicates that the company cannot
cover its current liabilities 3.9426 times, it also may indicate that it is not using its current assets
efficiently, securing financing very well, or properly managing its working capital. Secondly,
quick/acid test ratio measure liquidity by using more liquid types of current assets. The
quick/acid test ratio for the year 2022 is higher than 2021, which is 3.03 and 3.06. This shows
that the company has more quick assets to cover mature obligation in the year 2022 rather than
2021. Next, net profit margin or return sales for the year 2021 is higher than 2022. For the year
2021 the net profit margin is -0.04% and 2022 is -0.003%. Since the net profit margin is in
negative value, it indicates net loss of the company. For every RM 100 of sales, RM 0.04 loss
was made after any expenses were paid in 2021. For every RM 100 of sales, RM 0.003 loss was
made after any expenses were paid in 2022. The higher net profit margin, the more costs that
have been covered by the revenue. Hence, 2022 is better since the loss made is less compared
to the loss made in 2021. Furthermore, return on assets decreases from the year 2021 to 2022.
The year 2021 the return on assets in 0.63921% and in 2022 it is 0.26613%. Decrease in return
on assets can indicate that the company is not able to acquire or utilize its assets sufficiently
enough to generate a profitable return. In addition, inventory turnover increases from the year
2021 to 2022. In the year 2021 the inventory turnover is 0.73 and in 2022 it is 0.78. Increase in
inventory turnover makes the capital amount tied up in the inventory is reduced, thereby
improving liquidity and financial strength. Besides that, average collection period decreases
from the year 2021 to 2022. In the year 2021 average collection period is 458 days and in the
year 2022 it is 452 days. The decrease in average collection period indicates that the
organization collects payments faster. After that, debt ratio in year 2022 is lower than 2021, for
the year 2022 it is 0.36082 and for the year 2021 it is 0.36936. In the year 2022 it shows that
the company has more assets than debts compare to the year of 2021. Then, for time interest
earned increases from the year 2021 which is 7.80 to 2022 which is 13.30. Increases in the year
2022 show that the company has stronger performance and less risky compared to the year
2021. Additionally, earnings per share decrease from the year 2021 which is -3.6 to 2022 which
is -24.73. From this we can indicate that the sales of the company decreases, and the earnings
of the company also decreases. Lastly, dividend payout ratio increases from the year 2021 to
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the year 2022. In 2021 the dividend payout ratio is 1.36587 and in 2022 the dividend payout
ratio is 2.67992, this indicates that the company pays more earnings to shareholders.
8.0 APPENDIX
COMPANY: TROPICANA CORPORATION BERHAD
SECTOR: PROPERTY
CURRENCY: MALAYSIAN RINGGIT (MYR)
DATA FROM INCOME STATEMENT
2021
2022
1.
Revenue (‘000)
42,229
20,462
2.
Cost of sales
18,721
16,782
3.
Gross profit
23,508
3,680
4.
Operating profit
2,094
-12,804
5.
EBIT
155,580
256,726
6.
Net profit / loss after tax
- 30,073
- 410,597
7.
EPS
-3.6
-24.73
DATA FROM STATEMENT OF FINANCIAL POSITION
2021
2022
1.
Total assets
2.
Non-current assets
10,055,112
9,368,564
3.
Current assets
2,240,629
2,910,809
4.
Total inventories
566,007
1,231,325
5.
Current liabilities
1,1613,484
2,877,414
6.
Total liabilities
6,311,624
6,524,362
7.
Total equity
5,984,117
5,755,011
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References
Adam Hayes (2023), Acid-test ratio https://www.investopedia.com/terms/a/acidtest.asp
Formula and ‘Good’ ROA Defined from Investopedia. (1999) from https://g.co/kgs/q1ts1v
Jason Fernando (2023) Current ratio https://www.investopedia.com/terms/c/currentratio.asp
Jean Folger (2023) Ration more less than one
https://www.investopedia.com/ask/answers/062714/what-are-main-differences-betweencurrent-ratio-and-quickratio.asp#:~:text=A%20strong%20current%20ratio%20greater,short%2Dterm%20liabilities%
20if%20necessary.
Madhuri Thakur (2023). Dividend Payout Ratio Formula from
https://images.app.goo.gl/3tUEdU1V61YMEF629
Market data Tropicana Corporation (2023) , https://www.wsj.com/marketdata/quotes/MY/5401/financials/annual/income-statement
Shobhit Seth (2023) Quick ratio
https://www.investopedia.com/terms/q/quickratio.asp#:~:text=The%20quick%20ratio%20mea
sures%20a,as%20coverage%20for%20current%20liabilities.
Tropicana Interest Earned (2023) , https://www.fsmone.com.my/funds/research/articledetails/280764
Tropicana Corporation inventory turnover (2023) ,
https://www.gurufocus.com/term/InventoryTurnover/XKLS:5401/InventoryTurnover/Tropicana%20Bhd
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