Full Project

ACFM613 Accounting & Finance for managers

College of Graduate School

Project paper: Analysis of firm’s performance using accounting ratios

Name of companies: a) Muda Holdings Berhad b) Malaysian AE Models Holdings Behard

Prepared by

Hayder AbdUlhasan SadirID No.: SP20723

Lecturer: Dr Wong Pik Har

Analysis of firm’s performance using accounting ratios

ACFM 613 Accounting & Finance for Managers - project paper

This is an individual coursework that represent 40 percent of your total marks for ACFM 613 Accounting & Finance for managers. Your report should be font size 12 New Times Roman and would not be longer than 5000 words. Plagiarism declaration should be included in your report. Harvard referencing is used. Include the box below the cover of your report to unable marks to be given.

CriteriaName of

student & IDIntroduction

20%Content

60%Conclusion

20%Total100%

Choose two companies that are listed under the main board of the Bursa Malaysia.

Your report should include:1. History and background on each company2. Compare the financial performance using ratios for each company for 2007 and

2008.3. Evaluate the financial strategic used by each company based on the types of

financing that the company uses. Comment on the gearing levels of each company.

4. Conclusion

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College of Graduate SchoolPlagiarism Statement

Read, complete and sign this statement to be submitted together with your written project paper.

I confirm that the submitted work is all my own work and is in my own words.

Signature: Name (BLOCK CAPITAL): HAYDER ABDULHASAN SADIRID no: SP 20723Date: 03 OCTOBER 09

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TABLE OF CONTENTS

CHAPTER 1 INTRODUCTION 51.1 Background of the project paper 5

Separation of ownership and control 5Earnings management 7Evaluating the Earning’s of Corporation 9

1.2 Objectives of the Project Paper 101.3 Organizations of Project Paper 11

CHAPTER 2 LITERATURE REVIEW 122.1 Introduction 122.2 Conceptualisation of Accounting Profits 13

Weaknesses of accounting ratios is as follow 14Conservative accounting practices 14Accounting Based Performance Measurement 17

2.4 Summary 21

CHAPTER 3 RESULTS OF ANALYSES 223.1 Introduction 22

Why are ratios are useful? 233.2 Data Source and Profile 253.3. Arithmatic analysis 27

A. Financial Ratios: 27B. Calculations 36

3.4 Summary 37

CHAPTER 4 DISCUSSION AND CONCLUSION 384.1 Introduction 384.2 Discussion of the results 37

Limitation of This Project Paper 474.3 Conclusions 48

ACKNOLEDGMENTS 49REFERECES 49APPENDIX 52

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TABLE OF FIGURES

Figure 1: Project Paper Outline 11 Fig (2) Accounting Ratios 28 Fig (3)comparision for cash in bank 39 Figure 4: Comparison for Cash flow relted to Current Assets

and Current Liabilities40

Figure 5: Comparison for Current Assets Ratios 41 Figure 6: Comparison for Current Assets with cash generated

from operations 41 Figure 7: Comparison for Profit's amounts 42 Figure 8: Comparison for Profitablity Ratios 43 Figure 9: Comparison of Effeciency Ratios 44 Figure 10: Comparison of Debt Ratios 45 Figure 11: Comparison of Investment Ratios 46 Figure 12: Comparison of Gearing Ratios 47

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CHAPTER 1

Introduction

1.1 Background of Project Paper

Separation of ownership and control

The term separation of ownership and control as Stephen G. Mark (1999), "refers to

the phenomenon associated with publicly held business corporations in which the

shareholders (the residual claimants) possess little or no direct control over management

decisions". Reference to the separation of ownership and control, and concern over its

effect. Smith (1776), wrote about joint stock companies, stated: "The directors of such

companies ... , being the managers rather of other people’s money than of their own, it

cannot well be expected that they should watch over it with the same anxious vigilance

with which the partners in a private copartnery frequently watch over their own. Like the

stewards of a rich man, they are apt to consider attention to small matters as not for their

master’s honour, and very easily give themselves a dispensation from having it.

Negligence and profusion, therefore, must always prevail, more or less, in the

management of the affairs of such a company. It is upon this account that joint stock

companies for foreign trade have seldom been able to maintain the competition against

private adventurers".

We can define the separation of ownership and control with reference to the owner

managed firm. In such a firm, the owner/manager possesses two principal attributes. The

owner/manager makes management decisions of the firm and has a claim to the profits of

the firm. (These claims are sometimes called residual claims to reflect that they accrue

after all costs and fixed claims have been satisfied.) In a large publicly-held corporation,

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the shareholders own residual claims but lack direct control over management decision

making. Correspondingly, managers have control but possess relatively small (if any)

residual claims.

The advantages and disadvantages of seperation ownership and control, Mark J. Roe

(2004), wrote that "decentralization has key advantages: regulatory specialization,

multiple channels of information flowing into the regulators, and the potential for

multiple regulatory players to loosely check one another, without an overarching,

potentially rigid regulatory monolith. One regulator might miss the problem, but—we

hope—another one catches it. But decentralization’s advantages come with two costs in

porosity. And they’re big ones. First off, a corporate crisis could arise in which no

specialized regulator is immediately equipped to head off the problem; and each may

think the task really belongs to another regulator, thought to be better equipped to handle

the current problem".

Eugene F. Fama and Michael C. Jensen (1983), They argue that "the separation of

decision and risk-bearing functions observed in large corporations is common to other

organizations such as large professional partnerships, financial mutuals, and nonprofits.

We contend that separation of decision and risk-bearing functions survives in these

organizations in part because of the benefits of specialization of management and risk

bearing but also because of an effective common approach to controlling the agency

problems caused by separation of decision and risk-bearing functions. In particular, our

hypothesis is that the contract structures of all of these organizations separate the

ratification and monitoring of decisions from initiation and implementation of the

decisions".

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The benefits of separating ownership and control come from the interaction of three

factors. First, under certain conditions and for certain types of decisions, hierarchical

decision making may be more efficient than market allocation. Second, due to economies

of scale in both production and decision making, optimal firm size can be quite large.

Third, optimal investment strategy requires investors to be able to diversify and pool and

to be able to change their allocations in response to changing market conditions.

Under some conditions, hierarchical decision making may be more efficient than

market transactions. Both hierarchical structures and market structures impose transaction

costs. For some types of transactions, market costs may be particularly high. If so, then

hierarchical decision making may be more efficient.

Earning’s Management

Before diving into what earnings management is, it is important to have a solid

understanding of what we mean when we refer to earnings. Earnings are the profits of a

company. Investors and analysts look to earnings to determine the attractiveness of a

particular stock. Companies with poor earnings prospects will typically have lower share

prices than those with good prospects. Remember that a company's ability to generate

profit in the future plays a very important role in determining a stock's price.

That said, Earnings management is a strategy used by the management of a company to

deliberately manipulate the company's earnings so that the figures match a pre-

determined target. This practice is carried out for the purpose of income smoothing. Thus,

rather than having years of exceptionally good or bad earnings, companies will try to

keep the figures relatively stable by adding and removing cash from reserve accounts.

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http://www.investopedia.com/terms/e/earnings.asp

http://www.investopedia.com/terms/i/income.asp


According to Healy and Wahlen (1999), "Earnings Management" occurs

when managers use judgement in financial reportingand in structuring transactions to

alter financial reports to either mislead some stakeholders about the underlying economic

performance of a company or influence contractual outcomes that depend on reported

accounting numbers.

Earnings management usually involves the artificial increase (or decrease)

of revenues, profits, or earnings per share figures through aggressive accounting tactics.

Aggressive earnings management is a form of fraud and differs from reporting error.

Management wishing to show earnings at a certain level or following a certain

pattern seek loopholes in financial reporting standards that allow them to adjust the

numbers as far as is practicable to achieve their desired aim or to satisfy projections by

financial analysts. These adjustments amount to fraudulent financial reporting when they

fall 'outside the bounds of acceptable accounting practice'. Drivers for such behaviour

include market expectations, personal realisation of a bonus, and maintenance of position

within a market sector. In most cases conformance to acceptable accounting practices is a

matter of personal integrity. Aggressive earnings management becomes more probable

when a company is affected by a downturn in business.

Earnings management is seen as a pressing issue in current accounting practice. Part

of the difficulty lies in the accepted recognition that there is no such thing as a single

'right' earnings figure and that it is possible for legitimate business practices to develop

into unacceptable financial reporting.

It is relatively easy for an auditor to detect error, but earnings management can

involve sophisticated fraud that is covert. The requirement for management to assert that

45

http://en.wikipedia.org/wiki/Fraud

http://en.wikipedia.org/wiki/Profit_(accounting)

http://en.wikipedia.org/wiki/Revenue

http://en.wikipedia.org/wiki/Stakeholder_(corporate)

http://en.wikipedia.org/wiki/Financial_reporting

http://en.wikipedia.org/wiki/Management


the accounts have been prepared properly offers no protection where those managers

have already entered into conscious deceit and fraud. Auditors need to distinguish fraud

from error by identifying the presence of intention.

The main forms of earnings management are (Unsuitable revenue recognition,

Inappropriate accruals and estimates of liabilities, Excessive provisions and generous

reserve accounting and Intentional minor breaches of financial reporting requirements

that aggregate to a material breach).

Evaluating the Earning’s of Corporation

David M. Blitzer, Robert E. Friedman,Howard J. Silverblatt (2001), identified

that there are three general measures of earnings: as reported earnings, operating

earnings, and pro forma earnings. All three measures have uses in the appropriate

settings. These measures, their use, and meaning are summarized here:

• As reported earnings: This is the broadest measure of corporate

performance of the three considered here. As reported earnings are

earnings including all charges except those related to discontinued

operations, the impact of cumulative accounting changes, and

extraordinary items, as defined by GAAP. This is the traditional earnings

measure and has a long history, having been used for the S&P 500 and

company analyses for decades.

• Operating earnings: This measure focuses on the earnings from a

company’s principal operations, with the goal of making the numbers

comparable across different time periods. Operating earnings are usually

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considered to be as reported earnings with some charges reversed to

exclude corporate or one-time expenses. Despite the lack of any generally

accepted definition, operating earnings are increasingly popular in

corporate reports. The use of this measure seems to come from internal

management controls used when a business unit manager is not

responsible for managing corporatelevel costs.

• Pro forma earnings: Originally, the use of the term pro forma meant a

special analysis of a major change, such as a merger, where adjustments

were made for an “as if” review. In such cases, pro forma measures are

very useful. However, the specific items being considered in an “as if”

review must be clear. In some recent cases, “as if” has come to mean “as if

the company didn’t have to cover proper expenses.” In the most extreme

cases, pro forma is nicknamed EBBS, or “earnings before bad stuff.”

Such abuses not withstanding, pro forma earnings do have a place and

should be used for special analyses of potential changes in a corporation.

In such cases, pro forma earnings are defined for the particular analysis.

1.2 Objectives of the Project Paper

In this project we will estimate the finicial performance for two companies for each

one for 2007 and 2008 after that we will compare the finincial performance between

each other… all that will be by using accounting ratios.

The evaluation of Financial Statements will help us to Internal uses include

Performance evaluation – compensation and comparison between divisions, and

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Planning for the future – guide in estimating future cash flows. External uses include

Creditors, Suppliers, Customers and Stockholders.

1.3 Organizations of Project Paper

This project paper include five chapters: Chapter one an Introduction, chapter two is

a Literature Review, chapter three is the arithmatic Analysia and its results, chpter

four is Discussion and Conclusions for the results of the calculations and then finally

we have Appendix.

The following figure explaining the organzations of the project paper.

Figure 1: Project Paper Outline

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IntroductionLiterature

ReviewAnalysis

Discussion &Conclusion

Appendix


CHAPTER 2

LITERATURE REVIEW

2.1 Introduction

Over the past decade, financial institutions have placed a significant amount of

time and resources into developing ways of measuring and improving risk and

return.

Traditional performance indicators however, such as Return on Assets, Return on

Equity etc., focus on an accounting vision of profitability. As a result of this:

measures of risk and performance were often developed independently, involving

little co-ordination between risk and finance also capital management initiatives

negatively impacted business relationships whilst businesses expanded without

due recognition of changing risk profiles on capital requirements. And a financial,

regulatory view was created rather than one aligned to business imperatives.

True shareholder value is realized when earnings on capital invested is greater

than the minimum required by investors to compensate for taking on underlying

risk. Banks therefore strive tomaximize returns within the boundaries of defined

risk limits. Risk adjusted performance measurement offers more advanced

performance indicators using risk measures derived from regulatory & economic

capital which answer questions such as how much capital is needed to support the

bank’s total risk and target credit rating? how much capital is needed to support a

given level of profitability/business mix?

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2.2 Conceptualisation of Accounting Profits

Accounting profit is the difference between price and the costs of bringing to

market whatever it is that is accounted as an enterprise (whether by harvest,

extraction, manufacture, or purchase) in terms of the component costs of delivered

goods and/or services and any operating or other expenses.

A key difficulty in measuring profit is in defining costs. Pure economic monetary

profits can be zero or negative even incompetitive equilibrium when accounted

monetized costs exceed monetized price.

In the accounting sense of the term, net profit (before tax) is the sales of the firm

less costs such as wages, rent, fuel, raw materials, interest on loans

and depreciation. Costs such as depreciation, amortization, and overhead are

ambiguous. Revenue may also be ambiguous when different products are sold as a

package, or "bundled." Within US business, the preferred term for profit tends to

be the more ambiguous income.

Gross profit is profit before Selling, General and Administrative costs (SG&A),

like depreciation and interest; it is the Sales less direct Cost of Goods (or services)

Sold (COGS), Net profit after tax is after the deduction of either corporate tax (for

a company) or income tax (for an individual).

Operating profit is a measure of a company's earning power from ongoing

operations, equal to earnings before the deduction of interest payments and

income taxes.

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http://www.reference.com/browse/wiki/Income

http://www.reference.com/browse/wiki/Depreciation

http://www.reference.com/browse/wiki/Cost

http://www.reference.com/browse/wiki/Sales

http://www.reference.com/browse/wiki/Competitive_equilibrium

http://www.reference.com/browse/wiki/Cost

http://www.reference.com/browse/wiki/Price


Weaknesses of accounting ratios is as follow:

Although financial statement analysis is a highly useful tool, it has two

limitations. These two limitations involve the comparability of financial data

between companies and the need to look beyond ratios. Comparison of one

company with another can provide valuable clues about the financial health of an

organization. Unfortunately, differences in accounting methods between

companies sometime makes it difficult to compare the companies' financial data.

For example if one company values its inventories by the LIFO method and

another firm by average cost method, then direct comparisons of financial data

such as inventory valuations are and cost of goods sold between the two firms

may be misleading.

Conservative accounting practices

What is "conservative accounting"? It is the practice of recording and presenting

financial statements based on cautious principles such as "acquisition cost or

market value whichever is lower" (instead of the presently favored "fair value",

frequently based on the subjective overvaluation of assets or undervaluation of

debts) and "recognizing profits only after realizing sales", etc. If "philosophy" is

meant in the professional sense (i.e., not merely as an "attitude"), one comes to the

following conclusion:

A "conservative accounting philosophy" is an ontology and epistemology that

tries to justify conservative accounting by taking into consideration: The volatility

of values (in general, but particularly, of assets, equities, etc.), and from othe hand

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that these values should be represented in a "prudent" and objective rather than an

"optimistic" and subjective way..

A financial value is not a property of something but a three-way relation

between some (i) person(s), (ii) an object, and (iii) changeable circumstances.

This implies a potential for sudden or unexpected fluctuations in value such that

its representation at one moment of time may no longer correspond to the reality

at another moment. This creates a dilemma. On one side, accounting and financial

statements are supposed to represent "reality", on the other side, this reality is in

constant flux. Hence, neither a "conservative" value nor a "fair" value satisfies the

ontological quest posed by a realist ontology. One solution to this problem would

be to supplement accounting values of the financial statements with some kind of

error estimates (e.g., its standard deviation), or to use a "multiple value approach."

Proposals of this kind have been made in the literature (e.g., in

Mattessich's Accounting and Analytical Methods, 1964: 220-231) but have not

been seriously considered by practitioners. However, as far as share values are

concerned, financial practice often attributes a risk factor to each share price. The

traditional solution to this dilemma is to accept for accounting the

generalprinciple of conservativism (according to which it is preferable to err on

the cautious than optimistic side). This principle has been the pivot of accounting

practice (even of most of its theories) until the last decade of the twentieth century

when empirical and positive accounting theories were instrumental in promoting

"fair values". But some experts may argue that this resulted in occasional

overvaluations in the stock market with billions of dollars in losses to the public.

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Typical overvaluations as occurred in a series of financial scandals, such as

ENRON, WorldCom, Parmalat, etc. -- and more recently in the "sup-prime

mortgage scandal". However, a conservative accounting philosophy has its own

disadvantages. For example, it can lead to enormous discrepancies between

(unrealistically low) accounting book values and (much higher) share prices in the

market. Thus, neither a philosophy of conservative nor one of aggressive

accounting seems to be desirable. What is needed is a philosophy that, on one

side, emphasizes the fundamental dilemma of accounting representation and, on

the other side, tries to sail safely through the Skylla of conservative and the

Caryptis of aggressive accounting practice by indicating when to use one and

when to use the other.

2.3 Accounting Based Performance Measurement

Tom Farin (1995), In his article the author reviewed two levels of

financial ratios that contribute to the most important measure of an institution’s

profitability, its ROE. By setting standards for the ratios in the tree diagram and

comparing the institution’s performance to these ratios, management teams and

boards can diagnose major reasons for negative changes in their institution’s

profitability. If the reasons for changes in performance are identified early in the

process, corrective action can be initiated and the damage, minimized.

"In a case like Fort Knox Savings and Keep (FKS&K), as performance

improves, management and boards can begin to identify reasons for the

improvement, and begin to determine whether the changes are temporary or

permanent. The analysis showed that improvements in core profitability

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represented far more than the improvement to FKS&K’s ROA that occurred over

three years. Core profitability improvements were offset somewhat by a reduction

in non-reoccuning income and an increase in taxes.

Its three years increase in core profitability would seem to position FKS&K

for continued ROEs in the 1.4% range. But before drawing this conclusion one

needs to determine if the factors comprising core profitability will remain steady.

It must also be determined whether credit risk or interest rate risk is likely to

interfere with FKS&K’s ability to continue to deliver ROA at the 1.4% level".

Kathleen A. Kaminski, T. Sterling Wetzel, Liming Guan (2004), their study

were about Fraudulent financial reporting which is a matter of grave social and

economic concern. Recent news abounds with corporate fraud scandals (e.g.

Enron, WorldCom, Qwest). The purpose of this study was to explore the fraud

detection capabilities of ratio analysis. It compared a multitude of financial ratios

for matched fraudulent and nonfraudulent firms to see if differences existed. It

examined an extended time period both pre- and post-fraud years. Statistically,

there was not much difference in the ratios of fraud versus nonfraud firms. Those

ratios found significant were not consistent across the time periods. A

discriminant prediction model misclassified fraud firms from 58 percent to 98

percent of the time.

They Found that "The results of this study provide empirical evidence of the

limited ability of ratio analysis to detect fraudulent financial reporting. Such

findings should be useful to both standard setters and auditors in their prescription

and application of ratio analysis for the detection of financial statement fraud".

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There were several limitations to this study. First, the identified fraud firms

were limited to public firms with discovered fraud that were subject to SEC

enforcement actions. Second, a nonfraud firm might have been misclassified.

Financial statement fraud might have occurred but had not been detected or

subject to SEC investigation. Owing to the low incidence of financial statement

fraud and the need for an adequate sample size, the sample extends over a long

period. Such maturation often results in changing conditions within the sample

period which can also impact the model data and the prediction period. Owing to

sample size limitations, the use of a “hold out” sample to validate the discriminant

model was not feasible. Finally, there does not exist an acceptable theoretical

foundation for the selection of financial ratios for decision making. The ratios

selected for inclusion in this study were based on scattered heterogeneous

empirical evidence and logical inferences of accounts most likely involved in

fraudulent financial reporting. Different results might ensue if different ratios

were selected.

Yu-Jie Wang (2008), he assessed the financial performance of the domestic

airline in Tiwan. Many previous researches concerning the performance of

airlines usually focus on operation. Financial performance, which would influence

the survival of an airline, is often ignored. To evaluate financial performance,

financial ratios obtained form balance sheet, income statement and cash flow must

be partitioned into several clusters and found the representative indicators from

these clusters to be criteria. In his paper, he utilized grey relation analysis to

cluster financial ratios and found representative indicators. Then he applied a

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fuzzy multi-criteria decision-making (FMCDM) method to evaluate financial

performance of airlines. Finally, an empirical study of financial performance of

three domestic airlines in Taiwan is illustrated.

He concluded that the financial performance of these airlines can easily be

evaluated with the FMCDM method, whether the number of alternatives is large

or not. Besides, comparing one airline with others can identify the competitive

strength and weakness of itself. It is useful for that the airline can realize the

finance competition location on airline market and ready to improve its

competitive advantage for enhancing the finance ability in the future.

Edwin R. Etter, Barbara Lippincott and Jacqueline Reck (2006), Financial

accounting ratios of non-U.S. companies are subject to misinterpretation by U.S.

investors due to differences in accounting principles, institutional practices, and

economic environments. The purpose of this study is to compare selected

financial accounting ratios of companies from seven Latin American countries

with those of a matched sample of U.S. companies, and explain any observed

differences in the ratios based on the above three factors. In general, the results

indicated that the liquidity, activity, and coverage ratios of the Latin American

companies were lower than those of the U.S. companies. The profitability ratios

varied, however, with the profit margin on sales generally higher for the Latin

American companies, the return on assets mixed, and the return on equity ratios

not significantly different between the Latin American and U.S. companies.

Finally they concluded that with the growth of financial markets and businesses in

Latin America there are tremendous investment opportunities for U.S. investors.

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The results and subsequent discussion in this study suggest that a successful and

comprehensive analysis of Latin American financial accounting ratios can only be

conducted with an understanding of the underlying accounting principles,

institutional practices, and economic environments which influence them.

Issham Ismail (2006), The main purpose of his study was to identify the

relationship between Economic Value Added and the company performance in

Malaysia. It also sought to explain the ability of EVA, compared to traditional

tool, in measuring performance under various economic conditions; pre-economic

crisis, during economic crisis and post-economic crisis period. Single and

multiple panel pool regression, using pooled time-series, cross-sectional, with

common and period specific coefficients with White’s heteroscedasticity-

corrected variances and standard errors were used for data analysis. This study

found that traditional tools particularly EPS is able to correlate and had a

relationship with stock return and this study revealed that EVA also able to

correlate with stock return and it is superior in explaining the variations of the

stock return as compared to the traditional tools under varying economic

conditions.The finding disclosed that a component of EVA was not had a better

relationship with stock return than EVA. While, this study indicates that EVA had

a better relationship with stock return over a longer period of the study. The

finding revealed that neither positive EVA (value creators) nor negative EVA

(value destroyers) had a relationship with stock return. However, the positive

EVA (value creators) had a better relationship with earnings than negative EVA

(value destroyers) and this study indicates that value creators have better earnings

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multiplier than value destroyers. While the combination of traditional tool and

EVA will not lead to increase the ability in developing relationship with stock

return.

The study concluded that combination of traditional tool and EVA will not

lead to increase ability in developing the relationship with the stock return,

however in some cases the combination had a better relationship with the stock

return but the percentage increase is very nominal. These findings are in line with

finding by Isa and Lo (2004).

2.4 Summary

In this chapter the conceptualization of accounting profits was discussed

which will be as an enterance to the next chapter in which we will

calculate finacial rations of company Muda Holdings BHD. and

Malaysian AE Models Holding BHD. for both years for 2007 and 2008

separetaly.

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CHAPTER 3

RESULTS OF ANALYSES

3.1 Introduction

This chapter describes the steps taken to analysis the financial performance for

companies Muda Holdings Berhad and Malaysian AE Models Holding Behard

based on accounting ratios.

Ratio-analysis is a concept or technique which is as old as accounting concept.

Financial analysis is a scientific tool. It has assumed important role as a tool for

appraising the real worth of an enterprise, its performance during a period of time

and its pit falls. Financial analysis is a vital apparatus for the interpretation of

financial statements. It also helps to find out any cross-sectional and time series

linkages between various ratios. Unlike in the past when security was considered

to be sufficient consideration for banks and financial institutions to grant loans

and advances, nowadays the entire lending is need-based and the emphasis is on

the financial viability of a proposal and not only on security alone. Further all

business decision contains an element of risk. The risk is more in the case of

decisions relating to credits. Ratio analysis and other quantitative techniques

facilitate assessment of this risk.

Ratio-analysis means the process of computing, determining and presenting the

relationship of related items and groups of items of the financial statements. They

provide in a summarized and concise form of fairly good idea about the financial

position of a unit. They are important tools for financial analysis.

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Why are ratios are useful?

The primary objective of financial record keeping and analysis is to make

better business decisions. Identifying emerging problems and initiating timely

corrective action, as well as identifying potential opportunities for increased

profit, are some of the obvious benefits of financial analysis. Hopefully, ongoing

analysis will help the farm manager identify past mistakes and learn from them by

not repeating those same mistakes again.

A word of caution: the need for accurate record keeping is critical because

decisions are no better than the information they are based on. Financial measures

derived from incomplete or inaccurate information are typically misleading and

can lead to bad business decisions.

Several types of analysis are appropriate. At a minimum, farmers should

evaluate their performance over time. Comparing financial documents from past

years is useful because they reveal trends or patterns. Comparing current

statements to past statements reveal what has been happening to the farm

business' financial situation. The balance sheets show changes in owner's equity

and risk exposure (whether they have been increasing, decreasing or remaining

the same); the income statements reveal trends in profit; and, the cash flow

statements can help the farmer understand the timing of cash availability and

needs.

The information from these three financial statements also can be used to

prepare additional financial measures that reveal the strengths and weaknesses of

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the farm. These additional financial measures can be used to make several

comparisons.

First, the current performance of the farm can be compared to its historical

and projected or budgeted performance. This comparison helps farmers

understand how and why the actual outcome of the business differs from what

they had expected.

Second, the farm's performance can be compared to that of its peers, or

similar farm businesses, to determine the relative status. A farm’s performance

that is below the average indicates that additional profits are possible because

others (peers) are proving it is possible to be more productive. The key is to

identify why and take appropriate management action. These comparisons are

very useful but sometimes difficult to do because of the personal nature of the

information. However, farm financial information that can be used to compare

farm businesses is available through Extension reports and farm record-keeping

organizations.

A third comparison can be made between the performance of the

farm business and non-farm alternatives. This last comparison

identifies opportunities, if any, that are lost or relinquished because

one has invested their time and capital in owning and operating a

farm.

However most users of financial statements are concerned about what will

happen in the future. Stockholders are concerned with future earnings and

dividends. Creditors are concerned with the company's future ability to repay its

debts. Managers are concerned with the company's ability to finance future

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expansion. Managers must pay attention to the financial ratios used by external

inventories to evaluate the company's investment potential and creditworthiness.

3.2 Data Source and Profile

Data were obtained from the annual reports in the websites for each company

(Muda Holdings Berhad and Malaysian AE Models Holdings Behard) after being

chosen through the main market in the official web site for Bursa Malaysia

(http://www.bursamalaysia.com/website/bm/). we chose the annual report for each

company for (2007&2008) as a secondary data source.

Muda Holdings Berhad

Company background

It's considered pioneered the paper milling and packaging in Malaysia with it's

first paper mill in Tasek, Penang in 1964 and it's first corrugator plant in Petaling

Jaya in 1971. Today, it's own one of the largest integrated paper mill and

corrugated plants in Malaysia.

Except for one corrugated box plant in Qingyuan, China, it's manufacturing

activities are mostly centred in Peninsular Malaysia where it has two factories for

paper milling, four factories for making corrugated boxes, a factory for multi-wall

paper bags and a factory for PE laminated paper, paper bags and paper-based

stationery. It's plants have been awarded the ISO 9001, OHSAS 18001, and ISO

14001 accreditation.

Core Business

It's manufacture high grade industrial brown paper, paper boards, corrugated

boxes, multi-wall paper bags, PE laminated paper for industrial and food

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http://www.bursamalaysia.com/website/bm/


application, flat, satchel and self-opening-style paper bags for food and non-food

retail outlets, paper pallets and honeycomb for packaging and furniture industries,

paper-based stationery, trading in imported paper and paper related products for

the domestic and export market.

Malaysian AE Models Holding Behard

Company background

Founded by the CEO/Group MD Datuk Dr. Jimmy KS Lim and his business

mates, Malaysian AE Models Holdings Berhad (MAE) is an established

Malaysian conglomerate listed on the Main Board of Bursa Malaysia (Stockcode:

MAEMODE 7075).

Back to 1979, MAE was established in Singapore to produce high quality

engineering design scale models such as architecture, infrastructure and ship

models to local clients. In mid 1980s, the company started the trading business in

engineering and power transmission products in Malaysia such as motors,

automation parts, sensors, semiconductors and components. Subsequently MAE

ventured into material handling business and formed a strategic partnership with

Maruyasu Kikai - a material handling specialist from Japan. From there on, the

company further developed the technology and started penetrating into overseas

market via setup of subsidiary companies. Today, MAE is well equipped with the

technology and resources to provide turnkey material handling solution and has

established a global network to serve its clients’ needs in both domestic and

overseas markets, including Europe, USA, Middle East and Asia regions, with

total over 700 employees.

45


Core Business

It's specialize in system design, manufacture and system integration of

automated material handling solution to a large spectrum of industries including

coal and mineral, food and beverage processing, automotive, airport, electrical

and electronic, pulp and paper, postal and courier services, wholesales and

distribution, retail and general merchandise.

MAE’s principal businesses consist of: Unit Material Handling Solution

(UHS), Logistic Sortation Warehousing Solution (LSW), Bulk Material

Handling Solution (BHS), Contract Manufacturing Service (CMS) and other

SBUs: Packaging Machines, Pipe and Joint System, Engineering Design

Scale Models, and Trading

Business Philosophy

It's philosophy is to enhance living standard and working knowledge of the

employees, fulfill social responsibility to the society, create continuous learning

culture and to minimize cost and maximize efficiency

3.3. Arithmatic analysis

A. Financial Ratios:

We will use the accounting Ratios in fig (2) to analyse the fiancial performance of

the companies.

45

http://www.ae.com.my/sbu_4.html





http://www.ae.com.my/product_cms.html

http://www.ae.com.my/product_bhs.html

http://www.ae.com.my/product_bhs.html

http://www.ae.com.my/product_lws.html

http://www.ae.com.my/product_uhs.html

http://www.ae.com.my/product_uhs.html


Fig (2) Accounting Ratios

Profitability ratios:

Return on capital employed ratio

The best way of assessing profitability is to calculate a ratio known as the return on

capital employed (ROCE) ratio. It can be expressed quite simply as:

Profit–––––––100Capital

Gross profit ratio

The gross profit ratio enables us to judge how successful the entity has been at trading. It

is calculated as follows:

The gross profit ratio measures how much profit the entity has earned in relation to

the amount of sales that it has made. The definition of gross profit does not usually cause

45


any problems. Most entities adopt the definition which we have used in this book, namely

sales less the cost of goods sold, and so meaningful comparisons can usually be made

between different entities.

Mark-up ratio

The gross profit ratio complements another main trading ratio: for convenience, we will

refer to it as the mark-up ratio. The mark-up ratio is calculated as follows:

Mark-up ratios measure the amount of profit added to the cost of goods sold. The

cost of goods sold plus profit equals the sales revenue. The mark-up may be reduced to

stimulate extra sales activity, but this will have the effect of reducing the gross profit.

However, if extra goods are sold, there may be a greater volume of sales and this will

help to compensate for the reduction in the mark up on each unit.

Net profit ratio

Owners sometimes like to compare their net profit with the sales revenue. This can be

expressed in the form of the net profit ratio, which is calculated as follows:

It is difficult to compare fairly the net profit ratio for different entities. Individual

operating and financing arrangements vary so much that entities are bound to have

different levels of expenditure, no matter how efficient one entity is compared with

another. Thus it may only be realistic to use the net profit ratio in making internal

45


comparisons. Over a period of time, a pattern may emerge, and it might then be possible

to establish a trend.

Liquidity ratios

Liquidity ratios measure the extent to which assets can be quickly turned into cash.

In other words, they try to assess how much cash the entity has available in the short term

(this usually means within the next twelve months). For example, it is easy to extract the

total amount of trade debtors and trade creditors from the balance sheet, but are they too

high? We cannot really tell until we put them into context.We can do this by calculating

two liquidity ratios known as the current assets ratio and the acid test ratio. Current assets

ratio. The current assets ratio is calculated as follows:

It is usually expressed as a factor, e.g. 3 to 1, or 3 : 1, although sometimes it

expressed as a percentage (300% in our example, i.e. 3–1 × 100).

In most circumstances we can expect that current assets will be in excess of current

liabilities. The current assets ratio will then be at least 1 : 1. If this is not the case, the

entity may not have sufficient liquid resources (i.e. current assets that can be quickly

turned into cash) available to meet its immediate financial commitments. Some textbooks

argue that the current assets ratio must be at least 2 : 1, but there is no evidence to suggest

that this is a necessary relationship. Use it, therefore, only as a guide.

Acid test ratio

It may not be easy to dispose of stocks in the short term as they cannot always be quickly

turned into cash. In any case, the entity would then be depriving itself of those very

45


assets that enable it to make a trading profit. It seems sensible, therefore, to see what

would happen to the current ratio if stocks were not included in the definition of current

assets. This ratio is called the acid test (or quick) ratio. It is calculated as follows:

Like the current ratio, the acid test ratio is usually expressed as a factor (or occasionally

as a percentage). It is probably a better measure of the entity’s immediate liquidity

position than the current assets ratio because it may be difficult to dispose of the stocks in

the short term. Do not assume, however, that if current assets less stocks are less than

current liabilities, the entity’s cash position is vulnerable. As we explained above, some

of the current liabilities may not be due for payment for some months. Some textbooks

suggest that the acid test ratio must be at least 1 : 1, but again there is no evidence to

support this assertion, so once more use it only as a guide.

Efficiency ratios:

Traditional accounting statements do not tell us how efficiently an entity has been

managed, that is, how well its resources have been looked after. Profit may, to some

extent, be used as a measure of efficiency but, as we have explained in earlier chapters,

accounting profit is subject to a great many arbitrary adjustments, and it is not entirely

reliable. What we need to do is to put whatever evidence we have into context, compare it

with earlier accounting periods and, if possible, with other similar entities.

There are very many different types of ratios that we can use to measure the efficiency

of an entity, but in this book we will cover only the more common ones.

Stock turnover ratio The stock turnover ratio may be calculated as follows:

45


A simple average is usually used to calculate the average stock, i.e. (Opening stock +

closing stock).

The stock turnover ratio is normally expressed as a number (e.g. 5 or 10 times) and not as

apercentage.

Fixed assets turnover ratio

Another important area to examine, from the point of view of efficiency, relates to fixed

assets. Fixed assets (such as plant and machinery) enable the business to function more

efficiently, and so a high level of fixed assets ought to generate more sales.We can check

this by calculating a ratio known as the fixed asset turnover ratio. This may be done as

follows:

The fixed assets turnover ratio may also be expressed as a percentage. The more times

that the fixed assets are covered by the sales revenue, the greater the recovery of the

investment in fixed assets.

Trade debtor collection period ratio

Investing in fixed assets is all very well, but there is not much point in generating extra

sales if the customers do not pay for them. Customers might be encouraged to buy more

by a combination of lower selling prices and generous credit terms. If the debtors are

slow at paying, the entity might find that it has run into cash flow problems. Thus it is

important for it to watch the trade debtor position very carefully.We can check how

45


successful it has been by calculating the trade debtor collection period. The ratio may be

calculated as follows:

The average trade debtors are usually calculated by using a simple average [i.e g

(opening trade debtors + closing trade debtors)]. The closing trade debtors figure is

sometimes substituted for average trade debtors. This is acceptable, provided that the

figure is representative of the overall period.

Trade creditor payment period

A similar ratio can be calculated for the trade creditor payment period. The formula is

as follows:

The average trade creditors amount would again be a simple average of the opening and

closing balances, although it is quite common to use the closing trade creditors. The

trade creditors must be related to credit purchases.

Investment ratios:

The various ratios examined in the previous sections are probably of interest to all users

of accounts, such as creditors, employees and managers, as well as to shareholders. There

are some other ratios that are primarily (although not exclusively) of interest to

prospective investors. These ratios are known as investment ratios.

The first investment ratio that we might find useful is the dividend yield. It usually

applies to ordinary shareholders, and it may be calculated as follows:

45


The dividend yield measures the rate of return than an investor gets by comparing the

cost of his shares with the dividend receivable (or paid).

Dividend cover

Another useful investment ratio is called dividend cover. It is calculated as follows:

This ratio shows the number of times that the ordinary dividend could be paid out of

current earnings. The dividend is usually described as being x times covered by the

earnings. Thus, if the dividend is covered twice, the company would be paying out half of

its earnings as an ordinary dividend.

Earnings per share

Another important investment ratio is that known as earnings per share (EPS). This ratio

enables us to put the profit into context, and to avoid looking at it in simple absolute

terms. It is usually looked at from the ordinary shareholder’s point of view. we may use

the following formula to calculate what is called the basic earnings per share.

The above definition uses the term ‘non-equity shares’. Preference shares are an example

of such shares.

Capital gearing ratio

45


The last ratio that we are going to consider is the capital gearing ratio. Companies are

financed out of a mixture of share capital, retained profits and loans. Loans may be long-

term (such as debentures), or short-term (such as credit given by trade creditors). In

addition, the company may have set aside all sorts of provisions (e.g. for taxation) which

it expects to meet sometime in the future. These may also be regarded as a type of loan.

From an ordinary shareholder’s point of view, even preference share capital can be

classed as a loan, because the preference shareholders may have priority over ordinary

shareholders both in respect of dividends and upon liquidation. Therefore, if a company

finances itself from a high level of loans, there is obviously a higher risk in investing in

it. This arises for two main reasons:

1. The higher the loans, the more interest that the company will have to pay, and that

may affect the company’s ability to pay an ordinary dividend.

2. If the company cannot find the cash to repay its loans, the ordinary shareholders may

not get any money back if the company goes into liquidation.

As far as item 1 is concerned, there will be no particular problem arising if profits are

increasing, because the interest on its loans will become a smaller and smaller proportion

of the total profit. But it could become a problem if profits are falling and the interest is

having to be paid out of a continuing decline in profit. It might then be difficult

to pay out any ordinary dividend. There are many different ways of calculating capital

gearing. The most common methods is as follows:

45


B. Calculations

Below the calculations for the Ratios analysis for the companies (Muda Holdings

BHD. and Malaysian AE Models Holding BHD.) Performance based on accounting

ratios. Depending on the explained formuals in this Chapter.

Type of Ratios

FunctionMuda Holdings

Berhad

MALAYSIAN AE MODELS

HOLDINGS BERHAD

2007 2008 2007 2008

Ratio AnalysisCurrent Asset ratio 0.92 0.93 1.38 1.32

Acid test Ratio 0.58 0.53 1.3 1.26

Profitability ratios

ROCEProfit before taxation 5.4% 13.1% 13.4% 14.3%

Net profit 4 % 11% 10.1% 9.8%

Gross Profit ratio (GP) 16.9% 19.9% 23.3% 21.5%

Mark-up Ratio 20.34% 24.8% 30.4% 27.3%

Net profit Ratio 3.3% 7.8% 6.06% 6.48%

Effeciency Ratios

Stock Turnover Ratio 5.2 4.7 16.4 23.1

Fixed Asset Turnover ratio 1.6 1.8 4.1 3.5

Trade Debtor Collection Period

78 65 241 226

Trade Creditor payment Period 15 10 41 27

Investment Trend Ratios

Dividend Yield (return) 4.29% 4.03% 2.18% 2.56%

Dividend Cover Ratio 2.98 7.19 16.4 12.66

Earnings Per Share 0.158 0.506 0.171 0.19

Price Earning (PE ) Ratio 3.7 12.3 5.3 5.14

Capital Gearing Ratio 0.1 0.05 0.14 0.15

3.4 Summary

45


After being familier with how to standardize financial statements for comparison

purposes and how to compute important financial ratios, and after we got this results

from the calculations based on the mentioned formulas, they are ready now to interpretate

in the next chapter to get idea about the health and performance for those companies.

45


CHAPTER 4

DISCUSSION AND CONCLUSION

4.1 Introduction

In this chapter we will interpretate the accounting results in Ch.3. The term

‘interpretation of accounts’ is a detailed explanation of the financial performance of an

entity incorporating the information contained within a set of financial accounts.

The amount of information contained in a set of internal accounts is considerable and,

as we have discovered, even published accounts can be extremely detailed. Nevertheless,

such information is not adequate or sufficient to be able to get a realistic assessment of an

entity’s past or future performance. There are three main reasons why this is so. We

summarize them below.

First reason is Absolute. The information contained in financial accounts is limited to

quantitative matters that can be easily translated into financial terms. The data are

presented in absolute amounts such as thousands or millions of Ringit. The numbers are

difficult to comprehend if they are very large.

Second reason is Contextual. The absolute amounts presented in financial accounts do

not mean very much in isolation. Although comparative figures for the preceding year

may be of some help, greater and wider comparisons need to be made before the figures

begin to mean anything.

Third reason is Structural. Financial accounts are prepared on the basis of a series of

accounting rules. They contain a restricted amount of information and some arbitrary

assessments have to be made about the treatment of certain matters, e.g. bad debts,

depreciation and stock valuation. They are usually prepared for a past period of time,

45


limited to two accounting periods (at best), and they do not take into account the impact

of inflation (in some countries this can be significant, even over a one-year period).

4.2 Discussion of the results

Liquidity:

The most Critical Ratios are Liquidity ratios , if a company (or an entity) is not

likely to have sufficient cash to finance day-to-day needs it cannot continue in a

business for very long no matter how profitable it could turn out to be in the long

run.

Figfigure 3: Comparison for Cash amounts in bank

Fig (3)comparision for cash in bank

From Fig (3) we see how Muda had increased it's cash at the bank (63.5%), In

absolute amount it’s a large increase in the cash flow. In other hand we see MEA

had a decrease of (20.3%) from its cash on 2007, but still less than twofold the

cash for MUDA because of it's core business which need high liquidity.

45

Muda Malaysian AE Muda Malaysian AE

Bank

RM000

40,405 20.3% 32,212

17,200

63.5% 10,520

Financial year

Val

ue


With relating the cash amouts to the total current assets and total current

liabilities, we will get as shown in fig (4).

MAE still doing better in spite of the decreasing in cash amounts on 2008.

Figure 4: Comparison for Cash flow relted to Current Assets

and Current Liabilities

From fig(5) we can see how Current Assets Ratios relates without and with

Inventories.

Normaly the limits is (0.5 - 2), We see that MAE has more stable performance in

spite of getting decrease on 2008.

45

Cash flow relted to Current Assets and Current Liabilities

Muda Malaysian AECash flow relted to Current Assets and Current Liabilities

Muda Malaysian AE

5.5% 5.1%

3.5% 3.3%

17%

12.7% 12.3%

9.6%

Financial year

Per

cen

tage

(%

)


Figure 5: Comparison for Current Assets Ratios

Figure 6: Comparison for Current Assets with cash generated from operations

45

Comparison of Liquidity Ratios Muda Malaysian AE

Comparison of Liquidity Ratios Muda Malaysian AE

1.38 1.32 1.3 1.26

0.93 0.92

0.58 0.53

Financial year

Val

ue

Comparision of FixedAssets and Cash generated from Operations

Muda Malaysian AE

Comparision of FixedAssets and Cash generated from Operations

Muda Malaysian AERM000

445,879 444,175

127,467

93,035

36,575

91

103,280 93,654

Financial year

Val

ue


For the fig(6) we summerized a comparision between fixed assets (Property,

plant and equipments) with the cash generated from operations.

We can see that both have already ingaged in a major capital investment project

which is effecting on its low liquidity. We can see also that Muda has a small

investment comparing to that one for MAE. Same time it has more than three fold

from MAE for the current assets which mean more stable on the long term.

The overall verdict is that the companies appear not to have any immediate

liquidity problems.

Profitability:

According to the available data in the annual report, we can see from

consolidated income statement that both companies have increased in (The

Figure 7: Comparison for Profit's amounts

45

Comparison on Profits' amounts Muda Malaysian AE

Comparison on Profits' amounts Muda Malaysian AE

43,623

36,388

28,972

22,882 19,364 16,421

RM000

78,434

61,298

41,670

22,898

5,699 2,586

Financial Year

Val

ue


profit attributable to equity shareholders, The profit from the operations and

The profit on ordinary activities) as shown in the fig (7).

They are all increase and in absolute terms they are very large amounts.

By examining the profitability ratios we calculated (as shown in fig(8) below),

ROCE (in terms of net profit befors tax and interest, Net profit after tax) are taken

into account as a proportion of what the shareholders had invested in the business

and the results for Muda on 2007 being not good

Figure 8: Comparison for Profitablity Ratios

as a reutrn, but the results of 2008 is being better as a return comparing with

that return from investing in a bank or a building society.

For MAE was almost steady state. In broad terms the company still in

approximate stable level. It's being acceptable as a return comparing with that

return from investing in a bank or a building society.

45

Comparison of Profitability Ratios Muda Malaysian AE

Comparison of Profitability Ratios Muda Malaysian AE

Financial year

Per

cen

tage

(%

)

24.8%

19.9% 20.34%

16.9%

11%

7.8%

4% 3.3%

30.4%

27.3%

23.3% 21.5%

9.8% 10.1%

6.5% 6.06%


The gross profit also Mark up, Muda company sells the product with a price (17-

20%) more than it takes. The Net profit is being between (3.3%) on 2007 and

(7.8%) on 2008. In other side we see MAE sells the product with a price (17-20%)

more than it takes. The Net profit is being between (6%) on 2007 and (6.5%) on

2008, which is almost stable.

The overall verdict both companies appears to be in stable and good profitability

performance on 2008.

Effeciency:

We must treat the stock turnover ratios that we have calculated with some

caution because we think that the cost of sales includes production costs and so

Figure 9: Comparison of Effeciency Ratios

45

Comparison of effeciency Ratios

Muda Malaysian AE

Comparison of effeciency Ratios

Muda Malaysian AE

Financial year

Val

ue

4.7 5.2

1.8 1.6

23.1

16.4

3.5 4.1


we do not have a separate figure of the purchases. The stock turnover appears to

have gone[down for both companies as shown in fig(9).

The performance for the trade debtor collection period, and tade creditor

payment goes down for both companies on 2008. For tade creditor going down less

the normal limits that put from both companies, and in Muda case it's far form the

lowest limit, which means that the suppliers are more serious with this company

and has less trust so they shorted the payment period to (10)days, This is a very

short period. However, the purchases probably include production costs. If these

costs were taken out of purchases we would have a more realistic result for the

trade creditor payment period. In other side we see MAE has problem with it's

debtors, which represent risk on the company. The overall verdict seems to do

better effeciency on 2008 but still need to be more efficient.

Figure 5: Comparison of Debt Ratios

Figure 10: Comparison of Debt Ratios

45

Financial year

Val

ue

Financial year

Val

ue

Comparison of Debt Ratios

Muda Malaysian AE Normal margins for trade credit terms granted for customers. Normal margins for trade credit terms granted by suppliers.

Comparison of Debt Ratios

Muda Malaysian AE Normal margins for trade credit terms granted for customers. Normal margins for trade credit terms granted by suppliers.

90

60

30

180

78

65 41 27 10 15

241 226


Investment:

The Investment Ratios analysis are summerized in Fig(11) & (12) to show the

performance for both companies.

From the fig (11) we can see how the shareholders for Muda Co. will be sad to

get paid a small rate of their dividends, same time we see that earning per share

goes up sharply on 2008, which is very good indicatir, Clearly, the company has

had a policy for some time of retaining most of its earnings and of only paying a

small proportion of them in dividends. There could, therefore, be pressure from the

shareholders to increase the level of dividends paid out but obviously the impact on

cash flow would have to be considered very seriously.

Figure 11: Comparison of Investment Ratios

45

Comparison of Investment Ratios

Muda Malaysian AE

Comparison of Investment Ratios

Muda Malaysian AE

Financial year

Val

ue

50.6

15.8

12.3

7.19

2.98 3.7

19 16.4 19

12.66

5.14 5.3

Dividend Yield (return)4.03

4.29

2.18

2.56

5

4

3

2

1


In other side we see the share holders for MAE got less paid than 2007 and that

related for the need for money for the investment of the company (as expalined in

cash to fixed asset reatio).

For Gearing, as it's being clear from the chart that Muda company more safe, in

other Side MAE has increased on 2008 which mean the financial risk will

increase, and therefore the cost of capital of the firm will also increase.

The investment indicators reflect a good performance during the year

Figure 12: Comparison of Gearing Ratios

Limitations of This Project Paper

Although this study considered two years of data (2007&2008), the time period of

analysis is still relatively short and only involeves years during the economic

boom in the region.

45

5.3 5.14

0.1

0.05

Muda Malaysian AE Muda Malaysian AE

Financial year

Val

ue

0.14 0.15

0.1

0.05


Year-end values may not be representative. Certain account balances that are used

to calculate ratios may increase or decrease at the end of the accounting period

because of seasonal factors. Such changes may distort the value of the ratio.

Average values should be used when they are available.

4.3 Conculusions:

The study examined the financial performance for two Malaysian companies

from the main market list in Bursa Malaysia website which are Muda Holdings

Bhd and Malaysian AE Models Holding Bhd.

The evaluating was done by using the Financial Accounting Ratios (Liquidity

Ratios, Profitabbility Ratios, Effeciency Ratios and Investment ratios).

In general it was found that Malaysian AE Models Holding Bhd had more

liquidity inspite of it's ingaged in a major capital investment more than RM 34

Milion which effected on it's liquidity to be less than in 2007, also it has

relatively higher effeciency (in spite of some long debtors) reach five times that

for Muda in time they had an appoximate stable level performance for the

Profitability and finally Muda had better performance for the Investment.

As a result the MAE has more apportinties for going concern.

45


Acknowledgments

The researcher gratefully acknowledge and would like to thank Dr. Wong for her big

support and help to do this simple project. Also the researcher gratefully acknowledge

for the logistic support from his family in Iraq.

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Appendix

The reference data for Muda Holdings Berhad which already got from the annual report

1. Balance sheet:

45


45


2. Income Statements

45


3. Cash Flow statements:

45


45


The reference data for Malaysian AE Holding Bhd. which already got from the annual

report

1. Income Statements

45


2. Balance Sheets

45


45


3. Cash flow Statements:

45


45

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