SEMESTER 1 2023/2024 (A231) UNIVERSITI UTARA MALAYSIA BKAF1023 INTRODUCTION TO FINANCIAL ACCOUNTING NO NAME NO. MATRIC 1. CHEW LONG SEN 300190 2. NUR AINA AFRINA BINTI MUHD NASIR 300493 3. GOH CHEN WEI 299831 4. NUR BALQIS BINTI NURULIZAT 301415 5. JUSTIN LOW CHIA CHIAN 299687 6. NORSHAHWALIAH BINTI MAJID 300180 7. KIRTHANA A/P MANICKAM 300389
QUESTION 1 INTRODUCTION 1.1 MALAYAN FLOUR MILLS BERHAD Malayan Flour Mills Berhad (MFM) is located in Lumut and Pasir Gudang in Malaysia. MRM envisions to be a regional staple food producer. More than 50 years of agri-food manufacturing in Malaysia, Vietnam and Indonesia for flour milling, aqua feed manufacturing and poultry integration. MFM aim is to continue this feeding to communities in Malaysia, Vietnam, Indonesia and also in other foreign countries within the region. MFM expanded beyond flour milling in 1983 and ventured into the poultry industry in Malaysia. Today, vertically integrated poultry business encompasses feed milling, hatchery, breeder farms, broiler farms and poultry processing plant. MFM has also successfully used its core competencies to build the group’s poultry integration business to be a leading supplier of poultry products and aqua feed products in Malaysia. Genting Plantations is a company with its principal business in oil palm plantation across Malaysia and Indonesia, Genting Plantations Berhad is continuously striving to become an innovative leader in the plantation industry. This group has continuously focused on leveraging our expertise, experience and assets to build long-term value creation for their group and stakeholders. With a customer-oriented and market-driven approach to creating and sustaining value, their group has made strides in innovation and business activities that have continuously supported their vision to become a leader in the plantation industry alongside the transformation through agriculture technology, and the unlocking of value through property
development. Genting Plantations have six capital of value creation such as financial, human, manufactured, social and relationship, intellectual and natural. QUESTION 2 LIQUIDITY RATIOS
Liquidity ratios are a measure of the ability of a company to pay off its short-term liabilities or financial responsibility. These ratios determine how quickly a company can convert the assets into cash to cover its short-term liabilities or debts. The higher the ratio, the easier is the ability of the company meet its short-term financial obligations because high liquidity is generally seen as favourable. There are two primary liquidity ratios which is the current ratio and the quick ratio. • Current Ratio The current ratio measures the company’s ability to cover short-term liabilities or debts with its current assets. A current ratio above 1 show that a company has more current assets than current liabilities which means a company has able to cover its short-term obligations. Formula: Current Ratio = • Quick Ratio. The quick ratio of purposes is like current ratio, but it excludes the inventories since it may not be easy to convert the inventories into cash in the short-term. This ratio provides a stricter assessment of short-term liquidity. Formula: Quick Ratio = Quick assets = current assets - inventories LIQUIDITY RATIOS: Current Ratio Formula: MALAYAN FLOUR MILLS BERHAD (MFM) = 1490979000 1120606000 = 1.33:1 The current ratio for this company is 1.33:1 which shows that this company has ability to pay back its debts or liabilities in the short time in case they need to pay it all in once. It also shows that this company has RM 1.33 current assets to pay their RM 1 current liabilities. GENTING PLANTATIONS BERHAD = 2463093000 1144470000 = 2.15:1 The total of the current ratio of this company is 2.15:1 which shows that they are able to pay back their debts in the short term since they have more current assets than current liabilities. It also shows that if this
company has RM 2.15 current assets to pay their RM 1 current liabilities. LIQUIDITY RATIO: Quick Ratio Formula: Quick assets = Current assets - inventories MALAYAN FLOUR MILLS BERHAD (MFM) = 1490979000− 627831000 1120606000 = 863148000 1120606000 = 0.77:1 While the quick ratio for this company is 0.77:1. With the total of this quick ratio, this company might find some difficulties for them to pay all responsibilities at one time since the amount of their quick assets are not enough to pay it, since it shows they only have RM0.77 quick assets but RM 1 current liabilities. GENTING PLANTATIONS BERHAD = 2463093000 − 270385000 1144470000 = 2192708000 1144470000 = 1.92:1 The quick ratio for this company is 1.92:1 where it shows a good result. With the total of that ratio, this company basically can cover its liabilities in the short-term because they have a total of quick assets for a lump sum payment. It also shows this company have RM 1.92 quick assets to pay back RM 1 current liabilities.
Activity Ratios Activity ratios are financial metrics that assess how effectively a company manages its assets to generate revenue. These ratios provide detailed insights into the efficiency and productivity of a company’s operations. Activity ratios are particularly useful for researching and analysing a company’s performance, in terms of its use of resources and the turnover of its assets. • Total asset turnover Total asset turnover ratio assists on assessing the efficiency of a company uses its assets to generate income and revenue. It is implying that the higher the total asset turnover ratio, the better the utilisation of the asset. Formula: • Account receivable turnover Account receivable turnover ratio indicates how quickly a company collects cash from its credit sales. A higher ratio suggests that the company is collecting cash from its customers more quickly, which is generally favorable. It implies effective credit management and timely collection of receivables. Formula:
ACTIVITY RATIOS: Total asset turnover Formula: MALAYAN MILLS FLOUR BERHAD (MFM) = 2,915,570,000 (2,731,613,000 + 2,731,427,000) 2 = 2,915,570,000 2,731,520,000 =1.07 times This ratio implies that, on average, Malayan Mills Flour Berhad (MFM) has generated 1.07 times of its total assets in sales during the year 2022. GENTING PLANTATIONS BERHAD = 3,189,782,000 (8,763,950,000 +8,791,814,000) 2 = 3,189,782,000 8,777,882,000 = 0.36 times On the other hand, Genting Plantations Berhad (GENP) has generated on average of 0.36 times its total assets in sales during the year 2022.
ACTIVITY RATIOS: Account receivable turnover Formula: MALAYAN MILLS FLOUR BERHAD (MFM) = 2,915,570,000 (381,590,000 + 572,297,000) 2 = 2,915,570,000 476,943,500 =6.11 times The result indicates that on average, MFM turns over its account receivable approximately 6.11 times during the specific period. GENTING PLANTATIONS BERHAD = 3,189,782,000 (634,260,000 + 541,508,000) 2 = 3,189,782,000 587,884,000 = 5.43 times Meanwhile, the ratio from GENP indicates that, on average, it turns over its account receivable approximately 5.43 times during the year 2022.
Profitability Ratios Profitability ratios are financial metrics used to measure and evaluate business performance in terms of income and profit, whether relative to revenue, assets, operating costs or shareholder equity, over a given period. • Profit margin on sales Profit margin on sales is a ratio that describes a company’s ability to earn a net income from sales. Profit margin on sales expressed as a percentage which represents the portion of a company’s sales revenue that it gets to keep as a profit after subtracting all its costs. Formula: × 100% • Return on a common shareholders’ equity Return on a common shareholders’ equity measure indicates how well the company employed the owners’ investments to earn income. It is a measure of financial performance calculated by dividing net income minus preferred dividends by average common shareholders’ equity. Formula: − Pr ℎℎ ′ × 100% PROFITABILITY RATIOS: Profit margin on sales Formula: × 100% MALAYAN MILLS FLOUR BERHAD (MFM) = 154000000 2915570000 × 100% =5.28% The percentage for the income remaining of MALAYAN MILLS FLOUR BERHAD after costs are deducted from sales revenue is 5.28%. This mean every RM100 sales get RM5.28 net income. GENTING PLANTATIONS BERHAD = 483331000 3189782000 × 100% =15.15% The percentage for the income remaining of GENTING PLANTATIONS BERHAD after costs are deducted from sales revenue is 15.15%. This mean every RM100 sales get RM15.15 net income. PROFITABILITY RATIOS: Return on common shareholders’ equity
Formula: − Pr ℎℎ ′ × 100% MALAYAN MILLS FLOUR BERHAD (MFM) = 154000000 − 0 ( 1466093000 + 1350556000) ÷2 × 100% = 154000000 2816649000 ÷2 × 100% = 154000000 1408324500 × 100% =10.93% The return on common shareholders’ equity of MALAYAN MILLS FLOUR BERHAD is 10.93%. This mean every RM100 common shareholders’ equity get RM 10.93 return. GENTING PLANTATIONS BERHAD = 483331000 − 0 ( 5309170000 + 5295740000) ÷ 2 × 100% = 483331000 10604910000 ÷ 2 × 100% = 483331000 5302455000 × 100% =9.12% The return on common shareholders’ equity of GENTING PLANTATIONS BERHAD is 9.12%. This mean every RM100 common shareholders’ equity get RM 9.12 return.
LEVERAGE RATIOS Leverage ratio is any kind of financial ratio that indicates the level of debt incurred by a business entity against several other accounts in its balance sheet, income statement, or cash flow statement. • Debt to assets ratio Formula: × 100% Debt to assets ratio is a ratio that compares the total amount of liabilities of a company to all its assets. This ratio is usually used to measure how leveraged the company is. This information can reflect how financially stable a company is. • Debt to equity ratio Formula: ℎℎ × 100% Debt to equity ratio is used to evaluate a company’s financial leverage and is calculated by dividing a company’s total liabilities by its shareholder equity. Debt to equity ratio compares a company’s total liabilities with shareholders’ equity and can be used to assess the extent of its reliance on debt. Debt to equity ratio is usually used to compare direct competitors or to measure change in the company’s reliance on debt over time.
LEVERAGE RATIOS: Debt to assets ratio Formula:  × 100% MALAYAN FLOUR MILLS BERHAD (MFM) = 1265344000 2731427000 × 100% = 46.33% Debt to asset ratio Malayan Flour Mills Berhad (MFM) is 46.33%. It means that the company has RM 0.46 of debt for every RM 1 assets. From the statement, debt used about 46.3% to finance of company assets. GENTING PLANTATIONS BERHAD = 3482644000 8791814000 × 100% = 39.6% Debt to asset ratio Genting Plantations Berhad is 39.6%. It means that the company has RM 0.39 of debt for every RM 1 assets. From the statement, debt used about 39.6% to finance of company assets. Leverage Ratios: Debt to equity ratio Formula: ℎℎ × 100% MALAYAN FLOUR MILLS BERHAD (MFM) = 1265334000 1466093000 × 100% = 86.3% Debt to equity ratio Malayan Flour Mills Berhad (MFM) is 86.31%. This shows that the company has RM 0.86 of debt for every RM 1 equity. GENTING PLANTATIONS BERHAD = 3482644000 5309170000 × 100% = 65.6% Debt to equity ratio Genting Plantations Berhad is 65.6%. This shows that the company has RM 0.65 of debt for every RM 1 equity.
QUESTION 3 1. LIQUIDITY RATIOS A. CURRENT RATIO MALAYAN FLOUR MILLS BERHAD ( MFM ) GENTING PLANTATIONS BERHAD = RM 1490979000 RM 1120606000 = 1.33:1 = RM 2463093000 RM 1144470000 = 2.15:1 Genting Plantations Berhad is better than Malayan Flour Mills Berhad in current ratio because Genting Plantations Berhad have more ability to pay all its debt rather than Malayan Flour Mills Berhad (MFM ) as they have higher ratio which is 2.15:1 while Malayan Flour Mills Berhad (MFM ) is 1.33:1. B. QUICK RATIO MALAYAN FLOUR MILLS BERHAD ( MFM ) GENTING PLANTATIONS BERHAD = RM 1490979000 – RM 627831000 RM 1120606000 = 0.77:1 = RM 2463093000 – RM 270385000 RM 1144470000 = 1.92:1 Genting Plantations Berhad is better than Malayan Flour Mills Berhad in quick ratio because Genting Plantations Berhad can pay all its debt and able to change its asset into cash more than Malayan Flour Mills Berhad ( MFM ) has which is 1.92:1 while MFM 0.77:1 . 2. ACTIVITY RATIOS
A. PROFIT MARGIN ON SALES MALAYAN FLOUR MILLS BERHAD ( MFM ) GENTING PLANTATIONS BERHAD = RM 2 915 570 000 RM ( 2 731 631 000 + 2 731 427 000 ) / 2 = RM 2 915 570 000 RM 2 731 520 000 = 1.07 TIMES = RM 3 189 782 000 RM ( 3 763 950 000 + 8 791 814 000 ) /2 = RM 3 189 782 000 RM 8 777 882 000 = 0.37 TIMES Malayan Flour Mills Berhad ( MFM ) can generate revenue using their assets better than Genting Plantations Berhad as they have higher ratio than Genting Plantations Berhad. B. ACCOUNT RECEIVABLE TURNOVER MALAYAN FLOUR MILLS BERHAD ( MFM ) GENTING PLANTATIONS BERHAD = RM 2 915 570 000 RM ( 381 590 000 + 572 297 000 ) / 2 = RM 2 915 570 000 RM 476 943 500 = 6.11 TIMES = RM 3 189 782 000 RM ( 634 260 000 + 541 508 000 ) / 2 = RM 3 189 782 000 RM 587 884 000 = 5.43 TIMES For account receivable turnover ratio, Malayan Flour Mills Berhad ( MFM ) can collect their debt more efficiently than Genting Plantations Berhad as their ratio 6.11 times higher than Genting Plantations Berhad which is 5.43 times only. 3. PROFITABILITY RATIOS
A. PROFIT MARGIN ON SALES MALAYAN FLOUR MILLS BERHAD ( MFM ) GENTING PLANTATIONS BERHAD = RM 154000000 × 100 RM 2915570000 = 5.28% = RM 483331000 × 100 RM 3189782000 = 15.15% - For profit margin on sales , Genting Plantation Berhad has higher sales ratio which is 15.15% rather than sales ratio of Malayan Flour Mills Berhad ( MFM ) 5.28% . B. RETURN ON COMMON SHAREHOLDERS’ EQUITY MALAYAN FLOUR MILLS BERHAD (MFM ) GENTING PLANTATIONS BERHAD
= RM 154000000 - RM 0 ×100 (RM 1466093000 + RM 1350556000)/ 2 = RM 154000000 × 100 RM 2816649000 / 2 = RM 154000000 RM 1408324500 = 10.93% = RM 483331000 – RM 0 × 100 ( RM 5309170000 + RM 5295740000 ) / 2 = RM 483331000 × 100 RM 10604910000/ 2 = RM 483331000 RM 5302455000 = 9.12% - For this ratio Malayan Flour Mills Berhad ( MFM ) has higher ratio in shareholder’s equity 10.93% than Genting Plantations Berhad which is 9.12% . 4. LEVERAGE RATIOS A. DEBT TO ASSETS RATIO MALAYAN FLOUR MILLS BERHAD (MFM) GENTING PLANTATIONS BERHAD
= RM 1 265 334 000 × 100 RM 2 731 427 000 = 46.33 % = RM 3 482 644 000 × 100 RM 8 791 814 000 = 39.6 % - The ratio for Malayan Flour Mills Berhad ( MFM ) is 46.33% higher than Genting Plantations Berhad 39.6% . Hence , it shows that the risk for the new investment in Genting Plantations Berhad is low . B. DEBT TO EQUITY RATIO MALAYAN FLOUR MILLS BERHAD (MFM ) GENTING PLANTATIONS BERHAD = RM 1 265 334 000 × 100 RM 1 466 093 000 = 86.3 % = RM 3 482 644 000 × 100 RM 5 309 170 000 = 65.6 % - Genting Plantations Berhad is less reliant on debt and has a lower financial leverage since the ratio show that only 65.6% . For the Malayan Flour Mills Berhad ( MFM ) is more reliant on debt and has a higher financial leverage since the ratio is way higher which is 65.6% . QUESTION 4 SUGGESTION HOW COMPANIES TO IMPROVE THEIR CURRENT PERFORMANCE MALAYAN FLOUR MILLS 1) OPERATRIONAL EFFICIENTLY The owner of the Malayan Flour Mills needs to streamline internal processes, optimize supply chain management and invest in technology. Process optimization is also
important to evaluate and streamline internal processes to elimate redundancies and improve workflow efficiency. Supply chain management also important with optimize the supply chain by improving inventory management, reducing lead time and enchanging coordination with suppliers and distributors. 2) NEW PRODUCT The owner of the Malayan Flour Mills can produce new product base on the flour of the company. By strategically introducing new product, Malayan Flour Mills Company can attract new customers, retain existing ones and stay competitive in the market. For example, this company can introduce their own product which is introducing their own mee. The new product must be different from the existing company. Malayan Flour Mills can produce an instant mee with various flavors like curry, tomyam and mee soup. With this instant mee, it will make it easier for buyers to eat. So, by introducing new product, it can improve their current performance and will increase company's profit. GENTING PLANTATION BERHAD 1) FINANCIAL ANALYSIS Genting Plantation Berhad need to review financial statement to identify area of improvement. Financial analysis helps assess a company’s overall performance by examining its financial statements. This includes the income statement, balance sheet and cash flow statement. Financial analysis also helps to identify financial risk and vulnerabilities. Understanding factors such as debt levels, liquidity, and market risks
enables proactive risk management strategies. Other than that, by doing profitability assessment, it allows businesses of this Genting Plantation Berhad to evaluate their profitability by analysing revenue, expenses and profit margins. The insight helps in making informed decision to enhance profitability. 2) RISK MANAGEMENT Risk management for Genting Plantation Berhad involves identifying, assessing and mitigating potential risk to ensure the sustainability and profitability of the business. This company can develop strategies to mitigate risk associated with climate, market fluctuations and diseases. Firstly, this company can do a risk identification. Conduct a thorough assessment of potential risk specific to the plantation industry, such as climate-related risks, commodity price fluctuations and regulatory changes. This company can do a historical data analysis which can review past incidents, challenges and disruptions faced by company. By understanding past events and their outcomes, this company can better anticipate similar occurrences in the future. This help Genting Plantations Berhad in setting realistic goals, tracking progress and identifying areas for improvement.