Modul 7 Analisa Penyata Kewangan

MODULE 7:
FINANCIAL STATEMENTS ANALYSIS

DR. MAIZATULAKMA ABDULLAH
DR. KAMARUL BARAINI KELIWON

FAKULTI EKONOMI DAN PENGURUSAN
UNIVERSITI KEBANGSAAN MALAYSIA (UKM)

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

Module Learning Outcomes 3

At the end of the module, students are able to:

explain the importance of the company's financial
01 statement, as well as the types of information

contained therein

Analyze the company's financial statement using the
02 right concepts and methods for decision-making

purposes.

interpret the results of the company's financial
03 statement analysis for business-related decision-

making.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

Table of Contents

Topic Slide No.
Financial Statements
7
Definition 8
Purpose 9
Components 10
General Features 12
Structure and Content 13
Statement of Financial Position 15
Statement of Profit or Loss and Statement of Comprehensive Income 18
Statement of Changes in Equity 20
Statement of Cash Flows 24
Notes to the Financial Statements

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 4

Table of Contents Slide No.

Topic 27
Financial Statements Analysis 29
33
What is it? 37
Horizontal Analysis
Vertical Analysis
Ratio Analysis

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 5

MODULE 7(a):
FINANCIAL STATEMENTS

DR. MAIZATULAKMA ABDULLAH

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

Financial Statements

Definition

A structured representation A collection of summary-level
of the financial position reports about an

and financial performance organization's financial results,
of an entity. financial position, and cash

flows.

Written records that convey A set of documents that show a

the business activities and the company’s financial status at a specific

financial performance of a point in time. They include key data on

company. what a company owns and owes and

how much money it has made and

spent.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 7

Financial Statements

Purpose (MFRS 101.9)

To provide information about the financial To meet this objective, financial statements
position, financial performance and cash provide information about an entity’s
flows of an entity that is useful to a wide a) assets;
b) liabilities;
range of users in making economic decisions. c) equity;
d) income and expenses, including gains and
To show the results of the management’s
stewardship of the resources entrusted to it. losses;
e) contributions by and distributions to owners

in their capacity as owners; and
f) cash flows.

This information, along with other information in
the notes, assists users of financial statements in
predicting the entity’s future cash flows and, in
particular, their timing and certainty.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 8

Financial Statements

Components

01 A statement of financial position.

02 A statement of profit or loss and other
comprehensive income.

03 A statement of changes in equity.

04 A statement of cash flows.

05 Notes, comprising material accounting policy
information and other explanatory information.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 9

General 01 Fair presentation and compliance with accounting
Features
standards

• An entity should select and apply appropriate accounting policies in
accordance with the requirements of accounting standards.

• Provide information that is relevant, reliable, comparable and
understandable.

• Provide further disclosures if compliance with accounting standards
is insufficient to enable users to understand the impact of
transactions and other events.

02 Going concern basis and accrual basis

03 Materiality and Aggregation

• Materiality means “omissions or mis-statement of items are material
if they could individually or collectively influence the economic
decisions that users make on the basis of the financial statements.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 10

04 Offsetting General
Features
• Assets & liabilities should be reported separately in the Statement
of Financial Position. 11

• Income and expenses should be reported separately in the
Statement of Comprehensive Income.

05 Frequency of reporting

• Should be presented at least annually.

06 Comparative information

• Should present comparative information in respect of the previous
period for all amounts reported in the financial statements.

07 Consistency of presentation

• Items are presented and classified in the financial statements should
generally be consistent from one accounting period to the next.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

Structure and Content 12

The following information should be displayed
prominently and repeated where necessary for a
proper understanding of the information presented:

The name of reporting the reporting entity.

Whether the financial statements are for a
single entity or a group.
The date of the end of the reporting period or
the period covered by the set of financial
statements or notes.

The presentation currency used.

The level of rounding used (e.g £000 or £m).

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

Statement of Financial Position

01 formerly referred to as Balance Sheet.

02 a statement shows an entity’s assets,
liabilities and equities.

03 current and non-current assets and
liabilities should be presented

separately.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 13

Statement Source:
of Financial Top Glove Corp Bhd
Position Annual Report 2021

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 14

Statement of Profit or Loss and
Statement of Comprehensive Income

01

• a statement shows an entity’s
income and expenses for the
reporting period and
summarizes its financial
performance for that period.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 15

Statement of Source:
Profit or Loss Top Glove Corp Bhd
Annual Report 2021
Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022
16

Statement of
Comprehensive

Income

Source:
Top Glove Corp Bhd
Annual Report 2021

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 17

Statement of Changes in Equity

a statement shows how each 18
component of equity has

changed during an accounting
period.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

Statement of
Changes in
Equity

Source: 19
Top Glove Corp Bhd
Annual Report 2021

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

Statement of Cash Flows

01 a statement shows cash inflows and
outflows during an accounting period.

03 cash flows are classified by operating,
investing and financing activities.

02 can be used to assess an entity’s
ability to generate the cash it needs.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 20

Statement of Source:
Cash Flows Top Glove Corp Bhd
Annual Report 2021
Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022
21

Statement of
Cash Flows

Source:
Top Glove Corp Bhd
Annual Report 2021

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 22

Statement of Source:
Cash Flows Top Glove Corp Bhd
Annual Report 2021
Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022
23

Notes to the Financial Statements

Notes should:

Present information Disclose information Provide any
about the basis of required by additional
preparation of the
accounting standards. information which is
financial statements To the extent that this relevant to an
and the accounting
is not presented understanding of any
policies. elsewhere in the of the financial
financial statements. statements.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 24

Notes to the
Financial

Statements

Source: 25
Top Glove Corp Bhd
Annual Report 2021

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

MODULE 7(b):
FINANCIAL STATEMENTS ANALYSIS

DR. KAMARUL BARAINI KELIWON

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

Financial Statement Analysis

What is it?

Process of assessing a company’s financial
health by reviewing its financial statements,
including income statements, balance sheets,
and cash flows.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 27

Financial Statement Analysis

Analyzing financial statements involves:

Characteristics Comparison Tools of
Bases Analysis
• Liquidity
• Profitability • Intracompany • Horizontal
• Solvency • Industry • Vertical
• Ratio
averages
• Intercompany

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Horizontal Analysis

What is it? Purpose

• Also known as trend analysis. • To determine direction,
• A technique for evaluating a speed, and extent of a
trend.
series of financial statement
data over a period of time.

Common application

• Commonly applied to the
balance sheet, income
statement, and statement of
retained earnings.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 29

Purnama Sdn Bhd
Statement of Financial Position as at December 31

2022 2021 Increase Change
RM RM (Decrease) %

RM

Horizontal Assets: 290,400 173,050 117,350 67.8
Analysis Current assets 270,500 165,000 105,500 63.9
Property, plant & equipment (net) 107,000 (27,500) (25.7)
Intangibles 79,500 445,050 195,350 43.9
Total 640,400

Liabilities and shareholders’ equity: 72,800 67,110 5,690 8.5
Current liabilities 145,000 70,000 75,000 107.1
Long-term liabilities 250,000 200,000 50,000 25.0
Equity shares 172,600 107,940 64,660 59.9
Retained earnings 640,400 445,050 195,350 43.9
Total

Changes suggest that Purnama expanded its asset during 2021 and financed this
expansion primarily by assuming additional long-term debt.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 30

Purnama Sdn Bhd
Statement of Income for the year ended December 31

2022 2021 Increase Change
RM RM (Decrease) %

RM 20.0
14.8
Net sales 750,000 625,000 125,000 29.5
18.3
Cost of goods sold 465,000 405,000 60,000 33.9
24.2
Gross profit 285,000 220,000 65,000 42.5 Horizontal
36.6 Analysis
Selling expenses 115,000 97,200 17,800 44.4
31
Administrative expenses 78,000 58,250 19,750

Total operating expenses 193,000 155,450 37,550

Income before income taxes 92,000 64,550 27,450

Income tax expense 21,160 15,492 5,668

Net income 70,840 49,058 21,782

Overall, gross profit and net income were up substantially. Gross profit increased
29.5%, and net income, 44.4%. Purnama’s profit trend appears favorable.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

Purnama Sdn Bhd
Statement of Changes in Equity for the year ended December 31

Horizontal 2022 2021 Increase Change
Analysis RM RM (Decrease) %

RM 25.0

Equity shares 250,000 200,000 50,000 56.7
Retained earnings: 44.4
35.7
Beginning retained earnings 162,960 103,982 58,978 59.9
(+) Net income 70,840 49,058 21,782 37.2
(-) Dividends 61,200 45,100 16,100
Ending retained earnings 64,660
Total shareholders’ equity 172,600 107,940 114,660
422,600 307,940

The equity shares increased 25% and ending retained earnings increased 59.9%.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 32

Vertical Analysis

Common application What is it?

• Commonly applied to the balance • Also called common-size analysis.
sheet and the income statement. • A technique that expresses each

financial statement item as a percent
of a base amount.

Purpose

• Useful in understanding the internal
makeup of financial statements.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 33

Purnama Sdn Bhd
Statement of Financial Position as at December 31

2022 2021

RM % RM %

Assets:

Current assets 290,400 45.3 173,050 38.9

Vertical Property, plant & equipment (net) 270,500 42.2 165,000 37.1
Analysis Intangibles 79,500 12.4 107,000 24.0
Total 100.0 445,050 100.0
Liabilities and shareholders’ equity: 640,400

Current liabilities 72,800 11.4 67,110 15.1

Long-term liabilities 145,000 22.6 70,000 15.7

Equity shares 250,000 39.0 200,000 44.9
Retained earnings 172,600 27.0
Total 640,400 100.0 107,940 24.3

445,050 100.0

These results reinforce the earlier observations that Hint:
Purnama is choosing to finance its growth through issuing
The formula for calculating
additional long-term debt.
these statement of financial

position percentage is

Each item on SOFP =%

Total Assets 34

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

Purnama Sdn Bhd
Statement of Income for the year ended December 31

2022 2021

RM % RM %

Net sales 750,000 100.0 625,000 100.0

Cost of goods sold 465,000 62.0 405,000 64.8

Gross profit 285,000 38.0 220,000 35.2 Vertical
Selling expenses 115,000 15.3 97,200 15.6 Analysis

Administrative expenses 78,000 10.4 58,250 9.3 35

Total operating expenses 193,000 25.7 155,450 24.9
Income before income taxes 92,000 12.3 64,550 10.3

Income tax expense 21,160 2.8 15,492 2.5

Net income 70,840 9.4 49,058 7.8

Purnama appears to be a profitable enterprise that is Hint:
becoming even more successful. The formula for calculating
these statement of income
percentage is
Each item on SOI = %

Total Assets

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

Enables a comparison of companies of different sizes.

Statement of Income for the year ended December 31, 2022

Purnama Sdn Bhd Mega Bhd

RM % RM %

Vertical Net sales 750,000 100.0 26,405,000 100.0
Analysis
Cost of goods sold 465,000 62.0 15,738,000 59.6

Gross profit 285,000 38.0 10,667,000 40.4

Selling expenses 115,000 15.3 2,350,000 8.9 Selling
expense for
Administrative expenses 78,000 10.4 5,906,000 22.4 Purnama is
15.3% of
Total operating expenses 193,000 25.7 8,256,000 31.3 its net sales,
whereas
Income before income taxes 92,000 12.3 2,411,000 9.1 8.9% for
Mega.
Income tax expense 21,160 2.8 554530 2.1
36
Net income 70,840 9.4 1,856,470 7.0

Net income for Purnama
is 9.4% of its net sales,
whereas 7% for Mega.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

Ratio Analysis

What is it?

• expresses the relationship among selected items of financial

statement data.

Financial Ratio Classifications

• There are three classifications:

Liquidity Profitability Solvency

Measures the short-term Measures the income or Measures the ability of the
ability of the company to operating success of a company to survive over a
pay its maturing company for a given long period of time.
obligations and to meet period of time.
unexpected needs for
cash.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 37

Ratio Analysis

Usefulness

• Meaningful when there is a comparison using ratio.

Types of comparison

• The discussion of ratios will include the following types of

coInmtpraacroismonpsa: ny Intercompany

comparisons comparisons

• Different year. Industry average • Different company -
comparisons competitor.

• Industry average.

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Ratio Analysis

Liquidity ratios

Purpose Interested Ratios
party
Measure the short- 1. Current ratio
term ability of the Short-term creditors 2. Acid-test ratio
company to pay its such as bankers and 3. Accounts receivable
maturing obligations
suppliers turnover
and to meet 4. Inventory turnover
unexpected needs for

cash

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 39

Ratio Analysis

Liquidity ratios - formula

Current Ratio Acid-test ratio Accounts receivable Inventory turnover
turnover
= Current assets Cash + S/term Investment Cost of Goods Sold
Current liabilities + Acct. Receivable (Net) Net credit sales = Average Inventory
= Current liabilities = Average Net • Measures the number of
• Indicates a company’s • Indicates a company’s
capacity to repay short- capacity to pay off current Account Receivable times, on average, the
term loans due within the commitments using just its inventory is sold during
next year. most liquid assets. • Indicates how the period.
effectively a business • A higher ratio indicates
• How many dollars in collects credit from its that the company’s
current assets to cover debtors. product is in high demand
each dollar in current and sells quickly.
liabilities? • Measures the number
of times, on average, 40
the company collects
receivables during the
period.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022

Bintang Sdn Bhd
Statement of Financial Position as at December 31

2022 2021

Cash 40,000 30,000

Short-term investments 20,000 18,000

Receivables (net) 100,000 90,000

Inventories 80,000 60,000

Liquidity Total current assets 240,000 198,000 During 2022, net sales were
Ratio Total current liabilities 100,000 90,000 RM950,000, and cost of goods sold
was RM770,000.

a) Current ratio = 240,000
= Current assets 100,000
Current liabilities
= 2.4:1

Ratio of 2.4:1 means that for every ringgit of current liabilities, Bintang has RM2.40 of current assets.

b) Acid-test ratio = 160,000
= Cash + S/term Investment + Acct. Receivable (Net) 100,000
Current liabilities
= 1.6:1

Ratio of 1.6:1 means that for every ringgit of current liabilities, Bintang has RM1.60 of liquid current

assets.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 41

Bintang Sdn Bhd
Statement of Financial Position as at December 31

2022 2021

Cash 40,000 30,000

Short-term investments 20,000 18,000

Receivables (net) 100,000 90,000

Inventories 80,000 60,000

Total current assets 240,000 198,000 During 2022, net sales were RM950,000,
and cost of goods sold was RM770,000.
Total current liabilities 100,000 90,000

c) Accounts receivable turnover = 950,000 Liquidity
= Net credit sales Ratio
Average Net Acct. Receivable [(100,000 + 90,000)/2]
= 10 times

On average, Bintang collects its accounts receivable 10 times during 2022.

d) Inventory turnover = 770,000
= Cost of Goods Sold [(80,000 + 60,000)/2]
Average Inventory
= 11 times

On average, Bintang sold its inventories 11 times during 2022.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 42

Ratio Analysis

Profitability ratios

Measure the income or Investors and companies
operating success of a themselves - to track
operating performance
company for a given
period of time.

1. Gross profit margin
2. Net profit margin
3. EBITDA margin
4. Asset turnover
5. Return on assets

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 43

Ratio Analysis

Profitability ratios - formula

Gross profit margin Net profit margin

= (Sales – Cost of Goods Sold) / Sales x 100%. = Profit After Tax / Sales x 100%.
Measures the percentage of each dollar of sales Measures the percentage of each dollar
of sales that results in net profit.
that results in gross profit.
EBITDA margin
Asset turnover
= (PAT + Interest + Taxes + Depreciation
= Net sales / Average total assets. + Amortization) / Sales x 100%.
Measures how efficiently a company uses Measures the percentage of each dollar
of sales that results in EBITDA.
its assets to generate sales.

Return on assets

= Net income / Average total assets.
An overall measure of profitability.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 44

Selected information of Mentari Sdn. Bhd. for the year ended December 31, appears below:

Total assets 2022 2021
Long-term debt 1,200,000 800,000
Net credit sales 300,000
Cost of goods sold 400,000 700,000
Interest expense 1,330,000 530,000
Income tax expense 25,000
Net income 900,000 29,000
50,000 85,000
60,000

150,000

Profitability a) Gross Profit Margin = [(1,330,000 – 900,000) / 1,330,000] x 100%
ratios = (Sales – Cost of Goods Sold) / Sales x 100%. = 32.3%

Gross profit of Mentari is 32.3% of its sales.

b) Net Profit Margin
= Profit After Tax / Sales x 100%. = [150,000 / 1,330,000] x 100%
= 11.3%

Net profit of Mentari is 11.3% of its sales.

c) EBITDA Margin = [(150,000 + 50,000 + 60,000) / 1,330,00] x 100%
= (PAT + Interest + Taxes + Depreciation = 19.5%
+ Amortization) / Sales x 100%.

Net profit of Mentari is 11.3% of its sales.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 45

Selected information of Mentari Sdn. Bhd. for the year ended December 31, appears below:

Total assets 2022 2021
Long-term debt 1,200,000 800,000
Net credit sales 300,000
Cost of goods sold 400,000 700,000
Interest expense 1,330,000 530,000
Income tax expense 25,000
Net income 900,000 29,000
50,000 85,000
60,000

150,000

d) Return on assets = 150,000/[(1,200,000 +800,000)/2] x 100% Profitability
= Net income / Average total assets = 15% ratios

Mentari earned 15% profit for every ringgit it has in assets.

e) Asset turnover = 1,330,000 / [(1,200,000 +800,000)/2]
= Net sales / Average total assets = RM1.33

Mentari generated RM1.33 in sales for every ringgit in total assets.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 46

Ratio Analysis

Solvency ratios Purpose

Interested party measure the ability of a company to
survive over a long period of time.
Investors
Lenders Ratios

• Debt to Assets
• Times Interest Earned

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 47

Ratio Analysis

Solvency ratios - formula

Debt to Assets 01 Times Interest Earned
02
= Total debts / Total Assets. = Income before income taxes
Measures the percentage of and interest expense / Interest
the total assets that creditors expense
Indicates company’s ability to
provide. meet interest payments as they
come due.

Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022 48

Selected information of Mentari Sdn. Bhd. for the year ended December 31, appears below:

Solvency Total assets 2022 2021
ratios Long-term debt 1,200,000 800,000
Current liabilities 300,000
Net credit sales 400,000 110,000
Cost of goods sold 140,000 700,000
Interest expense 1,330,000 530,000
Income tax expense 900,000 25,000
Net income 29,000
50,000 85,000
60,000
150,000

a) Debt to Assets = [(400,000 + 140,000) / 1,200,000] x 100%
= Total debts / Total Assets = 45%

45% of the Mentari’s assets are funded using debt.

b) Times Interest Earned = [(150,000 + 60,000 + 50,000) / 50,000] =
= Income before income taxes and interest 11.3 times
expense / Interest expense

Mentari’s income is 11.3 times greater than its annual interest expense.

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Hakcipta Pembangunan Modul Sijil Profesional SJA FEP 2022