Financial Statement Analysis Using Horizontal Vertical And Ratio Analysis Finance Essay

Horizontal analysis is the fiscal statements of a house of consecutive twelvemonth ‘s present side-by-side. The map of horizontal analysis is to compare the figures of the current period with the past period, through this can assist steadfast and it stockholders analyze their public presentation and betterment of failings, so horizontal analysis is an of import portion of the fiscal statements and one-year studies.

Vertical analysis is a method of analyzingA fiscal statementsA in which each point in the statement is represented as a per centum of a individual larger point. This method of analysis may be used with both balance sheets and income statements as a manner of coherently comparing big pecuniary sums and doing sense of the information. One of the advantages of perpendicular analysis is that it makes comparings between companies of different sizes within the same industry easier to fix. It besides allows a company to weigh its current studies against studies from its yesteryear, uncovering possible tendencies or countries that need betterment. The perpendicular analysis besides uses to unwrap the internal construction of the house.

Ratio analysisA is a comparative magnitude of two selected numerical values taken from an enterprise’sA fiscal statements, it helps to place the fiscal strength and failings of a company. Ratio Analysis enables the concern proprietor or director to descry tendencies in a concern and to compare its public presentation and status with the mean public presentation of similar concerns in the same industry.

The intent of making fiscal statement analysis is to avoid the mistake decisions about the house ‘s fiscal status. In this assignment inquiry will compare between Top Glove Corporation Berhad and Supermax Corporation Berhad which are in the industrial merchandises sector and both of the companies are manufacture baseball mitt in Malaysia.

The background of Top Glove Corporation Berhad was Top Glove is the largest gum elastic baseball mitt maker in the universe. Since its origin in Malaysia in 1991, get downing from 1 mill in 1991 with 3 production lines, we have grown springs and bounds to where we are today, Top Glove has embarked on an impressive enlargement program to go the universe ‘s largest gum elastic baseball mitt maker. As at February 2011, Top Glove Corporation Berhad has 20 mills, 379 production lines and entire production capacity is 33.75billion baseball mitt per twelvemonth. Top Glove Corporation Berhad was listed in the Bursa Saham Kuala Lumpur in twelvemonth 2001 and in a short span of somewhat more than a twelvemonth, Top Glove Corporation Berhad ‘s listing has been successfully promoted from the Second Board to the Main Market of the Kuala Lumpur Stock Exchange on May 16, 2002. Top Glove has a stockholder fund of RM1.09 billion or USD358 million with an one-year turnover of about RM2.08 billion or USD682 million as at 31 August 2010. We are besides one of the component stocks of the FTSE Bursa Malaysia ( “ FBM ” ) Mid 70 Index, FBM Top 100 Index and FBM Emas Index.Customers ‘ Satisfaction is Top Glove chief focal point. Top Glove is really focussed on being a “ One-stop Complete Glove Sourcing Center ” . Gaining the importance of continuously remaining in front in merchandise development, Top Glove has placed a batch of accent in Research and Development to bring forth a broad and diversified scope of high quality and value-added baseball mitt merchandises in order to provide to the ever-increasing outlooks of end-users. The company collaborates closely with authorities bureaus and Ministries to maintain itself abreast of the latest development in gum elastic research engineering. The upgrading and coactions of R & A ; D is to enable Top Glove to be a universe category cost effectual manufacturer with the most extended scope of premium quality baseball mitt merchandises.

Background of Supermax Corporation Berhad was founded by Dato ‘ Seri Stanley Thai and his married woman Datin Seri Cheryl Tan in 1987 as a trading concern administering latex baseball mitts. Their low beginnings finally lead to their dream to bring forth premium quality baseball mitts of their ain. This motivated them to work hard and in 1989, they started their first fabrication installation with merely a little squad of committed and dedicated employees. With a concern foresight and in replying the Government ‘s call to trade name Malayan merchandises, Supermax ventured into ain trade name fabrication and became the first OBM ( ain trade name fabrication ) latex glove maker in Malaya when it launched its first trade name, Supermax. SUPERMAX Corporation BerhadA a universe category latex glove pudding stone listed on the Main Board of Bursa Malaysia Securities Berhad, is a taking international maker, distributer and seller of high quality medical baseball mitts. SupermaxA presently exports to over 145 states worldwide in the parts of America, Europe, Middle East, Asia and the South Pacific. As an own-brand maker, Supermax has developed a scope of successful trade names such as Supermax, Aurelia, Maxter, Medic-dent and Super baseball mitts which are trusted and recognized by research labs, infirmaries, druggists, physicians and sawboness around the world.A Supermax GroupA produces up to 16 billion pieces of baseball mitts per twelvemonth, meeting about 11 % of the universe demand for latex scrutiny gloves.A Supermax GroupA has nine ( 9 ) fabrication workss based in Malaysia equipped with the state-of-the-art machinery, energy-saving biomass system and a research and development Centre. SupermaxA has six ( 6 ) ain distribution centres cum corporate offices based in the United States of America, Brazil, Europe, Australia and Canada, and collaborates with 250 independent distributers.

Above is the background of the both companies and below will be the comparison of fiscal statement analysis between Top Glove Corporation Berhad and Supermax Corporation Berhad.

1 ) Internet Working Capital

Net Working capital is for step of the operating liquidness available for a company to utilize in developing and turning its concern.

Statement Analysis

Calculation Formula

Top GLOVE CORPORATION BERHAD

( RM )

SUPERMAX CORPORATION BERHAD

( RM )

Net Working Capital

Current Assetss

Current Liabilitiess

511,497,000

244,059,000

=

267,438,000

381,178,090

213,691,706

=

167,486,384

From the computation of both companies can cognize that Top Glove Corporation Berhad is better than Supermax Corporation Berhad, because Top Glove Corporation Berhad has the more net working capital than Supermax Corporation Berhad it shows that Top Glove Corporation Berhad has the more ability to pay off its short-run liabilities.

2 ) Current Ratio

Current Ratio is to mensurate the ability to run into its current liabilities out if current assets.

Statement Analysis

Calculation Formula

Top GLOVE CORPORATION BERHAD

( RM )

SUPERMAX CORPORATION BERHAD

( RM )

Current Ratio

Current Assetss

Current Liabilitiess

511,497,000

244,09,000

=2.1

=1: 2.1

381,178,090

213,691,706

=1.78

=1: 1.78

From the computation of both companies can cognize that Top Glove Corporation Berhad is better than Supermax Corporation Berhad, because Top Glove Corporation Berhad has the more ratios it means Top Glove Corporation Berhad is more capable to paying its duties for two times of its current liabilities. But Supermax Corporation Berhad merely can pay its current liabilities one time merely.

3 ) Acid-Test ( Quick ) Ratio

Acid-Test Ratio is to find whether a house has plenty short-run assets to cover its immediate liabilities without selling stock list. The acid-test ratio is far more strenuous than the on the job capital ratio, chiefly because the on the job capital ratio allows for the inclusion of stock list assets.

Statement Analysis

Calculation Formula

Top GLOVE CORPORATION BERHAD

( RM )

SUPERMAX CORPORATION BERHAD

( RM )

Acid-Test ( Quick ) Ratio

Current Assets – ( Inventory Prepare Expenses )

Current Liabilitiess

511,497,000- ( 119,053,000+14,200,000 )

244,059,000

=1.55

=1: 1.55

381,178,090- ( 116,199,707+4,741,403 )

213,691,706

=1.21

=1: 1.21

From the computation of both companies can cognize that Top Glove Corporation Berhad is better than Supermax Corporation Berhad, because Top Glove Corporation Berhad has the more ratios it means Top Glove Corporation Berhad is has more ability to pay back the current liabilities without selling stock list and the ratio of Top Glove Corporation is 1: 1.55 more than Supermax Corporation Berhad which is 1: 1.21.

4 ) Accounts Receivable Employee turnover

A The receivables turnoverA ratio is an activity ratio, A mensurating how expeditiously a steadfast uses its assets. It besides indicates the figure of times the house roll uping its recognition during the twelvemonth.

Statement Analysis

Calculation Formula

Top GLOVE CORPORATION BERHAD

( RM )

SUPERMAX CORPORATION BERHAD

( RM )

Histories Receivable Employee turnover

Net Credit Gross saless

Average Histories Receivable

1,529,077,000

206,229,500

=7.41

803,632,619

101,931,571

=7.88

From the computation of both companies can cognize that Supermax Corporation Berhad is better than Top Glove Corporation Berhad, because Supermax Corporation Berhad has the more times to roll uping its recognition during the twelvemonth.

5 ) Average Collection Period

Average Collection Period is to bespeak the figure of yearss it takes to roll up their histories receivable.

Statement Analysis

Calculation Formula

Top GLOVE CORPORATION BERHAD

( RM )

SUPERMAX CORPORATION BERHAD

( RM )

Average Collection Period

Account Receivable

Daily Credit Gross saless

198,263,000

4,189,250

=47.33

79,164,263

2,201,733.20

=35.96

From the computation of both companies can cognize that Supermax Corporation Berhad is better than Top Glove Corporation Berhad, because Supermax Corporation Berhad has the lower mean aggregation period which is 35.96days to turn its receivable to hard currency, Supermax Corporation Berhad is 11days shorter than Top Glove Corporation Berhad.

6 ) Inventory Turnover Ratio

A ratio demoing how many timesA a company’sA stock list is sold and replaced over a period.

Statement Analysis

Calculation Formula

Top GLOVE CORPORATION BERHAD

( RM )

SUPERMAX CORPORATION BERHAD

( RM )

Inventory Turnover Ratio

Cost of Goods Sold

Average Inventory

1,155,975,000

138,409,500

=8.35

=1: 8.35

536,933,813

125,853,585

=4.27

=1: 4.27

From the computation of both companies can cognize that Top Glove Corporation Berhad is better than Supermax Corporation Berhad, because Top Glove Corporation Berhad has the more ratios it means Top Glove Corporation Berhad is holding strong gross revenues than Supermax Corporation Berhad.

7 ) Fixed Asset Turnover

Fixes Asset Turnover is calculate to cognize how a house ‘s used its fixed assets expeditiously to bring forth gross or income.

Statement Analysis

Calculation Formula

Top GLOVE CORPORATION BERHAD

( RM )

SUPERMAX CORPORATION BERHAD

( RM )

Fixes Asset Turnover

Net Gross saless

Entire Fixed Asset

1,529,077,000

620,912,000

=2.46

803,632,619

564,071,142

=1.42

From the computation of both companies can cognize that Top Glove Corporation Berhad is better than Supermax Corporation Berhad, because Top Glove Corporation Berhad has more fixes plus turnover than Supermax Corporation Berhad and it show that Top Glove Corporation Berhad can expeditiously to bring forth gross or income.

8 ) Entire Asset Employee turnover

Entire Asset Turnover is to measure a company ‘s ability to utilize it plus expeditiously to bring forth gross.

Statement Analysis

Calculation Formula

Top GLOVE CORPORATION BERHAD

( RM )

SUPERMAX CORPORATION BERHAD

( RM )

Entire Asset Employee turnover

Net Gross saless

Entire Asset

1,529,077

1,132,409

=1.35

803,632,619

945,249,232

=0.85

From the computation of both companies can cognize that Top Glove Corporation Berhad is better than Supermax Corporation Berhad, because Top Glove Corporation Berhad has more entire plus turnover than it show that the company is use it plus expeditiously to bring forth gross.

9 ) Debt Ratio

Debt ratio shoes the per centum of entire financess obtained from creditors.

Statement Analysis

Calculation Formula

Top GLOVE CORPORATION BERHAD

( RM )

SUPERMAX CORPORATION BERHAD

( RM )

Debt Ratio

Entire Liabilitiess

Entire Assetss

286,432,000

1,132,409,000

=0.25

=25 %

386,414,439

945,249,232

=0.41

=41 %

From the computation of both companies can cognize that Top Glove Corporation Berhad is better than Supermax Corporation Berhad, because Top Glove Corporation Berhad has little debt ratio which is 25 % of debt, 75 % of equity and 16 % less than Supermax Corporation Berhad, creditor would wish to see a low debt ratio.

10 ) Debt/ Equity Ratio

Debt / Equity Ratio is a important step of solvency since a high grade of debt in the capital construction may do it hard.

Statement Analysis

Calculation Formula

Top GLOVE CORPORATION BERHAD

( RM )

SUPERMAX CORPORATION BERHAD

( RM )

Debt/equity Ratio

Entire Liabilitiess

Stockholder ‘s Equity

286,432,000

824,513,000

=0.35

=1: 0.35

386,414,439

558,834,793

=0.69

=1: 0.69

From the computation of both companies can cognize that Top Glove Corporation Berhad is better than Supermax Corporation Berhad, because Top Glove Corporation Berhad has little debt/equity ratio which is per RM1 merely has 35sen debt. It is much lower than Supermax Corporation Berhad which is per RM1 has 69sen debt.

11 ) Time Interest Earned Ratio