Study About Analyzing The Financial Statements Finance Essay

In my assignment inquiry 1, I will happen the most recent fiscal statements for two companies in the same industry and I will measure the fiscal place and public presentation for each of the two companies by utilizing accounting ratio analysis. What is fiscal statement analysis? Fiscal statement analysis is a procedure that usage to identifying of stableness, viability and profitableness of a concern. Next, I will calculate and compare of the accounting ratio between the two companies and I will compose down the restriction of utilizing accounting ratios for public presentation analysis in my decision.

About my inquiry 2, there are three different ways for reassigning capital or fund from rescuers to borrowers in the fiscal market, which are direct transportations of money and securities, investing banking house and fiscal mediators. I will place and discourse about these three different ways in my assignment.

The intent of analyze the fiscal statement is to avoid the incorrect decisions about the house ‘s fiscal status. There are several mensurating instruments that use to measure the fiscal statement, they are horizontal analysis, perpendicular analysis, and ratio analysis. The ratio analysis is a utile index that uses to place the fiscal strengths and failings of a company. Most of the ratio can be calculated from the fiscal statements, and the fiscal ration can be divided into five groups, there are liquidity ratios, profitableness ratio, plus turnover ratio, dividend policy ratios and fiscal purchase ratios ( debt direction ratio ) .

Following, I will calculate and compare the accounting ratio between the DIGI Berhad and Axiata Group Berhad, both of them are the service industry. The DIGI is a nomadic service supplier in Malaysia. The services are include the voice under their prepaid programs and postpaid programs, informations programs and services, SMS, international naming card, WAP service and international roaming. DIGI is owned in bulk by Telenor ASA of Norway with 49 % . On the 24 May 1995, the DIGI became the first Telco in the Malaysia and they start to establish and run a to the full digital cellular web. DIGI are besides the first to offer the GPRS and subsequently EDGE in Malaysia in 14 May 2004. They use the native dialing prefix identifier of “ 010 ” , “ 0143 ” , “ 016 ” , “ 0146 ” and the “ 0149 ” . Next, the Axiata Group Berhad is the emerging leader in Asian Mobile telecommunications. The group, one of the largest telecommunications company in the part, has extended operations and concerns in other 10 states in Asia. They provide a comprehensive scope of nomadic communicating services to a combined base of over 94 million endorsers. The Group presently has commanding the involvements in its nomadic communications operations in Indonesia, Bangladesh, Sri Lanka, Cambodia and Malaysia every bit good as strategic bets in Iran, Singapore, Pakistan, India and Thailand through its assorted subordinates and affiliates. Their nomadic subordinates and affiliates operate under the trade name names “ XL ” in Indonesia, “ AKTEL ” in Bangladesh, “ Dialogue ” in Sri Lanka, “ Hello ” in Cambodia, “ M1 ” in Singapore, “ MTCE ” in Iran, “ Idea ” in India and “ Celcom ” in Malaysia.

First, the liquidness ratio is use to find a company ability to unclutter the short-terms debts duties. The liquidness ratio includes the net working capital, acid-test ( speedy ) ratio and current ratio. The current ratio is use to mensurate the ability to run into its current liabilities out of current assets. The net on the job capital is a measuring of the operating liquidness available for a company to utilize in developing and turning its concern. About the acid-test ( speedy ) ratio, it is a more conservative version of the current ratio and it is use to bespeak a house ‘s liquidness excepting stock lists relative to its current liabilities. The chief difference between the speedy ratio and the current ratio is the speedy ratio does non include the stock lists. The expression that usage to cipher the current ratio is ( Current Assets/Current Liabilities ) , and the expression that usage to cipher the Net Working Capital is ( Current Assets – Current Liabilities ) and about the expression that usage to cipher the Acid-Test Ratio is ( Current Assets – ( Inventory + prepaid disbursals ) / Current Liabilities ) .

DIGI

Axiata

Current Ratio = 874,096 / 2,025,786

= 0.431

Current Ratio = 3,697,735 / 6,633,770

= 0.557

Net Working Capital = 874,096 – 2025786

= -1,151,690

Net Working Capital = 3,697,735 – 6,633,770

= -2,936,035

Acid-Test Ratio = 874,096 – ( 13,061 + 0 ) / 2,025,786

=0.425

Acid-Test Ratio = 3,697,735 – ( 35,344 + 0 ) / 6,633,770

=0.552

Decision: As a consequence, the current ratio between DIGI and Axiata are non higher than 1, so that means that they are difficult to run into their short-run duties. But the current ratio of Aixata is higher than DIGI, so that means Axiata is better than DIGI because Axiata have a better short-run fiscal standing to run into their short-run debt duties. Second, about the net working capital between DIGI and Axiata, the DIGI is better than Axiata because the net work capital of DIGI is higher than Axiata. But the DIGI and Axiata may run into problem for paying back the creditors in short term because of their current assets are non transcend their current liabilities. Following, about the acid-test ratio between DIGI and Axiata, the Axiata is higher than DIGI so means that Axiata is better because Axiata have more ability to run into their short-run duty with their liquid assets. But the acid-test ratios of DIGI and Axiata are less than one, that will do the house will hard to run into their current duties.

Following is about the plus use ( activity ) ratios, this ratio is use to find how efficaciously of the house pull offing their assets and it is the necessary to measure the liquidness or activity of specific current histories. Asset utilization ratios are include “ Histories receivable turnover ” , “ Average aggregation period ” , “ Inventory turnover ratio ” , “ Fixed plus turnover ” and “ Entire plus turnover ” . The histories receivable turnover is use to bespeak the figure of times the house roll uping their recognition during the twelvemonth. The expression that usage to cipher the histories receivable turnover is ( Net recognition gross revenues / Average histories receivable ) . The 2nd is mean aggregation period, this is use to bespeak the figure of yearss that the house takes to roll up on their histories receivable. The expression of the mean aggregation period is ( Accounts receivable / Daily recognition gross revenues ) . Following is the stock list turnover ratio, this ratio is use to bespeak how many times of a house ‘s stock list is replaced and sold during the twelvemonth. The expression of the stock list turnover ratio is ( cost of goods sold / mean stock list ) . About the fixed plus turnover, this ratio is use to steps a house ability to bring forth the gross or income from the fixed-asset investings. The expression of the fixed plus turnover is ( net gross revenues / entire fixed plus ) . Following is the entire plus turnover, it is use to measure the house ‘s ability to utilize the plus expeditiously to bring forth gross. The expression of calculate the entire plus turnover is ( net gross revenues / entire plus )

DIGI

Axiata

Histories receivable turnover = 4,909,565 / ( 420,336 + 420,807 ) / 2

= 4,909,565 / 420,571.5

= 11.67

Histories receivable turnover =13,105,054 / ( 1,559,158 + 1,539,878 ) / 2

=13,105,054 / 1,549,518

= 8.46

Average aggregation period = 420,336 / ( 4,909,565 / 365 )

= 420,336 / 13,451

=31.25

Average aggregation period = 1,559,158 / ( 13,105,054 / 365 )

= 1,559,158 / 35,904

= 43.43

Inventory turnover ratio = N/A / 15,057

Inventory turnover ratio = N/A / 56,303.50

Fixed plus turnover = 4,909,565 / 3,858,348

= 1.27

Fixed plus turnover = 13,105,054 / 11,630,137

= 1.13

Entire Asset turnover = 4,909,565 / 4,732,444

= 1.04

Entire Asset turnover = 13,105,054 / 37,144,355

= 0.35

Decision: As a consequence, the histories receivable turnover of the DIGI is higher that Axiata so the DIGI is better because the higher histories receivable means that DIGI is more efficient in aggregation of histories receivable and extension of the recognition. About the mean aggregation period, the Axiata is higher than DIGI, so that means the DIGI is better than Axiata because the short aggregation period means DIGI can have rapidly of the payment by debitors and that will besides can diminish the opportunity of bad debts. Following, about the fixed plus turnover, the DIGI is higher than Axiata, so means that DIGI is better. That besides means that DIGI is more expeditiously to utilize their fixed assets to bring forth the gross or income. After that, the entire plus turnover of the DIGI is higher than Axiata, so the DIGI is better than Axiata. As this consequence, means that the DIGI is more expeditiously to utilize their plus to bring forth the gross.

Following is the purchase ratio, and besides can name a debt direction, this ratio is use to measure a house ‘s ability to utilize their plus expeditiously to bring forth the gross. Following, it besides indicates a steadfast ability to run into their long term duties as they become due. Besides that, it besides concentrates on the long-run fiscal and operating construction of the concern. The purchase ratio is include the debt ratio, debt/equity ratio and times involvement earned ( involvement coverage ) ratio. The debt ratio is usage to demo the per centum of the entire financess obtained from creditors, such as provider or bank. The expression that usage to cipher the debt ratio is ( Entire Liabilities / Total Assets ) . Second is the debt/equity ratio, this ratio is a important step of solvency since a high grade of debt in the capital construction may do it hard. The expression that usage to cipher the debt/equity ratio is ( Entire Liabilities / Stockholder ‘s Equity ) . Following is the times involvement earned ( involvement coverage ) ratio. This ratio is reflects the figure of times net incomes before-tax that cover involvement rates and it besides shows how much of a diminution in net incomes a company can absorb. The expression of calculate the times involvement earned ratio is ( Net incomes before involvement and revenue enhancement / Interest disbursal ) .

Debt Ratio = 3,210,976 / 4,732,444

= 0.68

Debt Ratio = 18,263,907 / 37,144,355

= 0.5

Debt/Equity ratio = 3,210,976 / 1,521,468

= 2.1

Debt/Equity ratio = 18,263,907 / 18,184,085

= 1

Timess involvement earned ratio = 1,407,045 / 40,590

= 34.66

Timess involvement earned ratio = 3,425,252 / 759,031

= 4.5

Decision: foremost, about the debt ratio, the ratio of DIGI and Axiata is non greater than 1, this means that their debt is less than their assets. But the debt ratio of Axiata is lower than DIGI, so means that the Axiata is better. Following is about the Debt/Equity ratio, the ratio of the Axiata is less than the DIGI, so that means the Axiata is better than DIGI because the Axiata have more ability to utilize their equity to pay the liabilities. About the times involvement earned ratio, the DIGI is higher than Axiata so means that Axiata is better than DIGI because the DIGI have the high ratio of times involvement, that indicate that the DIGI has an unwanted deficiency of debt or they are paying down excessively much of debt.

Following is about the profitableness ratios, this ratios is an indicant of house ‘s fiscal state of affairs during the twelvemonth. Besides that, this ratio is besides usage to analysis how efficaciously of the house being managed and how the company ‘s ability to gain net income and return on investing. The profitableness ratio are include gross net income border, net net income border, return on entire assets, and return on common equity. The gross net income border is the per centum of each dollar left over after the concern has wage for their goods. The expression of calculate the gross net income border is ( Gross Profit / Net Gross saless ) . Second is the net net income border, it is indicates the profitableness generated from gross or income and it ‘s of import step of operating public presentation. The expression that usage to cipher the net net income border is ( Net Net income / Net Gross saless ) . The 3rd is the return on entire assets, it indicates the efficiency with direction has used its available resources to bring forth income. The expression that usage to cipher the return on entire assets is ( Net Income / Average Total Assets ) . Following is the return on common equity, it is indicates the rate of the return earned on the common shareholder ‘s investing. The expression that usage to cipher the return on common equity is ( Net incomes Available to Common Stockholders / Average Stockholders Equity.

Gross net income border = N/A / 4,909,565

Gross net income border = N/A / 13,105,054

Net net income border = 1,000,471 / 4,909,565

= 0.2

Net net income border = 1,755,908 / 13,105,054

= 0.13

Tax return on entire assets = 1,000,471 / 4,694,148

= 0.21

Tax return on entire assets = 1,755,908 / 37,248,376

= 0.05

Tax return on common equity = 1,000,471 / 1,709,320

= 0.59

Tax return on common equity = 1,755,908 / 14,700,404

= 0.12

Decision: First, about the net net income border, the ratio of DIGI is higher than Axiata so means DIGI is better because the DIGI have more ability to cover themselves when the difficult times and it besides have more advantages over their competition. Second, about the return on entire assets, the DIGI is higher than Axiata, that means the DIGI is better because higher of the return on entire assets means the DIGI is more efficient to pull off their available resources to bring forth the income. Following, about the return on common equity, the DIGI is more than Axiata so it means the DIGI is better because the higher of the return on common quity means that the DIGI have bring forthing more hard currency internally from the return on the common shareholder ‘s investing.

The last ratio is the market value ratio, this ratios is relates the house ‘s stock monetary value to its net incomes or book value per portion. Besides that, the discoverers besides use these ratio to supervise and measure the advancement if their investings. The market value ratios are include the earning per portion, price/earnings ratio, book value per portion and dividend ratios. The net incomes per portion is indicates the sum of net incomes for each common portion held. The expression that uses to cipher the net incomes per portion is ( { Net Income – Preferable Dividends } / Total common portions outstanding ) . Second, about the price/earnings ratio, it is indicates that the puting public considers the company. The expression that usage to cipher the price/earnings ratio is ( Market Price Per Share / Earnings Per Share ) . Third, about the book value per portion, it is similar to the earning per portion but has relate the shareholder ‘s equity to the figure of portion outstanding and giving the portions a natural value. The expression that usage to cipher the book value per portion is ( Entire Stockholder ‘s Equity – Preferred Dividends ) / Shares Outstanding. Following, there are two relevant ratios in dividend ratio, which are dividend outputs and Dividend payout, the dividend outputs is the per centum of dividends paid to stockholders in relation to the monetary value of the stock. The expression that usage to cipher the dividend outputs is ( Dividends Per Share / Market Price Per Share ) . The dividend payout is usage to find if a company bring forth a sufficient degree of hard currency flow in order to pay dividends to the investors or stockholder. The expression that usage to cipher the dividend payout is ( Dividends Per Share / Earnings Per Share ) .

Net incomes per portion = ( 1,000,471 – 0 ) / 777,500

= 1.29

Net incomes per portion = ( 1,755,908 – 0 ) / 8,445,154

= 0.21

Price/Earnings ratio = 17.07 / 1.29

=13.23

Price/Earnings ratio = 3.74 / 0.21

= 17.81

Book value per portion = 1,521,468 / 777,500

= 1.96

Book value per portion = 18,184,085 / 8,445,154

= 2.15

Dividend output = 54.0sen / 17.07

= 3.16sen

Dividend output = N/A

Dividend payout = 54.0sen / 1.29

= 41.9sen

Dividend payout = N/A

Decision: First, the net incomes per portion of DIGI is higher than Axiata, so that means the DIGI is better because the higher of the net incomes per portion, the more money that the company is doing. Second, the price/earnings ratio of Axiata is higher than DIGI so means that the Axiata is better than DIGI because a high price/earnings ratio will suggests the investors to anticipating higher net incomes growing in the hereafter if comparison to DIGI. Next is about the book value per portion, the book value per portion of Axiata is higher than DIGI, so the Axiata is better because the higher book value indicant that the investors are more regard the house.

Those five types of the ratio which are liquidness ratio, profitableness ratio, plus use ratio, debt direction ratio and the market value ratio can assist a company to cognize their failing and strength when comparison with the other company in the same industry. They can utilize the fiscal statements analysis to acquire the information about the public presentation, fiscal place of their company. If the company wants to gain much net income, they need to utilize the fiscal statement analysis to cognize their failing and seek to get the better of their current job.

Decision

There have some restrictions and jobs when I utilizing the accounting ratio for public presentation analysis, the first restrictions is the stock list turnover ratio, the one-year study of the DIGI and Axiata does non include any information about the cost of goods sold. The 2nd restrictions is the gross net income, in the one-year study for DIGI and Axiata, they besides non hold include the information about the gross net income. Following restrictions is about the dividend output and dividend payout, the ground why I can non cipher the ratio is because there is no have any information about the dividend per portion in the Axiata ‘s one-year study.