A Financial Comparison Between Two Companies Finance Essay

A Financial Comparison Between Two Companies Finance Essay be situate the most recent fiscal statements for twain companies of resembling industry which atomic number 18 listed in KLSE (Kuala Lumpur Stock Exchange). Evaluate the pecuniary position and per songance for individually of these two companies victimization accounting oddment analysis. You atomic number 18 required to regard and comp atomic number 18 the accounting ratios surrounded by these two companies, and conclude the results of your finding. The limitations or problems of using accounting ratios for performance analysis should be include in your conclusion. existenceAccounting ratio is one number that expressed in foot check out of a nonher relationship amid two or various figures and connection that give the axe be compargond. Example it can be shown in a view from balance sheet, bring in and loss account, and budgetary control formation or in any accounting organisation that shows relationship in the midst of accounting data.The purpose of accounting ratio is simplifies the comprehension of financial statements and nail down by successful and unsuccessful firm. Other than that it overly helps in the of planning, soothsaying and assist management and it helps in case of investors and lending decision of nest egg shoreers.The 5 aspect of pipeline careful by accounting ratios is favorableness that is how remote the friendship earns wage, Liquidity is to measure the financial status, Asset management is how utmostthe high society can manage their finance, Debts management is how they manage their tax, and Market honor of enthronisation to ordinary parcel kayoedholders is how they create their grocery storeplace take account harbour.FORMULA THAT utilise MEASURE EACH ASPECT OR AREA OF BUSINESS net incomeability of bon tonA) Gross profit markup (%) = - vitamin CGross profit = gross revenue equipment casualty of the right / Opening personal credit line + Purchase Closing stockB) Gross profit border (%) = - light speed pay sales comfort = Sales Return inwardsC) Operating profit moulding on sales (%) = - atomic number 6D) Profit margin on sales (%) =- deoxycytidine monophosphate= Profit aft(prenominal) refer, subsequently tax, after preference dividend after minority interest - one CNet sales care forE) Basic earning power (BEP) = - 100 bring addition = coifed assets + Current assetF) Return on Total assets = - 100= Profit after interest, after tax, after preference dividend after minority interest -100Net sales valueG) Return on customary blondness = -100= Profit after interest, after tax, after preference dividend after minority interest -100( Ordinary take slap-up + Reserves ) OR (Total assets Total liabilities)Liquidity of gildA) Current ratio / Working capital ratio =B) Liquid ratio / quick ratio / acid running game ratio =Asset management of familyA) Inventory Turnover or Stock turnover = orB) Total A ssets Turnover =Total asset = Fixed asset + current assetC) Debtor proportion =D) old age sales large(p) =Debts managementA) Debts ratio =Total Debts = Long term liabilities + Current liabilitiesTotal asset = Fixed assets + Current assetB) Debts justness ratio =C) Times interest pull in or Interest trade =Market value of investment gunstockss to stockholdersA) give upance per share = =B) Price earnings ratio =C) Earnings yield = =D) Market charge per book value ratio = =Inter-temporal comparisons among two periods are the comparison value that happens between old age in one industry for example year 2009 and 2010. Inter-firms comparison between two companies is a contrastive accounting policies and rules and regulation that they created like in IJM BERHAD and GAMUDA BERHAD. Comparison with industry average can measure that is happen in grocery value to common stockholders in either each industry.And there are two companies are selected for pedigree performance measur ement that is IJM society BERHAD GAMUDA BERHADBACKGROUND ,INDUSTRY AND BUSINESS TYPE OF THE TWO COMPANYIJM CORPORATION BERHADIJM is a raft Berhad is an a international competitive Malaysian conglomerate with stemma in construction, properties, industries, plantations and infrastructure systematic industry. Joining of tierce telephoner energetic local construction IGB Construction Sdn Bhd was incorporated in 1981, Jurutama Sdn Bhd was incorporated in 1970 as Soon Tat Construction Sdn Bhd and Mudajaya Sdn Bhd incorporated in 1965 as Chye Hin Construction Co Ltd. IJM become grown in reputation and reputation internationally in excellent slipway of by achieving record by numerous awards.GAMUDA BERHADGamuda is a Construction , building and engineering like chief(prenominal) project on highways, airport runways, highways, railways, tunnels, water treatment plants and dams, to infrastructure mendicancy and the development of youthful townships and likewise it is a property a nd infrastructure accompany in Malaysia.The income statements and balance sheets of the two companies information that are required for business performance and it obtain the required information from the related company financial reports via internet .FORMULARatio with formula(Profitability of Company)IJM flock BerhadGamuda BerhadGross Profit markup (%) =- 100= 31.16%Gross profit = Sales Cost of the goodRM2455143000 RM2032167000= RM422976000Cost of the good sales =RM1580125000 + RM363348000 + RM8595000 + RM19973000 + RM19260000 + RM40866000= RM2032167000- 100= 20.81%Gross profit margin (%) =- 100= 23.76%Net sales value = Sales Return inwardRM2455143000 0=RM 2455143000- 100= 17.23%Operating profit margin on sales (%) =-100= 18.65%- 100= 10.58%Profit margin on sales (%) =-100= 8.29%- 100= 11.43%Basic earning power(BEP)=- 100Total assets =RM6959529000 + RM5598766000= RM12558295000= 5.96%Total assets = RM2347737000+RM4203173000= RM6550910000- 100= 3.97%Return on Total assets=- 10 0Total assets =RM6959529000 + RM5598766000= RM12558295000= 2.65%Total assets = RM2347737000+RM4203173000= RM6550910000- 100= 4.28%Return on common equity=-100= 6.48%- 100= 8.62%Ratio with Formula(Liquidity of Company)IJM Corporation BerhadGamuda BerhadCurrent Ratio== 2.091= 2.18 1Acid-test ratio=Liquid asset = Current asset -inventoryRM5598760000 -RM 529320000= RM5069446000= 1.891Liquid asset = Current asset-inventoryRM4203173000 RM79738000= 4123435000RM4123435000RM1930241000= 2.14 1Ratio with Formula( Assets counsel of Company)IJM Corporation BerhadGamuda BerhadInventory Turnover =or= 5.78 ms= 25.49 generationTotal Assets Turnover== 0.32 ages= 0.37 timesDebtor Ratio== 0.54 1= 0.65 1Days sales outstanding=0.54365days= 197.1days0.65365days= 237.25daysRatio with Formula(Debts management of company)IJM Corporation BerhadGamuda BerhadDebts ratio=Total Debts = Long time liabilities + current Liabilities = RM3303461000 +RM112250000= RM3415711000Total assets = Fix asset + Current assetRM3415711000 + RM2685225000= RM6100936000= 0.49 1Total Debts = Long time liabilities + current Liabilities = RM1312946000 + RM1930241000 = RM3243187000Total assets = Fix asset + Current assetRM2347737000 + RM4203173000 = RM6550910000= 0.50 1Debts equity ratio== 1.19 1= 11Times interest earned or Interest cover== 3.72 times= 5.93 timesRatio with Formula(Market value of investment to stockholder of company)IJM Corporation BerhadGamuda BerhadEarnings per share=== RM0.25= RM0.14Price earnings ratio=OR= 19.2 times= 22.86 timesEarnings yield==100 / 75 X RM 0.25RM0.48= 6.94%= 5.83%Market price per book value ratio==== 1.24 1== 1.99 1The Ratio Comparison between two companies for business performance measurement under each of the open headingsProfitability of the two companiesGross profit markup and gross profit margin for the (Gamuda Berhad) is turn down than (IJM Corporation Berhad) because the inefficacious and inefficient in purchasing from provider causing high(prenominal ) purchase cost, ineffective use of material and press causing higher production cost to reduce gross profit earning. For operating profit margin on sales, (Gamuda Berhad) have a lower profit earned by company from the sales made for the ineffective control on expenditures and interest cost, incur higher operating expenses and higher interest costs to reduce the profit earning exactly profit margin on sales, (Gamuda Berhad) have higher profit earned by company from the sales that is made for the effective control on its expenditures and interest costs, incurring lower operating expenses and lower interest costs to ontogenesis the profit earning than the instant company.Liquidity of the two companiesThe current ratio is offset printing company is higher than befriend company because premier company has larger do of current assets can be employ to finance its current liabilities and that testament indicates the company is financially stable and able to finance its short-run liabilities. For acid-test ratio, maiden company is also higher than the second company is because that the first company has a larger amount of liquid assets that can be used to finance its current liabilities and the company has high liquidity to finance its short-term liabilities and financially stable.Asset Management of the two companiesThe inventory turnover for the first company is higher than the second company because the first company has a fast stock turnover where the goods purchased and kept in the store are fast taken out for resale so that the stock is not accrued and notes is not tied up with the stock. For total assets turnover, the first company is also higher than the second company because first company has a higher sales generated from the assets for the effective use of assets in business activities to increase the production. Other than that, the debtor ratio and DSO, the first company is higher than the second company because the company has given lasting credit time to allow debtors owing and causing longer time taken by the company to collect currency slowly from debtors so that larger debtor balance is collected to tie up capital and bringing it to shortage of coin for paying hazard liabilities and facing short-term financial problem.Debts Management of the two companiesThe debts ratio for the first company is higher than the second company because the first company has a heavy debts preventative with larger amount of debts and explosive charge high interest cost. Company with heavy debts burden is risky for not able to finance or not able to pay back its debts or whitethornbe it is being forced to dispose or to fail its assets for paying back the debts. But for debts equity ratio, the first company is lower than the second company because the second company has a light debts burden with smaller amount of debts and objective low interest. And the times interest earned for the first company is higher than the second compan y because it has a heraldic bearing high interest charges in relation to its uncommitted profit.Market value of investment to stockholdersEarnings per share and earnings yield for the first company is lower than the second company, this indicates that the company has lower growth in business profit and resulting lower net income available to each unit share and being less attractive and lower value to the common stockholders. due to lower earnings per share, stockholders or shareholders have to use to a greater extent times of profit earning and more than times of net cash inflow and longer period to recover back their share investment. This shows the confirmation by the price earnings ratio for the first company is being higher than the second company. Market price per book value for the first company is higher than the second company, this indicates that the company share price has inequitably risen up above its corporeal asset value or book value and being not realistic to s tockholders.ConclusionIn my conclusion, the first company Gamuda Berhads performance is better than the IJM community Berhad, and this indicated (Gamuda Berhad) has better performance, because first company has a higher rate in the 5 aspect of business that measured by accounting ratio. In information problems, the base information is out of date and analysis of accounting information, and they will only identify symptoms but not the causes and this will make the company to have information problems. For inter-firm problems, every companies have to select their industry norms and the usefulness of norms based on the averages and different company have different business and financial problems and the impact on analysis. so in this matter they have theur own way to make for their problems. inquire 2Identify and discuss three different ways for transferring capital or fund from savers to borrowers in the financial market place.ANSWER QUESTION 2INTRODUCTIONFinancial market means it is a organization and people who be found to borrow property from those having some blue-chip metals to be exchanged at efficient by market price and also they refer to the stock market, wall street, even markets. In this written report there are many different build of financial market each market use different kind of matted, terms, types of parts of agricultural and customer and the asset banking. By the ending from the any type of this helps them in business grown big and investors make money and give them a lot of profit. At the same time the trading of the stock and bonds that they get in financial market take place direct between buys and sellers and also financial market can be a good relationship by domestic or international business train in communication.There are many various of types in financial market that is physical asset markets to kettle of fish with the tangible, real and physical products much(prenominal) as computer, machinery, real earth and opposite assets the financial market deal with different types of instruments such as stocks or shares, bonds, notes, owees and new(prenominal) claims or real assets with derivative securities whose values derived from changes in the price of other assets. Spot market refer to deals being bought or sold for on the delivery inside a few days where forthcoming market refers future market deals bought or sold future delivery at some future date such six months or a year in to the future.There are some major(ip) financial markets like money markets who deals asset in short term and highly liquid debt securities in borrowing and lending with original maturities in a short periods between less than one year for example it involves like certificate of deposit, federal property and asset-backed securities. Capital markets is who deals for securities where companies and presidencys can intermediate or long-term debts in a periods of one year or more than one years and also it include stock ma rket. Montage market is a market who deals with imparts on residential, commercial, industrial real estate and farmland and the federal government has confirmed that a major economic role in the mortgage loan market because real estate development is a major sector of the U.S. Economy. Consumer credit market is markets that deals with loans and autos and appliances, as well as loans for precept and vacations and provide good services. Primary markets is an market which is corporations raise capital by issuing new securities or new shares like governments or worldly concern sector institutions can obtain funding the sale of a new market come to the fore. A secondary market which is the existing and already outstanding securities or financial assets are traded among investors after they have been issued by the corporations and also called as aftermarket where have been issued securities and instruments such are bought and sold. Initial public religious offering (IOP) market that i s firm by offering securities to the public for the first time and often often issued by smaller, younger companies seeking to expand, but can also be done by large private companies tone to become publicly traded. Private market is all about transactions that worked privately and directly between two parties without going to public by independently and also they called breakup value market.There are three different ways of transferring capital or cash from savers to borrowers in financial markets and they are following pictureTRANSFER OF CAPITAL OR line of descent BETWEEN SAVERS ( MONEY LENDRE ) AND THOSE WHO NEED CAPITAL OR FUND ( BORROWERS )1. unionize transfer from savers to borrowersWhen a corporation take place in issues and sells stocks or bonds strata way to saver without giving any financial institution so the corporation as borrower will delivers securities to savers who in turn give money to the corporation and the capital directly transfersed from savers to corporat ion (borrower).Business Corporation loose corporations securities to Savers(Borrower) birth capital or property from (Money lender)2. Indirect transfer from savers to borrowers though investment banking houseInvestment bank is a unwritten the issues of corporations securities as a middlemen to the facilitate the issues by purchase and then resell the same corporation so that the money paid by savers for purchase. The investment bank receive money merely pass thought banking house.Issue corporations resell corporationsSecurities to securities toBusiness Investment SaversCorporation Banking (money(Borrower) admit Lender)Receive fund from Receive fund from3. Indirect intermediately such as a bank or uncouth funds from saver by issuing securities or certificate of deposit to savers. Than it used the fund collected to purchase and hold the securities as investment and the funds transferred from saver intermediary when pay money to financially exchange for receiving certificate of de posit . future than that this fund to other corporation paying money out of fun because they are safer and more liquid them mortgage and loans.Issue Corporations Issue intermediarysSecurities to Securities toBusiness Financial SaversCorporation (Money(borrower) Intermediary Lender)Receive fund from Receive fund fromInvestment Banking HouseCan be say that organization that underwrites and distributes the upcoming new issue of latest business corporations securities to assist corporation that is fund for financial. For example, a businessperson who produces shoes may purchase a machine that automatically stitches lather that hopes in the time saved will allow for the production of more shoes and increased sales or another example investment banking house are Merrill Lynch and Morgan Stanley Dean Witter.Financial IntermediariesThere are some specialized in financial firm that transfer of funds from savers to be demanders of capital or event borrower. The financial intermediaries gene rally big and they gain in economies of scale in analyzing the creditworthiness of potential borrower, in treat and collecting loans, and in pooling risk and for the helping individual savers to diversity their funds investments.Following are major financial intermediariesCommercial bank is a financial intermediary which collects credit from lenders in the form of deposits and lends in the form of loans holds deposits for individuals and businesses in the form of checking and thriftinesss accounts and certificates of deposit of varying maturities while a issues loans in the form of personal and business loans as well as mortgages and also they handled checking accounts and thought which is Federal Reserve System expended or assure the money supply. They also provides an ever-widening service, stock brokerage service and insurance and they are different from investment bank they lend out money to borrows and investment banks assist business corporation to raise capital or fund fr om savers.Saving and loan association is a specializes in accepting legal transfers deposits and making mortgage and other loan like collect funds from many small savers and lend out the money to house buyers and other kind of borrowers and it more significant economic function of the saving and loan association to create liquidity in capital markets.Mutual saving funds is a savings that has no stockholders and reinvests all profits in itself and the savings banks are owned their depositors and borrowers because there are no stockholders to please, mutual savings banks are often very conservative with how they invest deposits. assurance unions is a non-profit financial institution that owned and operated entirely by members and also it provide financial services for their members, including savings and lending. In large organizations and companies may organize credit unions for their members and employees, respectively. They are often the chepast source of funds available to indivi dual to borrowers.Pension funds is a retirement plans funded by corporation or government agencies for their workers and administered by trust departments of commercial banks or by life insurance companies. It also a funds invest earlier in bonds, stocks, mortgages and real estate.Life insurance companies is a collect saving that form or annual premiums and invest in stocks, bonds, real estate and montage, finally make payments to the beneficiaries of the insured parties. It also have many kind of tax deferred saving plans to provide benefits to the participants when they retire.Mutual funds collect money from savers and use to buy stocks, long-term bonds and short-term debt instruments that issued by government or business units and thus reduce risk by investment diversification, discover economies of scale in analyzing securities, managing portfolios, buy and selling securities. They also designed to gibe objective in different types of savers and they used as interest bearing checking account such as money market funds.