Simple Ratio analysis on Food Industries

1951 words 8 pages
CONTENT
CHAPTER PAGE

1.0 INTRODUCTION 3 1.1 Company Profile 3 1.1.1 Hup Seng Industries Berhad 3 1.1.2 Hwa Tai Industries Berhad 3
1.2 Company Financial Position and Income Statement 4 1.2.1 Hup Seng Industries Berhad 4
1.2.2 Hwa Tai Industries Berhad 6

2.0 RATIOS ANALYSIS 8 2.1 Liquidity Ratios 8 2.1.1 Current Ratio 8 2.1.2 Quick (Acid-Test) Ratio 8 2.2 Activity Ratios 9
2.2.1 Inventory Turnover 9
2.2.2 Average Collection Period 9
2.2.3 Total Assets Turnover 10 2.3 Debt Ratios 11
2.3.1 Debt Ratio 11
2.3.2 Times Interest Earned Ratio 11
2.4 Profitability Ratios 12 2.4.1 Gross Profit
…show more content…

A high current ratio suggests a strong liquidity position and an ability to meet current obligations. Current ratio for Hup Seng Industries Berhad is 3.15, higher than 0.89 of Hwa Tai Industries Berhad. As for biscuit manufacturer market, a high current ratio is preferable because they are dealing with sudden and unexpected shifts in demand for its products. Hup Seng Industries is performing much better than Hwa Tai Industries Berhad. 2.1.2 Quick (Acid-Test) Ratio
Current Ratio = Current Assets – Inventory / Current Liabilities

Hup Seng Industries Berhad
Hwa Tai Industries Berhad
Quick Ratio
RM137,802,520 - RM20,586,831 / RM43,748,011
= 2.68
RM34,572,814 – RM5,172,887 / RM38,669,731
= 0.76

Quick (acid-test) ratio is similar to current ratio where both are used to determine the degree of liquidity, except that it excludes inventory, which is generally the least liquid current assets. The quick ratio provides better measurement of overall liquidity when it is hard to convert inventory into cash. Quick ratio for Hup Seng Industries Berhad is 2.68, higher than 0.76 of Hwa Tai Industries Berhad. Again, Hup Seng Industries is performing much better than Hwa Tai

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