# Financial

Pages: 8 (646 words) Published: January 23, 2013
Current Ratio
* A liquidity ratio that measures a company’s ability to pay short term obligations.

Current Ratio 2011

Current Assets

Current Liabilities

35,343,809

35,774,652

=0.99

The ratio of 0.99: 1 means that for every ringgit of current liabilities, Hwa Tai has RM0.99 of current assets.

Current Ratio 2010

Current Assets

Current Liabilities

36,746,539

37,634,489

=0.98

* The ratio of 0.98 : 1 means that for every ringgit of current liabilities, Hwa Tai has RM0.98 of current assets.

Acid Test ratio
* This indicator to determine whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assets.

Acid Test Ratio 2011

Cash + Short Term Investment + Receivables (Net)

Current Liabilities

28,530,006

35,774,652

= 0.80

Acid Test Ratio 2010

Cash + Short Term Investment + Receivables (Net)

Current Liabilities

31,403,261

37,634,489

= 0.83

* Acid test ratio for the respective three years shows that Hwa Tai always gain less than 1 ratio. Its shows that this company cannot pay their current liabilities and should be looked at with extreme caution. This acid test ratio is much lower compare to current ratio, it means the current assets for this company in highly dependent on inventory.

Receivable Turnover
* This ratio measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.

Receivables Turnover 2011

Net Credit Sales

Average Net Receivables

77,016,224

25,424,055

= 3.03
= 3.03 times

Average collection period 2011

365 days

Receivables Turnover

365

3.03

= 120.49
= every 120 days

* A high ratio implies either Hwa Tai operates on a cash basis or that its extension of credit and collection of accounts receivable is efficient. Based on the output, Hwa Tai receivables are collected on average every 120 days.

Receivables Turnover 2010

Net Credit Sales

Average Net Receivables

72,125,922

27,724,051

= 2.60
= 2.6 times

Average collection period 2010

365 days

Receivables Turnover

365

2.60

= 140.30
= 140 days

* Based on the output, Hwa Tai receivables are collected on average every 140 days.

Inventory Turnover
* This ration showing how many times a company's inventory is sold and replaced over a period

Inventory Turnover 2011

Cost of Goods Sold

Average Inventory

(54,393,416)

5,735,449

= -9.48
= 9.48 times

Days in Inventory 2011

365 days

Inventory Turnover

365

-9.48

= -38.49
= 38.49 days

* In 2011, 9.48 times Hwa Tai inventory is sold and replaced over a period. High inventory levels are seems unhealthy because it represents an investment with a rate of return of zero and it will give trouble to the company if the prices begin to fall.

Inventory Turnover 2010

Cost of Goods Sold

Average Inventory

(49,769,251)

5684149

= (8.76)
= 8.76 times

Days in Inventory 2010

365 days

Inventory Turnover

365

(8.76)

= -41.69
= 41.69 days

Asset Turnover
* It measures the amount of sales generated for every ringgit’s worth of assets.

Asset Turnover 2011

Net Sales

Average Assets

77,016,224

56,502,750.5

= 1.363052654
= 1 times

Asset Turnover 2010

Net Sales

Average Assets

72,125,922

59,901,160.5

= 1.20
= 1 times

* Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue. The higher the number the better. It also indicates...