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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...
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