Gamuda Case Study Solution
6.0 Recommendations
Acid Test Ratio
The acid test ratio shows that Muhibbah have less liquidity which indicates that they holding low amount of cash but high level of inventories .They may have difficulty paying its current liabilities on time. Business is relying on turnover of stock to meet obligations. Here, we recommend that Muhibbah should consider level of their accounts payable or paying off their liabilities and ensure the cash flow of the business is optimal meaning that the company must make sure their accounts receivable pay on time.
Gamuda have high result of acid test ratio which indicates high degree of assurance that immediate debts can be paid. But, sometimes too high a liquidity ratio may not always be good because it suggest …show more content…
In order to solve this problem, we suggest that Gamuda decreases the average total assets to ensure optimal level of assets retained. Gamuda also must be considerate of their potential of assets prior to acquisition to increase net profit.
Stock Turnover
Stock turnover ratio of Gamuda is 5.43 times for group and 0.78 times for company while for Muhibbah is 419.1 times for group and 461.50 times for company during 2015 year. A low stock turnover means Gamuda’s business slowdown, it appears that Gamuda’s stock is too high and may be piling up and not sold. Gamuda having difficulty selling it large holding of inventory and cause the cash is being tied down in stocks. On the other side, due to fast-moving inventory, Muhibbah has problem shortage of inventory available for sale.
To cover this problem, Gamuda should make sure its stock always at appropriate levels and also investigate methods of lowering cost of goods sold. For example, Gamuda can investigate alternative suppliers selling similar quality products for less or take advantage of discounts offered to lower costs. Gamuda can also apply marketing concept which was target customers more
Acid Test Ratio
The acid test ratio shows that Muhibbah have less liquidity which indicates that they holding low amount of cash but high level of inventories .They may have difficulty paying its current liabilities on time. Business is relying on turnover of stock to meet obligations. Here, we recommend that Muhibbah should consider level of their accounts payable or paying off their liabilities and ensure the cash flow of the business is optimal meaning that the company must make sure their accounts receivable pay on time.
Gamuda have high result of acid test ratio which indicates high degree of assurance that immediate debts can be paid. But, sometimes too high a liquidity ratio may not always be good because it suggest …show more content…
In order to solve this problem, we suggest that Gamuda decreases the average total assets to ensure optimal level of assets retained. Gamuda also must be considerate of their potential of assets prior to acquisition to increase net profit.
Stock Turnover
Stock turnover ratio of Gamuda is 5.43 times for group and 0.78 times for company while for Muhibbah is 419.1 times for group and 461.50 times for company during 2015 year. A low stock turnover means Gamuda’s business slowdown, it appears that Gamuda’s stock is too high and may be piling up and not sold. Gamuda having difficulty selling it large holding of inventory and cause the cash is being tied down in stocks. On the other side, due to fast-moving inventory, Muhibbah has problem shortage of inventory available for sale.
To cover this problem, Gamuda should make sure its stock always at appropriate levels and also investigate methods of lowering cost of goods sold. For example, Gamuda can investigate alternative suppliers selling similar quality products for less or take advantage of discounts offered to lower costs. Gamuda can also apply marketing concept which was target customers more