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Answer:
Introduction:

This report has been prepared to analyze the position and the performance of Apollo Food holdings berhad. For analyzing the performance of the company, financial statement of the company has been analyzed and the study of ratio analysis has been conducted. Ratio analysis is a process of analyzing the financial statement of a company on various levels to offer a conclusive study about the performance of the company to stakeholders and the management of the company. This study has been prepared to offer a recommendation to the management of the company about the financial performance of Apollo Food holdings berhad.

Recommendation:

The study of ratio analysis depict about the performance of the company on various levels. For analyzing the performance of the company and recommend the management about enhancing the position and the performance of the company, Apollo Food holdings berhad, liquidity ratios, asset management ratios, debt management ratios, profitability ratios, market value ratios etc. Every financial ratio depict about the different level and the performance of the company (Weygandt, Kimmel and Kieso, 2015).

Firstly, the liquidity ratios of the company have been analyzed. Liquidity ratios express about the position of the company to pay short term debt obligation. This is most used ratio when two or more companies are compared. This ratio evaluates that whether a company is able to pay entire current debt obligation or not. For analyzing the liquidity position of the company, current ratio and quick ratio has been analyzed (Warren, Reeve and Duchac, 2013). Current ratio is analyzed to identify the level in which the current assets and current liabilities and compared and it is identified that entire current debt obligation would be paid by the company or not. Through the evaluation, it has been found that the current ratio of the company is 13.55 times in 2016 and 15.60 times in 2017.

Further, quick ratio depict about the level in which the entire debt obligation could be paid at the same time. It takes the concern of quick assets and the current liabilities of the company. Through this analysis, it has been found that the quick ratio of the company was 12.04 times in 2016 and 14.04 times in 2017 (FT, 2017). It depicts that the current assets and quick assets of the company is quite higher than the current liabilities of the company. This level expresses that the company is not utilizing the resources at their maximum level. Thus through this evaluation, it is recommended to the management to reduce the level of the quick assets so that the maximum utilization of minimum resources could be done as well as the cost of the company could also be lowered (Wahlen, Baginski and Bradshaw, 2014).

Liquidity Ratios

 

2016

2017

current ratio

13.55 times

15.60 times

quick ratio

12.04 times

14.04 times

 

Further, the assets management ratios of the company have been analyzed. Assets management ratios express about the performance and the level of assets in comparison of total revenue of the company. These ratios are used to analyze the credit policy, inventory management and overall success of the company (Higgins, 2012). This ratio evaluates that whether the asset are managed in a proper way in an organization. For analyzing the assets management position of the company, inventory turnover days, inventory turnover ratios and day sales outstanding has been analyzed. Inventory turnover ratio is analyzed to identify the total time in which the inventory of the company is sold. Through the evaluation, it has been found that the inventory turnover ratio of the company is 8.33 times in 2016 and 10.50 times in 2017 (Morningstar, 2017).

Further, inventory turnover days have been calculated and it has been found that the inventory turnover days of the company are 43.82 days in 2016 and 34.76 days in 2017.  Moreover, day sales outstanding have been analyzed. It depict about the total days which are taken by the company to collect the amount of sales. It takes the concern of accounts receivable and total credit sales of the company. Through this analysis, it has been found that the day sales outstanding of the company were 64.58 days in 2016 and 66.28 days in 2017. It depicts that the assets management ratios of the company depict that the performance of the company has been lowered from 2016 in 2017 (Index, 2017). The inventory ratios depicts that the turnover of the company has been lesser and it express that the inventory level of the company has been lesser. Further, the day sales outstanding depicts that the extra cash would be required by the company to continue the operations.  Thus through this evaluation, it is recommended to the management to enhance the level of the sales and reduce the debtors collection days so that the inventory could be managed in a perfect way and the cash requirement could be lower (Lumby and Jones, 2007).

Asset Management Ratios

 

2016

2017

inventory turnover ratio

8.33 times

10.50 times

Inventory turnover days

43.82 days

34.76 days

Day sales outstanding

64.58 days

66.28 days


Moreover, debt management ratios of the company have been analyzed to evaluate the position of the debt in context of total equity. Through the evaluation over the debt ratio of the company, it has been found that the ratio was 9.03% in 2016 and 8.46% in 2017. It depicts that the level of debt has been lowered in comparison of total assets of the company (Hillier, Grinblatt and Titman, 2011). Further, Days payable outstanding has been calculated and it has been found that the total days of the payment have been lowered by the company in 2017. Earlier, the day payable outstanding ratio of the company was 26.52 days and in 2017, the DPO is 22.14% (Gibson, 2012).

The above evaluation depicts that the debt of the company has been enhanced and total payment days of the company has been lower from 2016 in 2017. This level expresses that the company is required to reduce the level of debt to manage the risk and return factor of the company and further, the payment days must be higher to manage the cash position of the company (Davies and Crawford, 2011). Thus through this evaluation, it is recommended to the management to reduce the level of the debt and enhance the level of the payment days so that the performance of the company could be better.

Debt Management Ratio

 

2016

2017

Debt ratio

9.03%

8.46 %

Day payable outstanding

26.52 days

22.14 days


Further, the profitability ratios of the company have been analyzed. Profitability ratios depict about the profit position of the company. For analyzing the profitability position of the company, net profit margin and return on total assets of the company have been analyzed. Net profit margin of the company depict about the net profit in context of total sales of the company. Through the calculations, it has been found that the level of net profit margin has been lowered from 2016 in 2017 (Bui et al, 2016). The net profit margin of 2016 was 14.29% and in 2017, the net profit margin is 8.54&. Further, the return on total assets of the company depict about the total net profit of the company in context of total assets of the company. The return on total assets of the company was 10.50% and 6.45% in 2016 and 2017.

Thus through the calculations, it has been found that the position of profits of the company has been lowered a lot. The expenses of the company are quite higher in 2017 from 2016 and thus the management of the company is suggested to reduce the level of the expenses so that the position of the net profit could be improved and a better profitability position could be enjoyed by the company.

Profitability Ratios

 

2016

2017

Net Profit Margin

14.29%

8.54%

Return on total assets

10.50%

6.45 %


Lastly, the market value ratio of the company has been analyzed. Market value ratios are used to identify and evaluate the current market share price of the common shares. This is most used ratio by the investors to analyze that whether the share prices of the stock are undervalued or overvalued. This ratio evaluates that whether the investment in the company would be profitable or not. For analyzing the market position of the stock of the company, price pr earning share and market price and book value ratio of the company has been analyzed (Brigham and Ehrhardt, 2013). Price per earnings share ratio is analyzed to identify the level of price of the stock according to the total earning per share of the company. Through the evaluation, it has been found that the price per earnings share ratio of the company is 0.16 times in 2016 and 0.21 times in 2017.

Further, market value per book value ratio depict about the total difference into the market price of the stock and book value of the stock. It takes the concern of market value, book value and earnings per share of the company. Through this analysis, it has been found that the market value per book value ratio of the company was 1.85 times in 2016 and 1.5795 times in 2017 (Brealey, Myers and Marcus, 2007). It depicts that the performance of the company has been better from last year in terms of market price. This market value ratio expresses that the stock of the company is overvalued. Thus through this evaluation, it is recommended to the management to manage the financial performance in a better way to save itself from any kind of risk and extra expenses.

Market Value Ratio

 

2016

2017

Price per Earnings Ratio

0.16times

0.2183times

Market price per book value ratio

1.8481times

1.5795 times

Conclusion:

Through the above study, it has been found that the ratio analysis is an important study as it depicts about the performance of the company on various levels. In this report, the performance of the company has been analyzed and various recommendations have been given the management about enhancing the position and the performance of the company, Apollo Food holdings berhad. For analyzing the performance of the company, liquidity ratios, asset management ratios, debt management ratios, profitability ratios, market value ratios etc. has been analyzed. Every financial ratio depict about the different level and the performance of the company.

Through the above study, it has been found that the overall performance of the company has been lower form 2016 in 2017. Through evaluating the financial statement of the company and comparing it with the financial statement of last year, it has been analyzed that the position of the company has been lowered and various changes are required by the company to make to enhance the position of the company again.

The above study depict that the liquidity position of the company has been enhanced and it depict that the company is not utilizing the maximum resources properly and the cost of the company is also higher. Further, the profitability ratios depict that level of profits has been lowered from last year in 2017. Moreover, the study over debt ratios depict that the company must reduce the level of the debt as it would impact over the profit position as well as risk level of the company. More, the asset inventory management must be done by the company in a proper way and lastly, the market value ratios of the company has been analyzed and it has been found that the  management of the company is required to manage the financial performance in a better way to save itself from any kind of risk and extra expenses.

Thus it depict that every financial ratio depict about the different level and the performance of the company. and further, through the study, it has been found that the performance of the company is not at all good and various changes are required to be done to manage and enhance the level of the company and lastly, it has been found that for the investment purpose, the position of the company is not at all good.

References:

Bloomberg. 2017. Apollo Food Holdings Berhad.  Available from: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=882479 [Accessed on 9th Dec, 2017].

Brealey, R., Myers, S.C. and Marcus, A.J., 2007. FundamentalsofCorporate Finance. Mc Graw Hill, New York.

Brigham, E.F. and Ehrhardt, M.C., 2013. Financial management: Theory and practice. Cengage Learning.

Bui, S.B.D., Petersen, T., Poulsen, J.N. and Gazerani, P., 2016. Headaches attributed to airplane travel: a Danish survey. The journal of headache and pain, 17(1), p.33.

Davies, T. and Crawford, I., 2011. Business accounting and finance. Pearson.

2017. Apollo Food Holdings Berhad.  Available from: https://markets.ft.com/data/equities/tearsheet/profile?s=APOLLO:KLS[Accessed on 9thDec, 2017].

  1. Gibson, C., 2012. Financial reporting and analysis. Nelson Education.

Higgins, R. C., 2012. Analysis for financial management. McGraw-Hill/Irwin.

Hillier, D., Grinblatt, M. and Titman, S., 2011. Financial markets and corporate strategy. McGraw Hill.

Index. 2017. Apollo Food Holdings Berhad.  Available from: http://www.apollofood.com.my/index.php [Accessed on 9th Dec, 2017].

Lumby,S and Jones,C,.2007, Corporate finance theory and practice, 7th edition, Thomson, London

Morningstar. 2017. Apollo Food Holdings Berhad.  Available from: http://financials.morningstar.com/income-statement/is.html?t=6432&region=mys [Accessed on 9th Dec, 2017].

Palicka, V.J. 2011. Fusion Analysis: Merging Fundamental and Technical Analysis for Risk-Adjusted Excess Returns. McGraw Hill Professional.

Wahlen, J., Baginski, S. and Bradshaw, M., 2014. Financial reporting, financial statement analysis and valuation. Nelson Education.

Warren, C.S., Reeve, J.M. and Duchac, J., 2013. Financial and managerial accounting. Cengage Learning.

Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial and Managerial Accounting. John Wiley and Sons.

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[Accessed 29 March 2024].

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