Guinness Anchor Berhad (GAB)

Guinness Anchor Bhd (GAB) was formed in 1989, with the merge of Guinness Malaysia Bhd and Malayan Breweries (Malaya) Sdn Bhd (presently known as Asia Pacific Breweries Ltd). In the same year itself, GAB was listed on the main board of Kuala Lumpur Stock Exchange.

GAB is the first and only brewery in Malaysia to receive the Hazard Analysis Critical Control Point (HACCP) certification from the Ministry of Health and received the ISO 9001: 2008 certification, having fulfilled the additional requirements of ISO 9001: 2000.

At present, GAB is the pioneer of the Malaysian beer and stout industry. GAB ‘s main business activities are Guinness Anchor Berhad production, packaging, marketing, and distribution of beverages to meet Malaysian demand. The company’s range of products are beer, stout, draught, and non-alcoholic malt drink such as Anchor Smooth, Anchor Strong, Tiger Beer, Heineken, Kilkenny, Anglia Shandy, Anglia Apple, Malta, and Malta Quench brand names.

MAXIS BERHAD

Maxis Berhad is a public-listed company. Maxis Berhad is a Malaysia’s biggest integrated communications service provider. Maxis commitment is to taking the technology and innovation high ground for mobile and fixed voice, messaging, mobile internet and wired and wireless broadband. Besides that, maxis vision is to bring the future to the customers’ live sand businesses, in a manner that is simple, personalized and enriching, by efficiently and creatively harnessing leading-edge technology and delivering a brand of service experience that is reliable and enchanting. Maxis main activities are to make sure that technology is never scary. Maxis challenge is to answer successfully the question "how human can the technology become?" Further maxis provide services such as maxis premium protection, my launch pad, home content insurance, free internet calls and moreover.

The headquarters for Maxis Berhad is located at level 18, Menara Maxis, Kuala Lumpur City Centre, Off Jalan Ampang, and 50088 Kuala Lumpur, Malaysia. Overall, Maxis registered Revenue of RM2, 133 million in Q1 2011 against RM2, 152 million over the same period last year. The small drop was mainly due to reduction in voice, interconnect and International Gateway Services revenue.

Asset Management Ratio

Asset Management Ratios attempt to measure the firm's success in managing its assets to generate sales. For example, these ratios can provide insight into the success of the firm's credit policy and inventory management. These ratios are also known as Activity or Turnover Ratios.

Receivables Turnover and Days' Receivables

The Receivables Turnover and Days' Receivables Ratios assess the firm's management of its Accounts Receivables and, thus, its credit policy. In general, the higher the Receivables Turnover Ratio the better since this implies that the firm is collecting on its accounts receivables sooner. However, if the ratio is too high then the firm may be offering too large of a discount for early payment or may have too restrictive credit terms. The Receivables Turnover Ratio is calculated by dividing Sales by Accounts Receivables. (Note: since Accounts Receivables arise from Credit Sales it is more meaningful to use Credit Sales in the numerator if the data is available.)

Receivable Turnover = Sales

Account Receivable

The Days' Receivables Ratio is calculated by dividing the number of days in a year, 360, by the Receivables Turnover Ratio. Therefore, the Days' Receivables indicates how long, on average, it takes for the firm to collect on its sales to customers on credit. This ratio is also known as the Days' Sales Outstanding (DSO) or Average Collection Period (ACP).

Days’ Receivable = 360

Receivable Turnover

Inventory Turnover and Days' Inventory

The Inventory Turnover and Days' Inventory Ratios measure the firm's management of its Inventory. In general, a higher Inventory Turnover Ratio is indicative of better performance since this indicates that the firm's inventories are being sold more quickly. However, if the ratio is too high then the firm may be losing sales to competitors due to inventory shortages. The Inventory Turnover Ratio is calculated by dividing Cost of Goods Sold by Inventory. When comparing one firms's Inventory Turnover ratio with that of another firm it is important to consider the inventory valuation methid used by the firms. Some firms use a FIFO (first-in-first-out) method, others use a LIFO (last-in-first-out) method, while still others use a weighted average method.

Inventory Turnover = COGS

Inventory

The Days' Inventory Ratio is calculated by dividing the number of days in a year, 360, by the Inventory Turnover Ratio. Therefore, the Days' Inventory indicates how long, on average, an inventory item sits on the shelf until it is sold.

Days' Inventory = 360

Inventory Turnover

Fixed Assets Turnover

The Fixed Assets Turnover Ratio measures how productively the firm is managing its Fixed Assets to generate Sales. This ratio is calculated by dividing Sales by Net Fixed Assets. When comparing Fixed Assets Turnover Ratios of different firms it is important to keep in mind that the values for Net Fixed Assets reported on the firms' Balance Sheets are book values which can be very different from market values.

Fixed Assets Turnover = SalesNet ¿

Assets ¿

Total Assets Turnover

The Total Assets Turnover Ratio measures how productively the firm is managing all of its assets to generate Sales. This ratio is calculated by dividing Sales by Total Assets.

Total Assets Turnover = sales

Total Assets

Leverage Ratio

By using a combination of assets, debt, equity, and interest payments, leverage ratio's are used to understand a company's ability to meet it long term financial obligations. The three most widely used leverage ratios are the debt ratio, debt to equity ratio, and interest coverage ratio..

Debt Ratio

The debt ratio compares a company's total debt to its total assets, which is used to gain a general idea as to the amount of leverage being used by a company. A low percentage means that the company is less dependent on leverage, i.e., money borrowed from and/or owed to others. The lower the percentage, the less leverage a company is using and the stronger its equity position. In general, the higher the ratio, the more risk that company is considered to have taken on;

Debt Ratio = Total LiabilitiesTotal Assets

× 100

Debt-equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by shareholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets.

Debt-equity Ratio = Long– termliabilitiesShareholders Equity

Equity Multiplier

Equity multiplier is a financial leverage ratio which is calculated by dividing total assets by the shareholders equity. It tells about assets in dollar per dollar of equity. The higher the ratio the lower the financial leverage and the lower the ratio the higher the financial leverage.

Equity Multiplier = Total AssetsTotal Equity

Interest Coverage Ratio

The interest coverage ratio tells us how easily a company is able to pay interest expenses associated to the debt they currently have. The ratio is designed to understand the amount of interest due as a function of a companies earnings before interest and taxes (EBIT).

Interest Coverage Ratio = Net profit+ Interest expenses+Tax expenses

Interest expenses

Interest Coverage Ratio =Profit before interest∧tax

Inventory

Compute and Interpret the Asset Management Ratio and Leverage Ratio for year 2011of

Guinness Anchor Berhad (GAB)

1)Asset Management Ratio for year 2011of Guinness Anchor Berhad (GAB)

Receivable Turnover = (Sales )/(Account Receivable)

Sales = RM 1,488,720 (GAB Annual Report 2011, p101)

Account Receivable = RM 205,966 (GAB Annual Report 2011, p100)

Receivable Turnover = RM 1,488,720 / RM 205,966

= 7.22 times

Days’ Receivable = 360/(Receivable Turnover)

Days = 360 days

Receivable Turnover = 7.22 times

Days’ Receivable = 360 days/7.22 times

= 49.86 days

Inventory Turnover = COGS/Inventory

COGS = RM 1,019,249 (GAB Annual Report 2011, p101)

Inventory = RM 65,402 (GAB Annual Report 2011, p100)

Inventory Turnover = RM1,019,249/ RM65,402

= 15.58 times

Days' Inventory = 360/(Inventory Turnover)

Days = 360 days

Inventory Turnover = 15.58 times

Days' Inventory = 360 days/15.58 times

= 23.10 days

Fixed Assets Turnover = Sales/(Net Fixed Assets)

Sales = RM 1,488,720 (GAB Annual Report 2011, p101)

Net Fixed Assets = RM 451,909 (GAB Annual Report 2011, p100)

Fixed Assets Turnover = RM 1,488,720/ RM 451,909

= 3.29 times

Total Assets Turnover = sales/(Total Assets)

Sales = RM 1,488,720 (GAB Annual Report 2011, p101)

Total Assets = RM 685,138 (GAB Annual Report 2011, p100)

Total Assets Turnover = RM 1,488,720 / RM 685,138

= 2.17 times

2) Leverage Ratio for year 2011of Guinness Anchor Berhad (GAB)

Debt Ratio = (Total Liabilities)/(Total Assets) × 100

Total Liabilities = RM 168,522 (GAB Annual Report 2011, p100)

Total Asset = RM 685,138 (GAB Annual Report 2011, p100)

Debt Ratio = RM 168,522 / RM 685,138 × 100

= 24.6%

Debt-equity Ratio = (Long –term liabilities)/(Shareholders Equity) × 100

Long –term liabilities = RM 32,592 (GAB Annual Report 2011, p100)

Shareholders Equity = RM 516,616 (GAB Annual Report 2011, p100)

Debt-equity Ratio = RM 32,592/ RM 516,616 × 100

= 6.3%

Equity Multiplier = (Total Assets)/(Total Equity)

Total Assets = RM 685,13 (GAB Annual Report 2011, p100)

Total Equity = RM 516,616 (GAB Annual Report 2011, p100)

Equity Multiplier = RM 685,13/ RM 516,616

= 0.13 times

Interest Coverage Ratio = Profit before interest and tax / Inventory

Profit before interest and tax = RM 242,883 (GAB Annual Report 2011, p101)

Inventory = RM 65,402 (GAB Annual Report 2011, p100)

Interest Coverage Ratio = 3.71 time

1)Asset Management Ratio for year 2011of Maxis Berhad

Receivable Turnover = (Sales )/(Account Receivable)

Sales = RM 8,799,921 (Maxis Annual Report 2011, p106)

Account Receivable = RM 858,011 (Maxis Annual Report 2011, p108)

Receivable Turnover = RM 8,799,921 / RM 858,011

= 10.26 times

Days’ Receivable = 360/(Receivable Turnover)

Days = 360 days

Receivable Turnover = 10.26 times

Days’ Receivable = 360 days/10.26 times

= 35.08 days

Inventory Turnover = COGS/Inventory

COGS = RM 2,762,978 (Maxis Annual Report 2011, p106)

Inventory = RM 110,249 (Maxis Annual Report 2011, p108)

Inventory Turnover = RM 2,762,978 / RM 110,249

= 25.06 times

Days' Inventory = 360/(Inventory Turnover)

Days = 360 days

Inventory Turnover = 25.06 times

Days' Inventory = 360 days/25.06 times

= 14.36 days

Fixed Assets Turnover = Sales/(Net Fixed Assets)

Sales = RM 8,799,921 (Maxis Annual Report 2011, p106)

Net Fixed Assets = RM 1,835,675 (Maxis Annual Report 2011, p108)

Fixed Assets Turnover = RM 8,799,921 / RM 1,835,675

= 4.79 times

Total Assets Turnover = sales/(Total Assets)

Sales = RM 8,799,921 (Maxis Annual Report 2011, p106)

Total Assets = RM 17,990,519 (Maxis Annual Report 2011, p108)

Total Assets Turnover = RM 8,799,921 / RM 17,990,519

= 0.49 times

2) Leverage Ratio for year 2011of Maxis Berhad

Debt Ratio = (Total Liabilities)/(Total Assets) × 100

Total Liabilities = RM 8,088,384 (Maxis Annual Report 2011, p109)

Total Asset = RM 17,990,519 (Maxis Annual Report 2011, p108)

Debt Ratio = RM 8,088,384 / RM 17,990,519 × 100

= 44.9%

Debt-equity Ratio = (Long –term liabilities)/(Shareholders Equity) × 100

Long –term liabilities = RM 5,516,270 (Maxis Annual Report 2011, p109)

Shareholders Equity = RM 8,084,417 (Maxis Annual Report 2011, p109)

Debt-equity Ratio = RM 5,516,270 / RM 8,084,417× 100

= 68.23%

Equity Multiplier = (Total Assets)/(Total Equity)

Total Assets = RM 17,990,519 (Maxis Annual Report 2011, p108)

Total Equity = RM 8,088,384 (Maxis Annual Report 2011, p109)

Equity Multiplier = RM 17,990,519 / RM 8,088,384

= 2.22 times

Interest Coverage Ratio = Profit before interest and tax / Inventory

Profit before interest and tax = RM 3,004,076 (Maxis Annual Report 2011, p108)

Inventory = RM 110,249 (Maxis Annual Report 2011, p108)

Interest Coverage Ratio = 27.24 time

Comparison - GAB VS Maxis Berhad

GAB Maxis Berhad

Year/Ratio 2011Receivable Turnover 10.26 timesDays’ Receivable 35.08 daysInventory Turnover 25.06 timesDays' Inventory 14.36 daysFixed Assets Turnover 4.79 timesTotal Assets Turnover 0.49 timesDebt Ratio 44.9%Debt-equity Ratio 68.23%Equity Multiplier 2.22 timesInterest Coverage Ratio 27.24 time

Year/Ratio 2011Receivable Turnover 7.22 timesDays’ Receivable 49.86 daysInventory Turnover 15.58 timesDays' Inventory 23.10 daysFixed Assets Turnover 3.29 timesTotal Assets Turnover 2.17 timesDebt Ratio 24.6%Debt-equity Ratio 6.3%Equity Multiplier 0.13 timesInterest Coverage Ratio 3.71 time

The Receivables Turnover

The Receivables Turnover and Days' Receivables Ratios assess the firm's management of its Accounts Receivables. In 2011 GAB and Maxis Berhad had receivable turnover of 7.22 and 10.26 times each. This data shows that both company had an outstanding growth in revenue. Although the figures differ but both organizations were actually growing massively. Maxis Berhad in this case have more receivable turnover compared to GAB, Receivable turnover ratio is good or bad is on the average for other companies in the same industry, and by the specific credit terms given to this company’s customers.

Inventory Turnover Ratio

2011's Inventory turnover ratio for GAB and Maxis Berhad is 15.58 and 25.06. This ratio is compared against the industry averages. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. In this case Maxis Berhad had been spending tremendously on the inventory, whereby GAB has lower inventory turnover ratio although A low turnover is usually a bad sign because products tend to deteriorate as they sit in a warehouse. They manage to sustain the important inventory for their usage. And they don’t spend much on the perishable items.

Fixed Assets Turnover

GAB has lower fixed asset turnover compared to Maxis Berhad 3.29 and 4.79. This is due to the inventory spending of Maxis Berhad which was higher than GAB in 2011. Fixed assets are important because they usually represent the largest component of total assets. An increasing trend in fixed assets turnover ratio is desirable because it means that the company has less money tied up in fixed assets for each unit of sales. In this case, Maxis Berhad expenditure in inventory is higher compared to GAB

therefore a declining trend in fixed asset turnover may mean that the company is over investing in the property, plant and equipment.

Total Assets Turnover

2011 data explains that GAB 2.17 and for Maxis Berhad 0.49. GAB has generated more sales with fewer assets while Maxis Berhad has less sales turnover due to spenditure with the inventory in 2011. If a company can generate more sales with fewer assets it has a higher turnover ratio which tells it is a good company because it is using its assets efficiently. A lower turnover ratio tells that the company is not using its assets optimally.

Debt Ratio

GAB debt ratio is lesser compared to Maxis Berhad in the year of 2011. GAB has 24.6% debt ratio while Maxis Berhad have 44.9%. A low debt ratio indicates conservative financing with an opportunity to borrow in the future at no significant risk. This shows how much the company relies on debt to finance assets. The debt ratio gives users a quick measure of the amount of debt that the company has on its balance sheets compared to its assets. The higher the ratio, the greater the risk associated with the firm's operation. Maxis Berhad's debt ratio is higher compared to GAB which concludes that they are struggling compared to GAB whom has less debt ratio.

Equity Multiplier

Based on the data provided by GAB and Maxis Berhad both have been calculated for equity multiplier is total assets divided by stockholder's equity. Equity multiplier is a financial leverage ratio that evaluates a company's use of debt to purchase assets. GAB is 0.13 and Maxis Berhad is 2.22. These figures indicate that financial leverage is used in financial analysis to evaluate a company's use of debt. Maxis berhad's debt is more than GAB therefore the equity multiplier is slightly higher than GAB.

Conclusion

Ratios are just one number divided by another and as such really don’t mean much. Once ratios are calculated, an analyst needs some benchmarks to find out where the company stands at that particular point. Maxis Berhad and GAB’s comparison throughout the analysis indicated the changes that have been implemented in their business nature. As a conclusion I would like to rectify that GAB’s growth is more than Maxis Berhad and their business nature is more stable.

It may be useful to compare a company to certain industry averages to get a feel for how the company is performing. In that case it is necessary to obtain industry performance measures. One of the ways in

which financial statements can be put to work is through ratio analysis. Ratios are simply one number divided by another; as such they may or not be meaningful. In finance, ratios are usually two financial statement items that may be related to one another and may provide the prudent user a good deal of information.