Finance: Detailed Ratio Analysis and Financial Performance of MYEG Company

Running Head: FINANCE 0
Finance

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Contents
Introduction......................................................................................................................................3
Detailed Ratio Analysis - Two-Year Comparison...........................................................................3
Liquidity Ratios...............................................................................................................................3
Current Ratio............................................................................................................................3
Quick Ratio...............................................................................................................................3
Activity Ratios.................................................................................................................................4
Accounts Receivable Turnover................................................................................................4
Accounts Payable Turnover Ratio............................................................................................4
Sales to Fixed Asset ratio.........................................................................................................5
Profitability Ratios...........................................................................................................................5
Gross Profit...............................................................................................................................5
Net Profit..................................................................................................................................5
Return on Assets.......................................................................................................................6
Return on Equity......................................................................................................................6
Coverage Ratios...............................................................................................................................6
Debt to Equity..........................................................................................................................6
Debt to total Asset....................................................................................................................7
Times Interest Coverage Ratio.................................................................................................7

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Conclusions and Recommendations................................................................................................7
Definitions of the Categories belonging to the balance sheet and the Income Statement...............9
Income Statement.........................................................................................................................9
Balance sheet................................................................................................................................9
References......................................................................................................................................11

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Introduction
MYEG Company is the Malaysian based company having a business of the E-
government services or can also be found under the IT management sector of Malaysia. The
current revenue of the company is $371.22 million with the net profit of $201511. Current 40561
employees are working in this organization and tend to expand its business offshore as well
(Morning Star, 2018).
Financial Analysis is an important criterion for determining the strength and the
weakness of the company. This tool indicates both the positive as well as the negative aspects of
the financial statements and also reflects the areas where the management needs to work upon to
improve the areas of the weakness. The variances can also be found out with the help of the ratio
analysis technique which has been discussed below in this report (Vogel, 2014). This report has a
major outlook on the two year comparison of the balance sheet and the income statement of the
MYEG Company based in the Malaysia, the two year detailed ratio analysis, the comparison
against the industry and the peer group. For the peer group analysis the company taken is the
POS Malaysia. Apart from this the five year trend analysis of the balance sheet, income
statement and ratio analysis as well has been undertaken (Morning Star, 2018).
Detailed Ratio Analysis - Two-Year Comparison
Liquidity Ratios
Liquidity ratios are calculated with an intention to determine the company’s ability to
meet the short term obligations and short term requirements. Such ratio is calculated to match the
ability of the company to convert its assets into cash. Such ratios are very helpful for the

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creditors as it helps them in finding out the ability of the company for the repayment of loans. It
also helps in predicting whether the company can meet the obligation for the money which was
being lent by the lenders of the company (Baker, Cummings & Jagtiani, 2017).
Current Ratio
One of the liquidity ratios is current ratio and it helps in a fair calculation of the
company’s ability to meet the short-term liabilities. It is a simple comparison of the company’s
current assets and current liabilities. If the result of the comparison indicates the higher number
than it is the indication that the company has a strong base to meet the short term obligations
The current ratio of the company for the year 2017 is 18.5 whereas in the year 2016
financial year is 10.97 indicates that the company is able to pay the obligations in comparison to
the previous year (Yahoo finance, 2018). The current ratio of the POS company is low with
respect to the MYEG thus it explains that the company is performing better than the POS and has
more scope of paying off the obligations as it has sufficient current assets as having by the POS
(Heikal, Khaddafi & Ummah, 2014).
Quick Ratio
It is a type of ratio where a quick comparison is done on the basis of cash in hand,
accounts receivables and marketable securities of the company against the current liabilities of
the company. The result is measured on the basis of a higher number which indicates the strong
position of the company to meet the short term obligations of the company (Saeidi, 2015).
The quick ratio of the MYEG is 5.088 in the previous year and 3.91 in the financial year
2017. The quick ratio has been decreased by 23% in comparison to the previous year. The above
ratio indicates that the company ability to serve the obligations of the short term nature has been

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reduced and deteriorated (Morning Star, 2018). The Quick ratio on the other hand is more of the
POS Company than MYEG which suggest that though the current assets are sufficient to pay
back the current liabilities yet the cash is generated at the faster pace in case of POS (Nobanee &
Al Hajjar, 2014).
Activity Ratios
An activity ratio generally reflects the ability of the company to reflect the ability and the
power of the company to convert various accounts into the financial statements of the company
in the form of cash or sales (Cable, Healy & Sun, 2018).
Accounts Receivable Turnover
Accounts Receivable Turnover ratio is the key driver that lets the management know
about the dependency of the working capital of the company upon the accounts receivable of the
company. The result is measured on the basis of indication in the numbers if such ratio indicates
a lower number than the working capital of the company is adequate which shows lesser risks of
the business (Bergeron, 2017).
The accounts receivable ratio of the company is 71 days and 76 days from the year 2016 to
2017. Thee inventory turnover ratio of the company is nil as the company has not maintained any
inventory. The sales to fixed assets of the company have decreased from 1.03 to 0.74 from 2016
to 2017 (Morning Star, 2018). There are several suggestions to improve the receivable ratio as
well as the day’s sales in the receivables ratio. The AR ratio in terms of the industry comparison
is 82.25 and whereas the ratio of the MYEG is 76.5 in the year 2017 which is again the positive
impact however to reach to the position of the 2015 at 63.1 there are following recommendations
outlined below (Weygandt, Kimmel & Kieso, 2015).