Finance Management: Analysis of Financial Performance of DH Sdn Bhd and KC Trading Company

Running Head: FINANCE MANAGEMENT 1
Finance Management

FINANCE MANAGEMENT 2
Contents
1. Introduction........................................................................................................ 3
2. Literature Review................................................................................................. 3
3. Ratio Calculations................................................................................................. 4
A: Margin Ratios..................................................................................................... 5
B: Return Ratios...................................................................................................... 8
4. Leverage Ratios.................................................................................................. 11
5. Analysis of profitability and leverage ratios...............................................................11
6. Comparison of financial performance.......................................................................12
7. Qualitative factors............................................................................................... 13
8. Conclusion........................................................................................................ 13
References.............................................................................................................. 14

FINANCE MANAGEMENT 3
1. Introduction
Development in the Malaysian economy directed for a second continuous quarter in
the principal quarter of 2018. The economy extended 5.4% year-on-year in the January –
March period; the outcome came in underneath advertise desires for 5.5% and beneath the
past quarter's 5.9% expansion. In any case, on a quarter-on-quarter regularly balanced
premise, monetary development accelerated to 1.4%, up from the earlier quarter's 1.0%. A
breakdown of the drivers of the yearly development rate indicated that exhibition was led by
versatile private segment spending and solid development in net fares, while fixed
speculation development was almost level and this is because of the fast mover consumer
goods producing company namely DH sdn bhd and KC trading company. DH Sdn Bhd came
into existence in 1984 whereas KC trading company was founded in the year 1947.
2. Literature Review
In perception of Gitman, Juchau & Flanagan, (2015), financial statement analysis
involves a complete analysis of the income statement, balance sheet and cash flows. The
main focus of the ratio analysis is to use the overall findings of decision making process. It
also helps to figure out the unproductive areas if any areas of the palatable performance. By
identifying the good as well as bad area, the companies will be aware of where the efforts
shall be channelized. This can be done only on the basis of the ratio analysis. Ratio analysis is
a technique or say financial measurement methodology which states the performance of the
business in various categories and areas. In finance there are several techniques that aid to
evaluate the overall performance of the company and when it comes to the ratio analysis, it is
the easiest and the reliable tool. It helps various users of the report such as stakeholders,
financiers, shareholder, and creditors. Since the ratio analysis is a powerful tool to assess the
performance on different grounds, this toll has been used for two Malaysian based companies

FINANCE MANAGEMENT 4
namely, DH Sdn Bhd and KC Trading Company. In opinion of Grant, (2016), the ratios are
divided into different categories such as profitability, liquidity, and solvency. Based on the
findings of the two companies with respect to the profitability and the solvency, the results
have been arrived. It was evident from the income statement that revenue has increased from
RM5271047 to RM5509538 and the same have finally increased to RM6010281, whereas in
case of KKC trading company the situation is similar as the revenue increased but at a slower
pace comparatively. Overall both the companies are performing below satisfactory level,
however DH still has the scope to improve and can bring back itself. In terms of profitability,
only in terms of gross margin, KC Trading Company is ahead, otherwise in all the rest of the
sectors DH plays a vital role and is performing better than KC Trading Company.
3. Ratio Calculations
DH Sdn Bhd
KC Trading
Company
SOLVENCY 201
6
201
7
201
8 2016 2017 2018
Debt to Equity Debt 2.51 2.30 2.64 1.47 1.70 2.40
Equity
Times interest
coverage ratio EBIT
10.8
7
10.3
2
7.39 0.65 0.41 -0.67
Interest Expense
Debt to Total
Assets Debt
0.71 0.70 0.72 0.63 0.66 0.73
Total Assets
DH Sdn Bhd
KC Trading
Company
PROFITABILITY
201
6
201
7
201
8 2016 2017 2018
Net Profit
Net income 0.96
%
0.95
%
0.74
%
0.57
%
0.37
%
-
1.48
%
Net sales
Operating Margin
Operating profit 9.46
%
9.61
%
9.35
%
2.40
%
2.38
%
0.56
%