BWFF1013 FOUNDATION OF FINANCE

CONTENT
N0 1 2 3 4 5 6 7 8 TITLE INTRODUCTION HISTORY OF MUDA HOLDINGS BERHAD METHODOLOGY FINDINGS AND ANALYSIS -FINANCIAL RATIO FINDINGS AND ANALYSIS -ANALYSIS CONCLUSION REFERENCE APPENDIX PAGE

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1. INTRODUCTION
For Foundations Of Finance ( BWFF 1013 ) group project, we already are being given a task to analysis the financial performance of a company Muda Holdings Berhad that is listed in the Bursa Malaysia Berhad. The company that we decided to choose and analysis financial performance from year 2007 until 2009 (3 years) based on the company financial report that we get from company web pages using internet. Before we start making analysis about this company financial performance, in introduction we will tell a little bit about this company history. Beside that, we will tell a methodology that we use to analyze this company financial performance before moving to make a findings and analysis the trend that shown by the company for that period. Then, in finding and analysis the company financial performance we use the ratio method. Lastly, will tell the result and we also explain about analysis ratio. We also put together the company income statement and balance sheet for the year 2007 until year 2009.

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2. HISTORY OF MUDA HOLDINGS BERHAD

Muda Holdings Berhad pioneered the paper milling and packaging in Malaysia with our first paper mill Tasek, Penang in 1964 and our first corrugators plant in Petaling Jaya in 1971. Today, Muda Holdings Berhad own one of the largest integrated paper mill and corrugated plants in Malaysia. Muda Holdings Berhad remain committed to focus on customer satisfaction through quality products and customer service ,ensuring supply reliability ,benchmarking performance capacity building, capacity building, prioritizing safety and health, enhancing research and development to achieve products for world class standards. Muda Holdings Berhad manufacture high grade industrial brown paper, paper boards, corrugated boxes, multi-wall paper bags, PE laminated paper for industrial and food application, flat, satchel and self-opening-style paper bags for food and non-food retail outlets, paper pallets and honeycomb for packaging and furniture industries, paper-based stationery, trading in imported paper and paper related products for the domestic and export market. Except for one corrugated box plant in Qingyuan ,China ,our manufacturing activities are mostly centered in Peninsular Malaysia where they have two factories for paper milling ,four factories for making corrugated boxes, a factory for multi-wall paper bags and a factory for PE laminated paper, paper bags and paper based stationery .Muda Holdings Berhad have numerous wastepaper collection centers throughout Peninsular Malaysia. Our plants have been awarded the ISO 9001, OHSAS 18001, and ISO 14001 accreditation.

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Muda Holdings Berhad take pride in the far reaching impact of our business on the environment as we recycle more than 400,000 metric tons of wastepaper per annum and the number keeps increasing as our business volume grow. The recovery of wastepaper, which requires tremendous effort and resources, is by far the single most important corporate social responsibility activity undertaken by the group that benefits the environment. In the protection and conservation of our environment ,Muda Holdings Berhad have water treatment plants to ensure no harmful discharge to the environment to protect the surrounding areas by reusing the treated water in our manufacturing processes they help to conserve water. Muda Holdings Berhad embrace the notion that our business must not be in conflict with the environment in which they operate, they also have invested in cogeneration technology in our paper mill to improve on thermal efficiency and reductions in emissions of carbon dioxide.

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3. METHODOLOGY
In method to make an analysis the financial performance of a Muda Holdings Berhad, we decide to use is a ratio method by looking at the income statement and balance sheet. Income statement also known as profit and loss account that will shows the performance or achievement for a firm in certain period such as annually and semiannually. Whereas balance sheet is a statement that shows the financial position for a company at certain time by giving information about assets, liabilities and equities of a company. We care choosing to use ratio because ratio can be used to answer four important questions about Muda Holding Berhad operation, which is include; How liquid of the firm?, Is the management generates enough operating profit?, How the firm financing its assets?, Is the shareholders get the worth return on their investment?. From that, we choose to analyze the company trend from liquidity ratios which shows the ability of Muda Holding Berhad to pay it short term debt in the time given. Generally, bigger liquidity ratios, give a better position of the company liquidity. There are two methods to answer these question by looks at the firm assets which liquid relatively and compare to the debt that will be due and looks also how fast the current assets of the firm such as account receivable and inventories can be converted into cash. Besides that, we also using asset management ratio to identify the efficiency and effectiveness of the firm in managing its assets. Which means Muda Holdings Berhad should make basic decision about average collection period, inventory turnover, total asset turnover and fixed asset. The company also are responsible to use the assets efficiency and effectively.

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The third ratio that we are being use is leveraging ratio to shows the debt ratio, debt equity ratio and time interest earned. This ratio will determine the effectiveness of management in using and managing their capital in order to measure the impact of using debt capital to finance assets. Company like Muda Holdings Berhad can use debt to lever (increase) returns on common equity. The fourth ratio that we use is profitability ratios which is including net profit margin and return on equity. The profit margin will tells how much profit that Muda Holdings Berhad can makes for every RM 1 to generate in revenue or sales. Besides that, we also look at the return on equity to know that business has a high return on equity to make it capable of generating cash internally. For the most part, the higher a company's return on equity compared to its industry, its better. Finally, market value ratio includes earning per share, price earning ratio and find market-to-bookratio. This ratio measures how much a company worth is at present, in comparison with the amount of capital invested by current and past shareholders into it. It is also can show Muda Holdings Berhad success increating value for its stakeholder.

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4. FINDINGS AND ANALYSIS

ANALYSIS OF LIQUIDITY RATIO FOR MUDA HOLDINGS BHD. In order to demonstrate and compute the liquidity ratio, we are referring to the balance sheet from the annual report of Muda Holding Bhd which is from 2007 to 2009. Liquidity ratios, such as current and quick, measure the cooperatives ability to meet short-term obligations. They focus on the cooperatives ability to remain solvent. The purpose of computing the liquidity ratio from year 2007 to 2009 is to study which year has the highest and the lowest liquidity ratio. The higher the figure the better the financial condition of the business.

LIQUIDITY RATIO
1 0.9 0.8 0.7 Axis Title 0.6 0.5 0.4 0.3 0.2 0.1 0 current ratio quick ratio 2007 0.92 0.58 2008 0.93 0.53 2009 0.92 0.58 current ratio quick ratio

The current ratio is current assets divided by current liabilities. From the liquidity ratio in current ratio, we found that the current ratio of year 2007 is 0.92 times. For year 2008, it increased to 0.93 times whereas for the year 2009, the current ratio has decreased to 0.92 times. Based on the result, we can estimate that the highest current ratio was at year 2008, which is 0.93

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times. A these mean that in year 2008, Muda Holdings Bhd. has more liquidity compare to year 2007 and 2009. Quick ratio is current assets minus inventories, divided by current liabilities. Inventories are excluded the least liquid of all current assets.For the quick ratio from the liquidity ratio, we found that the quick ratio for the year 2007 is 0.58 times. For the year 2008, the quick ratio has decreased to 0.53 times and at the year 2009 the quick ratio has increased to 0.58 times. From the result above, we knew that the highest ratio is in year 2007 and 2009 which is 0.58 times. This means that the business has more quick assets or liquid asset to cover its short term debt compare to year 2007 and 2009.

ANALYSIS OF THE ASSET MANAGEMENT RATIO MUDA HOLDINGS BHD For asset management ratio, the purpose to compute asset management is to identify the efficiency and effectiveness of Muda Holdings Bhd in managing their assets. By doing this asset management ratio, we are referring to the annual report of Muda Holdings Bhd from year 2007 to year 2009 to complete the computing. The average collection period for year 2007 is 79 days. For year 2008, the collection period is 65 days whereas for the year 2009 the average collection period is 77 days. This ratio measures how long a firm takes to collect its credit accounts. The lower of this figure is better. Based on the result, the lowest average collection period fall on year 2008 which is 65 days compare to the year 2007 and 2009. This means that in year 2008, they are more efficiency in collect debt. Moreover, the purpose of doing the inventory turnover is to measures the number of times a firms inventories are sold and replace during the year. The higher the ratio indicates that

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inventory can be sold and replaced more frequently. After doing the calculation, we knew that for the year 2007, the inventory turnover is 5.19 times. For the year 2008, the inventory turnover has decreased to 4.71 times and in year 2009, it increase to 5.07 times. Based on the result that we study, the highest inventory turnover is on year 2007 which is 5.19 times compare to year 2008 and 2009. This means that the inventory on year 2008 can be sold and replaced more frequently compare to 2008 and 2009 because of its high ratio.

ASSETS MANAGEMENT RATIO

1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 total assets turnover fixed assets turnover 2007 0.85 1.42 2008 0.91 1.59 2009 0.76 1.41 total assets turnover fixed assets turnover

Furthermore, the purpose of calculating the total asset turnover is to show the efficiency of the firm to use its asset to generate sales. The higher of the figure show the more effective in managing its assets. After calculating, we knew that the total asset turnover in year 2007 is 0.85 times. In year 2008, the total asset turnover has increased to 0.91 times and decreased to 0.76 times in year 2009. Based on the result, we knew that the highest total asset turnover is in year 2008 which is 0.91 times compare to year 2007 and 2009. This means that in year 2008, the firms are more effective in managing its assets.

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Besides that, the purpose of calculate the fixed assets turnover is to shows the efficiency of the firm in using fixed assets for its sale. The higher figure shows the firm more effective in produce sales from its fixed assets. The fixed assets turnover in year 2007 is 1.42 times. the fixed assets turnover rate is increased to 1.59 times in 2008 but in the year 2009, the fixed assets turnover has decreased to 1.41 times. Based on the result that we study, we can assume that the firm more effectiveness to produce sales from its fixed assets in year 2008 because it is the highest compare to year 2007 and 2009. ANALYSIS FOR THE LEVERAGE RATIO FOR MUDA HOLDINGS BHD Besides the two ratio that we have done before, we also doing the analysis for the financial performance for Muda Holdings Bhd by looking at the leverage ratios. Leverage ratio shows the ability of the firm to fulfill its responsibility or obligation to their debtors, and determine the effectiveness of management in using and managing capital. In leverage ratio, we are going to find the debt ratio, debt to equity ratio and times interest earned.

LEVERAGE RATIO
1.2 1 0.8 0.6 debt ratio 0.4 0.2 0 debt ratio debt equity ratio 2007 0.52 1.1 2008 0.46 0.84 2009 0.43 0.77 debt equity ratio

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Debt ratio shows the percentage of firms assets that financed by debt. The lower debt ratio shows that the company have more coverage earn by the debtors if firm bankrupt. Debt ratio in year 2007 is 0.52%. For the year 2008, the debt has decrease to 0.46% and at the year 2009, the debt has still decreased 0.43%. Based on the result, we found that the debt ratio in year 2009 is lower than 2007 and 2008. Therefore it means in year 2009, the company has more coverage earn by the debtors of the firm bankrupt. Debt ratio equity measure the percentage of liability covers by equity. After we calculate, the debt ratio equity in year 2007 is 1.1%. In year 2008, the debt ratio equity has decreased to 0.84% whereas in year 2009, the debt ratio equity has still decreased to 0.77%. Based on the result, we found that the lowest debt ratio equity is in year 2009 which is 0.77%, it means in year 2009 the firm is able to add its debt or liability if it needs to do so compare to the debt ratio equity in year 2007 and 2008.

TIMES INTEREST EARNED RATIO

5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 TIMES INTEREST EARNED RATIO 2007 2.22 2008 4.57 2009 2.76 TIMES INTEREST EARNED RATIO

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Times interest earned measure how many times the firm has profit to pay interest expenses. It also shows the ability of the firm to generate enough funds to pay the interest at maturity. The time interest earned in year 2006 is 139.7920 times. In the year 2007, there was a big drop to -94.3850 which they dont have ability to generate funds to pay the interest at maturity. After a year, which is in year 2008, they have improved and their times interest earned have increased to 20.511 times compare to year 2007. Therefore we can assume that in year 2006, their times interest earned is highest compare to the year 2007 and 2008. This means that in year 2007, the firm is able to pay the interest expenses. ANALYSIS OF PROFITABILITY RATIO FOR MUDA HOLDINGS BHD Last but not least, we have done an analysis based on profitability ratios. One of the analyses is to know the return on the common stockholders investment and want to know if earning available to Muda Holdings Bhd.

NET PROFIT MARGIN

0.08 0.07 0.06 0.05 0.04 0.03 0.02 0.01 0 NET PROFIT MARGIN 2007 0.03 2008 0.07 2009 0.06 NET PROFIT MARGIN

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In order to answer the question we have choose to analysis the profitability ratio by using net profit margin. Net profit determine profit earns from every dollar of sales after all expenses, including cost of good, sales expenses, general and admin cost, depreciation, interest and tax completely paid. In year 2007, the net profit margin is 0.03%, the percentage has increased to 0.07% in 2008 and in the year 2009, the net profit is 0.06%. The higher profit will be the better. Based on the result above, the higher of net profit is in year 2008. This means that the higher ratio in year 2008 will reduce in expenses or cost in producing sales in firm.

PROFITABILITY RATIO
0.12 0.1 0.08 0.06 RETURN ON ASSETS 0.04 0.02 0 RETURN ON ASSETS RETURN ON EQUITY 2007 0.02 0.05 2008 0.06 0.11 2009 0.04 0.08 RETURN ON EQUITY

Other than that, return on asset determines the effectiveness of management in using their asset to generate income. After we done the analysis, the return on asset in year 2007 is 0.02%. In year 2006, the return on asset increased to 0.06% and decreased to 0.04% in year 2009. Based on the result above, we found that in year 2008 have higher return on asset compare to year 2007 and 2009. This shows that the firm is more effective in using their asset in year 2008 compare to year 2007 and 2009.

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Return on equity determines the efficiency of the firm to generate income for its shareholder, its profitability measurement to equity investment in the firm. The higher of the ratio is better. After we calculate, we found that the return of equity for year 2006 is 0.05% and 2008 the return on equity is increased to 0.11%. But in 2009 the return on equity is decreased to 0.08%. Based on the result that we get, we knew that in year 2008, the higher ratios of these is able to produce higher profit to its owners compare to year 2007 and 2009.

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5. CONCLUSION
When we see the comparison the financial in MUDA holdings Berhad, in year 2007,2008 and 2009, we can conclude their financial is liquid or not to pay their debt and dividend. The firms is liquidity, as measured by the current and quick ratios, has been relatively stable over time. Although there was a decline in these ratio from year 2007 until 2009 the ratio have improve overall during the period this is because in the year 2009, MUDA Holding Berhad has rm0.92 in current asset for every rm1 in current liability.. In asset management ratio, the just take a little longer to collect its receivable than the averaged firm is 77 days. Accounts receivable turnover has also been relatively but has shown slight declines. Inventory turnover improved in 2009 over the previous four years, suggestion that inventory is being managed more efficiently. MUDA Holdings Berhad reduce it use of debt somewhat over the past five years. During this times, the times interest earned shone significant improved. Thus, the firm is well able to able to service its interest expense without any difficultly. We must remember that the interest is not paid with income but with cash, and that the firm may be required to repay some of the debt principle as well as the interest. Thus, the times interest earned is only a crude measured of the firms capacity to service in debt.

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6. REFERENCE
1. www.klse.com.my 2. http://www.muda.com/index.php