Iii define and calculate ten 10 ratios used in

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iii) Define and calculate TEN (10) ratios used in evaluating the companies’ profitability, liquidity, efficiency, shareholder and capital structure. 1. Profitability ratios The Store Corporation Berhad (RM’000) Aeon Company Berhad (RM’000) a. Gross profit margin is a profitability ratio that indicates how much profit a company can make after paying off its cost of goods sold. Gross profit percentage = Gross profit Sales × 100 RM 345322 RM 1635327 × 100 ¿ 21.12 RM 3834640 RM ( 58244 + ¿ 2395114 ) RM 3834640 × 100 ¿ 36.02 Note: Gross profit = Revenue – (Change in inventories + Net purchases) b. Net profit percentage is to measure the return on sales that is how much profit in every ringgit of sales. Net profit percentage = Net profit Sales × 100 RM 12695 RM 1635327 × 100 ¿ 0.78 RM 131671 RM 3834640 × 100 ¿ 3.43 c. Return on Capital employed is a financial ratio which measures the profitability of the resources utilized in earning the profit. Return on Capital Employed = profit beforeinterest tax capital employed × 100 Note: Capital employed =Ordinary share capital + Reserve +Preference shares +Long-term loan RM 24854 RM ( 465798 + ¿ 476094 ) / 2 × 100 ¿ RM 24854 RM 470946 × 100 = 5.28 RM ( 210841 + ¿ 18452 ) RM ( 1783373 + ¿ 1844534 ) / 2 × 100 ¿ RM 229293 RM 1813953.5 × 100 = 12.64 2. Liquidity ratios
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The Store Corporation Berhad (RM’000) Aeon Company Berhad (RM’000) a. Current ratio is a liquidity ratio that shows whether the company has sufficient short term assets to meet short term liabilities. Current ratio = Current assets Current liabilities RM 481,217 RM 409,773 ¿ 1.17:1 RM 931,660 RM 2,090,680 ¿ 0.45:1 b. Acid test ratio is to measure whether the company has sufficient current assets that are readily convertible to cash to pay short term debts. Acid test ratio = Current assets inventory Currentliabilities RM 481,217 RM 250,612 RM 409,773 ¿ 0.56:1 RM 931,660 RM 577,517 RM 2,090,680 ¿ 0.17:1
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3. Efficiency Ratios The Store Corporation Berhad (RM’000) Aeon Company Berhad (RM’000) a. Stock turnover is a ratio that measures the movement of stock. Stock turnover = costof sales average stock RM 1290005 RM ( 250612 + ¿ 247669 ) / 2 ¿ RM 1290005 RM 249140.5 = 5.18 × ¿ RM ( 58244 + ¿ 2395114 ) RM ( 577517 + ¿ 518842 ) / 2 ¿ RM 2453358 RM 548179.5 = 4.48 × ¿ Note: Cost of sales = Change in inventories + Net purchases a. Creditor/Purchase ratio is measures how long it takes for a business to settle its debt with supplier. Creditor/Purchase ratio= Creditor Purchases × 365 RM 325527 RM 1290005 × 365 ¿ 92.11 92 days RM 702518 RM 2395114 × 365 ¿ 107.06 107 days
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4. Shareholder Ratios The Store Corporation Berhad (RM’000) Aeon Big Company Berhad (RM’000) a. Earning Per Share ratio (EPS) is a ratio that used to compare a company’s one year’s earnings with another years’s. Earning Per Share ratio = Net profit afterinterest tax preference dividends Number of ordinary sharesissued RM 12,695 68,504 ¿ RM 0.19 RM 131,671 1,404,000 ¿ RM 0.094 b. Dividend yield ratio is to measure the real rate of return of a share. Dividend yield ratio = Gross dividend per share Market price per share RM 3.75 RM 3.10 ¿ 1.21 RM 5 RM 2.83 ¿ 1.77 5. Capital Structure The Store Corporation Berhad (RM’000) Aeon Company Berhad (RM’000) Gearing ratio shows the relationship between internal capital and long-term loans is very important.
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