BWFF3023 CREDIT MANAGEMENT Table of Contents 1.0 INTRODUCTION 2 1.1 COMPANY PROFILE 2 1.2 QUALITY AND STANDARDS: 2 2.0 BALANCE SHEET OF APOLLO FOOD HOLDINGS BERHAD 2010 TO 2012 4 2.1 APOLLO FOOD HOLDINGS BERHAD BALANCE SHEET OF COMMON SIZE 2010 TO 2012 5 2.2 APOLLO FOOD HOLDINGS BERHAD INCOME STATEMENT 2010 TO 2012 6 2.3 APOLLO FOOD HOLDINGS BERHAD COMMON SIZE OF INCOME STATEMENT 2010 TO 2012 6 2.4 APOLLO FOOD HOLDINGS BERHAD CASH FLOW STATEMENT 2010 TO 2012 7 3.0 FINANCIAL RATIOS OF APOLLO FOOD HOLDINGS BERHAD 2011 TO 2012 8 4.0 APOLLO FOOD HOLDINGS BERHAD KEY RATIOS FOR CREDIT ASSESSMENT 9 4.1.0 LIQUIDITY RATIO 10 4.1.1 ACTIVITY RATIO 12 4.1.2 LEVERAGE RATIO 14 4.1.3 PROFITABILITY RATIO 15 5.0 CREDIT SCORING 17 6.0 CONCLUSION 20 REFERENCE: 21 1
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BWFF3023 CREDIT MANAGEMENT
Table of Contents
1.0 INTRODUCTION 2
1.1 COMPANY PROFILE 2
1.2 QUALITY AND STANDARDS: 2 2.0 BALANCE SHEET OF APOLLO FOOD HOLDINGS BERHAD 2010 TO 2012 42.1 APOLLO FOOD HOLDINGS BERHAD BALANCE SHEET OF COMMON SIZE 2010 TO 2012 52.2 APOLLO FOOD HOLDINGS BERHAD INCOME STATEMENT 2010 TO 2012 62.3 APOLLO FOOD HOLDINGS BERHAD COMMON SIZE OF INCOME STATEMENT 2010 TO 2012 62.4 APOLLO FOOD HOLDINGS BERHAD CASH FLOW STATEMENT 2010 TO 2012 73.0 FINANCIAL RATIOS OF APOLLO FOOD HOLDINGS BERHAD 2011 TO 2012 84.0 APOLLO FOOD HOLDINGS BERHAD KEY RATIOS FOR CREDIT ASSESSMENT 94.1.0 LIQUIDITY RATIO 104.1.1 ACTIVITY RATIO 124.1.2 LEVERAGE RATIO 144.1.3 PROFITABILITY RATIO 155.0 CREDIT SCORING 176.0 CONCLUSION 20REFERENCE: 21
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1.0 Introduction
This assignment is dedicated to analyse the industry
based on the past three (3) years report between 2010 to
2012. However, the report will include the Profit &
Loss, Balance Sheet and Cash Flow Statement which all can
help us to do the critical research on the company’s
credit assessment whether the company is capable to offer
a credit facility to a particular company. Moreover, we
start by introducing the company background, its industry
nature, and the distribution of products to overseas
markets.
1.1 Company Profile
The principal activities of APOLLO are investment holding
and provision of management services to subsidiaries. The
principal activities of the subsidiaries are manufacture
of and trading in compound chocolates and chocolate
confectionery products and cakes. Apollo Food Holdings
Bhd (APOLLO) was incorporated on 5th March 1994 as a
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private limited company under the name Apollo Food
Holdings Sdn Bhd. It subsequently converted into a public
company on 8th September 1994 and changed its name to
present
Apollo Food Industries Sdn Bhd, The Company that is
and layer cakes based in Malaysia. Apollo’s product
mainly divided into two main categories, which are:
• Chocolate Wafer products
• Layer cake, Chocolate Layer Cake and Swiss roll products
As a leading manufacturer of the Chocolate Confectionery
Products and Layer Cake industry in Malaysia, the Apollo
products are distributed in Malaysia and other overseas
market, which are Singapore, Indonesia, Thailand,
Philippines, Vietnam, China, Hong Kong, Taiwan, Japan,
India, Middle East, Mauritius, and Maldives.
1.2 Quality and Standards:
Quality and innovation are one of the Apollo’s strengths.
The organization constantly strives to determine and
provide the resources needed
a) Implement and maintain the quality management system
and continually improve its effectiveness.
b) Produce the products with top quality of raw &
packaging materials
c) Using world class wafer and layer cake-manufacturing
machinery from Europe and constantly upgrade and
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improve to remain competitively.
d) Enhance customer satisfaction by meeting customer
requirements.
e) Recognize our customers’ needs by introduce
independence packaging.
f) Ensure the quality assurance procedures, the company
had accredited with HALAL.
Our AIM
To always fulfilled the customer needs and requirement by
using the latest equipment and technology.
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2.0 BALANCE SHEET OF APOLLO FOOD HOLDINGS BERHAD 2010to 2012
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BALANCE SHEET OF APOLLO FOOD HOLDINGS BHD 2010 to 2012DESCRIPTION 2010 2011 2012ASSETSNon Current AssetsProperty, plant, and equipment 98,972,511 113,958,
080118,105,5
58Investment Properties 13,206,429 14,165,2
2413,952,84
1Leasehold land use rights 11,648,849 5079204 2,399,690Available-for-sale investments 971,688 899820 2,835,298Deferred tax assets 6,600 36000 93,400Total non current assets 124,806,07
7134,138,
328137,386,7
87Current AssetsInventories 14,569,823 14,569,8
2317,221,36
3Trade Receivables 20,472,957 23,152,1
0826,221,65
4Other receivables, deposits and prepayments
1,846,001 1,058,136
2,642,793
Tax recoverable 2,953,003 1,205,418
383,986
Cash and cash equivalents 62,503,691 55,350,629
56,591,062
Total current assets 102,345,475
99,633,147
103,060,858
TOTAL ASSETS 227,151,552
233,771,475
240,447,645
EQUITY AND LIABILITIESShareholders’ EquityEquity attributable to equity holders of the companyShare capital 80,000,000 80,000,0
0080,000,00
0Reserves 123,176,46
5124,478,
300135,133,3
53Total Equity 203,176,46
5208,478,
300215,133,3
53Non current LiabilitiesRetirement benefits obligations 1,205,585 1,308,16
81,411,747
Deferred tax liabilities 14,760,035 15,894,465
16,290,795
Total non current liabilities 15,965,620 17,202,633
17,702,542
Current LiabilitiesTrade Payables 3,144,648 4,290,53
2.1 APOLLO FOOD HOLDINGS BERHAD BALANCE SHEET OF COMMON SIZE 2010 to 2012
DESCRIPTION 2010 2011 2012ASSETSNon Current AssetsProperty, plant, and equipment
43.57% 48.75% 49.12%
Investment Properties 5.81% 6.06% 5.80%Leasehold land use rights 5.13% 2.17% 1.00%Available-for-sale investments
0.43% 0.38% 1.18%
Deferred tax assets 0.00% 0.02% 0.04%Total non current assets 54.94% 57.38% 57.14%Current AssetsInventories 6.41% 6.23% 7.16%Trade Receivables 9.01% 9.90% 10.91%Other receivables, deposits and prepayments
0.81% 0.45% 1.10%
Tax recoverable 1.30% 0.52% 0.16%Cash and cash equivalents 27.52% 23.68% 23.54%Total current assets 45.06% 42.62% 42.86%TOTAL ASSETS 100.00% 100.00% 100.00%EQUITY AND LIABILITIESShareholders’ EquityEquity attributable to equity holders of the companyShare capital 35.22% 34.22% 33.27%Reserves 54.23% 53.25% 56.20%Total Equity 89.45% 89.18% 89.47%Non current LiabilitiesRetirement benefits obligations
0.53% 0.56% 0.59%
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Deferred tax liabilities 6.50% 6.80% 6.78%Total non current liabilities
7.03% 7.36% 7.36%
Current LiabilitiesTrade Payables 1.38% 1.84% 1.54%Other payables and accruals
1.42% 1.51% 1.50%
Retirement benefits obligations
0.30% 0.03% 0.02%
Current tax liabilities 0.42% 0.08% 0.11%Total current liabilities 3.53% 3.46% 3.17%Total liabilities 10.55% 10.82% 10.53%TOTAL EQUITY AND LIABILITIES
100.00% 100.00% 100.00%
2.2 APOLLO FOOD HOLDINGS BERHAD INCOME STATEMENT 2010to 2012
DESCRIPTION 2010 2011 2012
DATE OF FISCAL YEAR END 4/30/10 4/30/11 4/30/12REVENUE 159,531,2
55176,291,9
85200,548,4
62COST OF SALES 114,034,4
44136,036,3
06155,455,4
66GROSS PROFIT 45,496,81
140,255,67
945,092,99
6OTHER INCOME 6,315,337 2,228,062 2,870,847ADMINISTRATIVE EXPENSES 10,818,40
611,335,98
811,013,65
8SELLING AND DISTRIVUTION EXPENSES 6,652,111 6,171,497 8,356,522OTHER OPERATING EXPENSES 2,093,865 2,399,332 -PROFIT BEFORE TAX 32,247,76
622,576,92
428,593,66
3INCOME TAX EXPENSES 7,570,774 4,722,703 6,852,338PROFIT FOR THE YEAR 24,676,99
2 17,854,
22121,741,32
5ATTRIBUTABLE TO: EQUITY HOLDERS OF THE COMPANY
24,676,992
17,854,221
21,741,325
EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS
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Basic, for profit for the year 30.85 22.32 27.18Diluted 30.85 22.32 NADividend Per Share 20 25 20
DESCRIPTION 2010 2011 2012
DATE OF FISCAL YEAR ENDREVENUE 100.00
%100.00
%100.00
%COST OF SALES 71.48% 77.17% 77.52%GROSS PROFIT 28.52% 22.83% 22.48%OTHER INCOME 3.96% 1.26% 1.43%ADMINISTRATIVE EXPENSES 6.78% 6.43% 5.49%SELLING AND DISTRIVUTION EXPENSES 4.17% 3.50% 4.17%OTHER OPERATING EXPENSES 1.31% 1.36%PROFIT BEFORE TAX 20.21% 12.81% 14.26%INCOME TAX EXPENSES 4.75% 2.68% 3.42%PROFIT FOR THE YEAR 15.47% 10.13% 10.84%ATTRIBUTABLE TO: EQUITY HOLDERS OF THE COMPANY 15.47% 10.13% 10.84%
2.3 APOLLO FOOD HOLDINGS BERHAD COMMON SIZE OF INCOMESTATEMENT 2010 to 2012
2.4 APOLLO FOOD HOLDINGS BERHAD CASH FLOW STATEMENT 2010 to 2012
APOLLO FOOD HOLDINGSDESCRIPTION 2010 2011 2012
DETAILED
DETAILED
DETAILED
DATE OF FISCAL YEAR END 4/30/10 4/30/11 4/30/12CASH FLOWS FROM OPERATING ACTIVITIESPROFIT BEFORE TAX 32,247,
76622,576,
92428,593,
663Adjustment for:
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Depreciation of property, plant an equipment
8,491,033
8,724,462
9,290,859
Depreciation of investment properties
128,498 212,383 212,383
Amortisation of leasehold land use rights
616,905 283,355 163,842
Unrealised loss/(gain) on foreign currency translations
274,877 803,911 121,152
Provision for retirement benefits 240,525 169,193 160,992Property, plant and equipment written off
402 220 20
Inventories written off 95,341 111,947 219,398Bad debts written off 90,935 1,013 35,945Gain on disposal of investments 4,199,6
04217,010 212,424
Interest Income 1,212,449
1,304,210
1,579,998
Rental income from investment properties
315,400 320,700 314,400
Dividend income 141,369 23,364 106,881Loss/gain on disposal of property, plant and equipment
1,850 6,999 7,550
Reversal of/allowance for diminutionin value of investments
161,726 -
Operating profit before working capital changes
36,157,584
31,011,125
36,347,797
Changes in working capitalInventories 2,456,3
864,408,9
801,426,0
95Receivables 190,788 2,021,9
994,648,6
27Payables 665,717 1,466,9
99531,137
Cash generated from operations 34,176,127
26,047,145
32,594,128
Interest received 1,134,545
1,385,662
1,591,745
Income tax refunded 2,078,032
Taxes paid 3,182,129
5,580,438
6,014,744
Payment of retirement benefits 16,358 689,430 72,483Net cash generated from operating activities
32,112,185
23,240,971
28,098,646
CASH FLOWS FROM INVESTING ACTIVITIES
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Purchase of available-for-sale investments
2,454,906
Proceeds from disposal of investments
16,760,231
527,851 807,859
Rental received from investment properties
315,400 320,700 314,400
Dividend received 109,647 23,031 106,881Purchase of property, plant and equipment
14,341,284
14,066,592
9,703,331
Purchase of investmentPurchase of leasehold land use rights
3,100,000
1,050,000
-
Proceeds from diposal of plant equipment
400 7,000 3,000
Net cash used in financing activities
255,606 14,238,370
10,926,097
CASH FLOWS FROM FINANCING ACTIVITIESDividends paid 12,000,
00015,400,
00016,000,
000Net cash used in financing activities
12,000,000
15,400,000
16,000,000
NET INCREASE IN CASH AND CASH EQUIVALENTS
19,856,579
6,397,399
1,172,549
Currency translation differences 210,803 755,663 67,884CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
42,857,915
62,503,691
55,350,629
CASH AND CASH EQUIVALENTS AT END OF YEAR
62,503,691
55,350,629
56,591,062
3.0 FINANCIAL RATIOS OF APOLLO FOOD HOLDINGS BERHAD 2011 TO 2012
Liquidity ratio
Liquidity Ratios 2010 2011 2012
1) Current ratio = Current assets/Current liabilities 12.78 12.31 13.54
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2) Quick ratio = Current assets-inventory & other current assets/Current liabilities 10.96 10.51 11.28
3) Cash ratio = Cash and equivalents/current liabilities 7.80 6.84 7.43
Average industry fixed asset turnover ratio in 2010, was
1.09 and in the following year, 2011 was 1.24 and 1.41
respectively in 2012. If you see the above table all
three LBH was not effective the to manage its fixed
assets however, it was the worst company among other two
companies and the rest of two companies OFI and AFH are
quite well to manage their fixed assets in contrast to
its average industry fixed asset turnover rate. For
instance, Apollo Food Holdings, fixed asset turnover
ratio was 1.23 in 2010 and it was good than its average
ratio in the same year, by 1.09. At the next year, 2011,
the company’s ratio has been increased by 1.30, which was
greater by the difference 0.06, 1.24. In 2012, the
Apollo’s fixed asset ratio was 1.4 and it was greater
also from the average industry ratio.
Total asset turnover - the amount of sales generated for
every dollar’s worth of assets. It is calculated by
dividing sales in ringgit by assets in ringgit. Total asset turnover 2010 2011 2012LBH 0.45 0.39 0.41OFI 0.92 1.03 1.23AFH 0.70 0.75 0.83Average 0.69 0.72 0.82
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Two companies are effective because its average industry
ratios were less than each company’s ratios. AFH has
0.70, 0.75 and 0.83 over three years, 2010, 2011, and
2012 respectively. The companies were effective or in
other terms corporate resources were being well managed
that the firm would be able to realize a high level of
sales and ultimately, profits from its asset investments.
4.1.2 Leverage ratio
Leverage measures - which can composite of debt ratio and
debt equity ratio. A ratio indicates what proportion of
debt a company has relative to its assets. The measure
gives an idea to the leverage of the company along with
the potential risks the company faces in terms of its
debt-load. Debt ratio can be defined by dividing the
total debt over the company’s total assets. Debt ratio 2010 2011 2012LBH 0.50 0.52 0.46OFI 0.17 0.20 0.21AFH 0.10 0.10 0.10Average 0.26 0.27 0.26
Two companies were doing the good job to manage on their
debt except London Biscuit because had a ratio of 0.50 in
2010, at the next coming year; it has increased to 0.52
slightly. However, the company’s debt ratio decreased to
0.46. The company has not been managing its debt over
three years in comparison to its industry average ratio
and it was greater than the average industrial ratio.
However, OFI, the company also did the good job in
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comparing the previous company and it is relatively low
as you can see from the above table. The company 0.17,
0.20 and 21 over three years respectively. However, the
best company to manage its debt in a low ratio is Apollo
Food Holdings, the company has done the outstanding job
in contrast to both previous companies as well as average
industry ratio. The company’s debt ratio for year 2010,
2011, 2012 are 0.10. Its average industry ratio 0.26,
0.27 and 0.26, which were good for Apollo. It has become
constant for the year continuously.
Debt to equity ratio – A measure of a company’s financial
leverage calculated by dividing its total liabilities by
stockholder’s equity. It indicates what proportion of
equity and debt the company is using to finance its
assets.
Debt to equity ratio 2010 2011 2012LBH 1.27 1.48 1.02OFI 0.20 0.24 0.27AFH 0.12 0.12 0.12Average 0.53 0.61 0.47
In year 2010, the debt/equity ratio for LBH is 1.27. For
the next year, which is in 2011, it becomes increased to
1.48. Although, in 2012, the company’s debt/equity ratio
decreased sharply to 1.02 comparing to the previous
years.
The OFI debt/equity ratio for 2010 is 0.20. It has been
increased in year 2011, from 0.20 to 0.24. In year 2012,
the company has set the ratio to 0.27
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Apollo’s debt/equity ratio is constant over three years,
which is started constantly by 0.12, in 2010 until 2012.
Two companies were good on their debt/equity ratio, which
was less than its average industry ratio. However, the
most preferable company is Apollo, which has a relatively
low debt/equity ratio in contrast to its counterparties.
4.1.3 Profitability ratio
Gross profit - The gross profit margin ratio is used as
one indicator of a business's financial health. It shows
how efficiently a business is using its materials and
labour in the production process and gives an indication
of the pricing, cost structure, and production efficiency
of your business. The higher the gross profit margin
ratio the better.
Gross Profit 2010 2011 2012LBH 0.24 0.23 0.23OFI 0.29 0.26 0.22AFH 0.29 0.23 0.22Average 0.27 0.24 0.22Apollo has less gross profit margin over three years in
comparison to its average industry ratio. However, Apollo
has a ratio of 0.29, 0.23 and 0.22. In comparison to its
average industry ratio, in 2010, Apollo has done well
because its gross profit margin was 0.29 comparing to
industry average. In the next year, 2011, the company’s
gross profit margin declined to 0.23 by showing the 2011,
company’s gross profit margin was less than the average
industry ratio. In 2012, however, Apollo’s gross profit
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margin dropped slightly by the difference 0.01 and
equaled to the average ratio. During two years, company’s
gross profit margin was stable except in 2010.
Operating income margin is a measurement of what
proportion of a company's revenue is left over after
paying for variable costs of production such as wages,
raw materials, etc. A healthy operating margin is
required for a company to be able to pay for its fixed
costs, such as interest on debt.Operating Income 2010 2011 2012LBH 0.01 0.03 0.03OFI 0.02 0.00 0.01AFH 0.20 0.13 0.14Average 0.08 0.05 0.06
As you can see from the above table, 0.20 started
Apollo’s operating income in 2010. Although its
decreasing ratio in the next year, 2011, by 0.13. In
2012, operating income has started to make a slight
improvement by 0.14. Thus, operating margin of Apollo has
done quite well in comparison to its average industrial
ratio. For instance, in 2010, the average industry ratio
was 0.08, which less than the company by 0.12, at the
following years, the industry average ratio declined to
0.05 and comparing to the company’s ratio 0.13, the
average industry ratio looked less by 0.07.
In 2012, the average industry ratio was 0.06, which was
less than the company-operating margin by the difference
0.09.
Net profit margin - The net profit margin ratio is the
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net profit as a proportion of sales. The net profit
margin ratio shows the proportion of every dollar of
sales that is left after all expenses have been paid, and
remains as net profit.
Net profit is used to pay for interest, tax and
distribution to the owners. The higher the net profit