ACC720/0911/RAR
Company History & Business
Hwa Tai Industries Berhad (HTIB) is one of the premier and longest established biscuit
manufacturers in Malaysia. Established in 1962 and listed on the Stock Exchange Malaysia in
1992. Since then, this fast expanding company has grown to be one of the largest players in the
biscuits industry in the country and produce a fine, wide range of superior quality biscuits. It has
been successfully marketed domestically and internationally through HTIB’s own vast and
comprehensive distribution network. Our biscuits are marketed under the brand name or
trademark of “HWA TAI” and “LUXURY”.
We take pride in our excellent innovation and high quality products which have firmly
entrenched us not only in Malaysia but also in over 50 countries around the world. We are keenly
involved in the integrated supply chain of our products, from manufacture to sales to distribution
throughout the entire trade channels. Due to our extensive and comprehensive distribution
network, we are also carrying products / brands by other principals for the Malaysian market.
Our Vision
We aim to be a leading biscuits and confectionery manufacturer in the region known for its
product quality and variety.
Our Commitment
HTIB is committed in producing the best quality biscuit products for our customers all over the
world and creating business opportunities for our partners. We have more than 49 years of
manufacturing experience and the ability to manage our entire value chain, from procurement of
raw materials to distribution of finished products. From the company's very first beginning, we
have recognized that the skilled and dedicated people who work for us are critical to our success.
We expect high standards from our staff – a team totally committed to the provision of the
highest quality service in the business.
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Quality Assurance
HTIB's dedication to quality is further reinforced by using the most advanced state-of-the art
machinery and processing techniques to produce premium biscuits with distinct flavors and
tastes. HTIB has developed an internationally recognized Quality Management System based
upon MS ISO 9001:2000 to ensure that our products conform to international standards.
Awards & Achievements
As an active and enterprising company, we participated in the Monde Selection in Belgium with
4 of our products, i.e. Duchess Cookies, Sesamio, Siang-Siang cream crackers & Choose, and we
were awarded with 2 gold & 2 silver medals respectively. In the year 2000, Hwa Tai Industries
Berhad won two gold medals from the Monde Selection again for Luxury Original Calcium
Crackers and Luxury Vegetable Crackers.
HTIB Today
HTIB has successfully established a strong presence in Malaysia and has built up a wide
international market. Today, our products can be found locally from small sundry shops to big
hypermarkets, fast-food chains, airlines and other mass consumption industries. A total of 40%
of our company's production is exported internationally to countries such as China, Taiwan,
Hong Kong, Singapore, Brunei, USA, Mauritius, Middle East, Papua New Guinea, Maldives,
Nigeria and 28 other countries. And we are still growing - support facilities are constantly being
upgraded, with our continuous goal of producing the finest product ranges possible.
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1. Horizontal Analysis (Balance Sheet)
Definition: also called trend analysis, is a technique for evaluating a series of financial statement data over a period of time.
2009 2008 2007
-20%
0%
20%
40%
60%
80%
100%
120%
Property, plant and equipmentLeasehold landInvestment in an associate companyInvestment propertiesPrepaid land lease paymentsTotal Non Current Assets
Total Non Current Assets
Property, plant and equipment
Leasehold land
Investment in an associate company
Investment properties
Prepaid land lease payments
2009
3% 3% 3% 2% 0% 0%
2008
21% 8% 0% -2% 100% 100%
2007
3% -1% 0% -1% 17% 3%
1.1 Horizontal Analysis for Non Current Assets
Based on the graph above, the non-current asset basically is the investment of property, plant
and equipments, leasehold land, investment in an associate company, investment properties and
prepaid land lease payments. The non-current asset growth was the biggest in year 2008, that is
21% as compared to the year 2009 and 2007 which only have 3%. Meaning that compared to this
three years, in 2008, Hwa Tai got higher of asset which is not easily convertible to cash or not
expected to become cash within the next year.
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2009 2008 2007
-700%
-600%
-500%
-400%
-300%
-200%
-100%
0%
100%
200%
InventoriesTrade and other receivablesPrepaymentsFixed deposit place with licensed bankTax recoverableCash and bank balanceTotal Current Assets
Total Current Assets
Inventories Trade and Other receivables
Prepayments Fixed Deposit Place
Cash and Bank Balance
Tax Recoverable
2009 4% -24% 9% 110% 0% 7% -53%2008 -3% 18% 7% 0% 100% -624% 56%2007 4% -15% 2% 0% 0% 65% 80%
1.2 Horizontal Analysis for Current Assets
Based on the graph, current assets include inventories, trade and other receivables,
prepayments, fixed deposit place, cash and bank balance and tax recoverable. All this assets are
readily to be converted into cash within one year in the normal course of business. Based on the
result above, in 2009 and 2007, the current assets are higher compare to 2008. As we can see,
total for non current 2008 is higher and the total current asset is lower. Trade receivable was at
the highest in year 2009 when comparing year-to-year (9%). The lowest trade receivable trend is
in 2007 (2%). Trade receivable trend dropped drastically in year 2007 from 2008 (7% dropped to
2%). This is in tandem with the economic trend. During good years, the trade receivable is good,
and during bad times, the trade receivable is bad. Since experiencing an economic downturn in
2008, Hwa Tai decrease. Their cash reserves are remain positive in 2009 and 2007. During the
economic downturn, the cash in 2008 moved to negative (-624%). By reason of this matter, Hwa
Tai experienced losses in 2008.
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2009
2008
2007
0% 1% 2% 3% 4% 5% 6% 7% 8% 9%
Total Assets
Total Assets2009 4%2008 8%2007 4%
1.3 Horizontal Analysis for Total Assets
The total assets registered the highest in years, 2008 (8%) respectively. The increased in the
year 2008 are due to:
i. increased in investment on property, plant and equipments (8%)
ii. increased in inventories (18%)
iii. increase in investment properties (100%)
iv. increased in prepaid land and lease payment (100%)
v. increased in fixed deposit place (100%)
vi. increased in noncurrent assets (21%)
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2009 2008 2007
-600%
-500%
-400%
-300%
-200%
-100%
0%
100%
200%
Loans and borrowingsDeferred tax liabilitiesHire purchase liabilitiesTotal Non Current Liabilities
Total Non Current Liabilities
Loans and Borrowings Deferred Tax Liabilities Hire Purchase Liabilities
2009
21% 21% 0% 0%
2008
-58% 0% 20% 0%
2007
-482% 0% 100% -470%
1.4 Horizontal Analysis for Non Current Liabilities
Noncurrent liabilities are the obligations of the firm that generally are due more than one
year after the balance sheet date. The portion of noncurrent liabilities consists of loans and
borrowings and hire purchase liabilities. In addition, deferred tax liabilities are an important
component of liabilities for many companies. Based on the graph, in 2009, Hwa Tai posses the
highest noncurrent liabilities (21%) compared to 2008 and 2007. These liabilities represent
money Hwa Tai owes one year or more in the future. In 2009, Hwa Tai bought more assets in
terms of transportation in order to expand their businesses after downturn in 2008.
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2009 2008 2007
-200%
-150%
-100%
-50%
0%
50%
100%
150%
Trade and other payablesHire purchase liabilitiesShort term borrowingsLoans and borrowingsTerm loansBank overdraftProvisionsTax PayableTotal Current Liabilities
Total Current Liabilities
Trade and Other Payables
Hire Purchase Liabilities
Loans and Borrowings
Term Loans
Provisions Tax Payable
Bank Overdraft
Short Term Borrowings
2009 5% 21% 0% -3% 0% 95% 11% 0% 0%2008 17% 0% 20% 0% 0% -93% -14% 100% 0%2007 9% 0% 100% 0% 100% -16% 0% 9% -470%
1.5 Horizontal Analysis for Current Liabilities
Current liabilities are understood as all liabilities of the business that are to be settle in cash
within the fiscal year or the operating cycle. Based on the data above, total current liabilities
increase in 2008 (17%). Managing current liabilities is very important to Hwa Tai and other
company’s cash flow process and extended viability. The increase of current liabilities in 2008 is
because of increase of other payable. In 2009, the current liabilities is lower because there are no
hire purchase liabilities compare to another two years (2008, 2007).
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2009 2008 20070%
2%
4%
6%
8%
10%
12%
14%
16%
Total Liabilities
Total Liabilities2009 6%2008 14%2007 6%
1.6 Horizontal Analysis for Total Liabilities
The trend for total liabilities peaked in the year 2008, which is at 14%. This peaked is due to
the increase in total current liabilities. This increase is due to the bank overdraft at 100%.
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2009 2008 2007
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
Total equity
Total Equity2009 -2%2008 -14%2007 -3%
1.7 Horizontal Analysis for Total Equity
Total equity is the net worth of business and includes such elements as the value of common
and preferred shares. According to the data, the highest total equity is in year 2009 (-2%). In
Hwa Tai situation, this company experience higher accumulated losses in three years. However,
in 2009, the equity is increased from 2008.
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2. Horizontal Analysis (Income Statement)
Definition: also called trend analysis, is a technique for evaluating a series of financial statement data over a period of time.
2009 2008 2007
-100%
-80%
-60%
-40%
-20%
0%
20%
40%
RevenueCost of Good SoldGross Profit
Revenue Cost of Goods Sold Gross Profit
2009
-7% 10% -13%
2008
-9% 22% -3%
2007
-1% -36% -76%
2.1 Horizontal Analysis for Income Statement (Revenue, Cost of Goods Sold, Gross Profit)
Based on the data, total revenue both the three year dropped into negative figure.
However, the highest total revenue is for year 2007 (-1%). For cost of goods sold, the sale was
highest in 2008 (22%). At this year, the more purchase of raw materials, consumables and
inventories. The gross profit was at highest in year 2008, that is -3%. Second highest is in year
2009, that is -13%. The lowest gross profit is in year 2007 at -76%. This is in tandem with the
revenue generated for that respective year.
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2009 2008 2007
-500%
-400%
-300%
-200%
-100%
0%
100%
200%
Profit/ Loss before TaxationProfit/ Loss after Taxation
Profit/ Loss before Taxation Profit/ Loss after Taxation
2009 67% 81%2008 -386% -394%2007 124% 134%
2.2 Horizontal Analysis for Income Statement (Profit before Tax and profit after Tax)
Hwa Tai experienced the worst profit before tax (PBT) and profit after tax (PAT) in 2008
(-386% PBT and -394% in PAT). The decrease of PBT and PAT is due to the economic
downturn that happened in 2008. However, during 2009 and 2007, PBT and PAT are higher
compared to 2008.
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3. Ratio Analysis
Definition: expresses the relationship among selected items of financial statement data. Financial ratio classified into three categories, liquidity ratio, profitability ratio and solvency ratio.
Current Ratio
A liquidity ratio that measures a company’s ability to pay short term obligations.
Current Ratio 2010 = Current AssetsCurrent Liabilities
= 35,343,809 35,774,652
= 0.99= 0.99 : 1
The ratio of 0.99: 1 means that for every ringgit of current liabilities, Hwa Tai has RM0.99 of current assets.
Current Ratio 2009 = Current AssetsCurrent Liabilities
= 36,746,539 37,634,489
= 0.98= 0.98 : 1
The ratio of 0.98 : 1 means that for every ringgit of current liabilities, Hwa Tai has RM0.98 of current assets.
Current Ratio 2008 = Current AssetsCurrent Liabilities
= 35,795,328 45,486,169
= 0.79= 0.79 : 1
The ratio of 0.79 : 1 means that for every ringgit of current liabilities, Hwa Tai has RM0.79 of current assets.
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2010 2009 2008
0.99 0.98
0.790.80.83000000000000
10.65000000000000
2
Current Ratio and Acid Test RatioCurrent Ratio Acid Test Ratio Series 3
Based on the output of current ratio, for every three year, Hwa Tai ratio is under 1.
Because of this matter, Hwa Tai would be unable to pay off its obligations. This data
shows that the company is not in a good financial health but it does not mean that Hwa
Tai will go bankrupt.
Acid Test ratio
This indicator to determine whether a firm has enough short-term assets to cover its
immediate liabilities without selling inventory. The acid-test ratio is far more strenuous
than the working capital ratio, primarily because the working capital ratio allows for the
inclusion of inventory assets.
Acid Test Ratio 2010 = Cast + Short Term Investment + Receivables (Net)Current Liabilities
= 28,530,006 35,774,652
= 0.80= 0.80 :1
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Acid Test Ratio 2009 = Cast + Short Term Investment + Receivables (Net)Current Liabilities
= 31,403,261 37,634,489
= 0.83= 0.83 :1
Acid Test Ratio 2008 = Cast + Short Term Investment + Receivables (Net)Current Liabilities
= 29,411,898 45,486,169
= 0.65= 0.65 : 1
Acid test ratio for the respective three years shows that Hwa Tai always gain less than 1 ratio. Its
shows that this company cannot pay their current liabilities and should be looked at with extreme
caution. This acid test ratio is much lower compare to current ratio, it means the current assets
for this company in highly dependent on inventory.
Receivable Turnover
This ratio measure used to quantify a firm's effectiveness in extending credit as well as collecting
debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its
assets.
Receivables Turnover 2010 = Net Credit Sales
Average Net Receivables
= 77,016,224 25,424,055
= 3.03= 3.03 times
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Average collection period 2010 = 365 days
Receiveables Turnover= 365
3.03= 120.49= every 120 days
A high ratio implies either Hwa Tai operates on a cash basis or that its extension of credit and
collection of accounts receivable is efficient. Based on the output, Hwa Tai receivables are
collected on average every 120 days.
Receivables Turnover 2009 = Net Credit SalesAverage Net Receivables
= 72,125,922 27724051
= 2.60 = 2.6 times
Average collection period 2009 = 365 days
Receiveables Turnover= 365
2.60 = 140.30= 140 days
Based on the output, Hwa Tai receivables are collected on average every 140 days.
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Receivables Turnover 2008 = Net Credit SalesAverage Net Receivables
= 80,245,698 29129452.5
= 2.75 = 2.75 times
Average collection period 2008 = 365 days
Receiveables Turnover= 365
2.75 = 132.50= 132 days
Based on the output, Hwa Tai receivables are collected on average every 132 days. From the data
in the three respective years, Hwa Tai took mostly more than 100 days to collect debts from the
creditor and it will cause problem in running the business. Furthermore, this matter will decrease
the confidence of the investor to invest in this company.
Inventory Turnover
This ration showing how many times a company's inventory is sold and replaced over a period
Inventory Turnover 2010 = Cost of Goods SoldAverage Inventory
= (54,393,416) 5,735,449
= -9.489.48 times
Days in Inventory 2010 = 365 daysInventory Turnover
= 365-9.48
= -38.49
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= 38.49 days
In 2010, 9.48 times Hwa Tai inventory is sold and replaced over a period. High inventory levels
are seems unhealthy because it represents an investment with a rate of return of zero and it will
give trouble to the company if the prices begin to fall.
Inventory Turnover 2009 = Cost of Goods SoldAverage Inventory
= (49,769,251)5684149
= (8.76)= 8.76 times
Days in Inventory 2009 = 365 daysInventory Turnover
= 365(8.76)
= -41.69= 41.69 days
Inventory Turnover 2008 = Cost of Goods SoldAverage Inventory
= (63,838,577)5855317.5
= (10.90)= 10.90times
Days in Inventory 2008 = 365 daysInventory Turnover
= 365 (10.90)
= -33.48= 33.48 days
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Profit Margin
This probability ratio measures how much out of every ringgit of sales a company actually keeps in earnings.
Profit Margin 2010 = Net IncomeNet Sales
= 385,127 77,016,224
= 0.01= 0.50= 0.50%
Profit Margin 2009 = Net IncomeNet Sales
= 2,051,989 72,125,922
= 0.03= 2.85= 2.85%
Profit Margin 2008 = Net IncomeNet Sales
= 415,178 80,245,698
= 0.01= 0.52= 0.52%
Higher profit margin indicates a more profitable company that has better control over its costs
compared to its competitors. Based on the output in 2010, Hwa Tai got 0.50% profit margin. It
means that the company has a net income of RM0.005 for each ringgit of sales. And this number
did not show the good performance during 2010. Same goes to 2008, the company only has a net
income of RM0.0052 for each ringgit of sales. However, this company had little increased their
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profit margin in 2009 which the company has a net income of RM0.0285 for each ringgit of
sales.
Asset Turnover
It measures the amount of sales generated for every ringgit’s worth of assets.
Asset Turnover 2010 = Net SalesAverage Assets
= 77,016,224
56502750.5= 1.363052654= 1 times
Asset Turnover 2009 = Net SalesAverage Assets
= 72,125,922
59901160.5= 1.20 = 1 times
Asset Turnover 2008 = Net SalesAverage Assets
= 80,245,698
63626216.5= 1.26 = 1 times
Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue. The
higher the number the better. It also indicates pricing strategy, companies with low profit
margins tend to have high asset turnover, while those with high profit margins have low asset
turnover. But for Hwa Tai, they experienced low profit margin but still low in asset turnover.
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Return on Assets
This indicator show how profitable a company is relative to its total assets. ROA gives an idea as
to how efficient management is at using its assets to generate earnings. It also known as return on
investment.
Return on Assets 2010 = Net IncomeAverage Assets
= 385,127 56502750.5
= 0.01 = 0.68 = 0.68%
Return on Assets 2009 = Net IncomeAverage Assets
= 2,051,989 59901160.5
= 0.03 = 3.43 = 3.43%
Return on Assets 2008 = Net IncomeAverage Assets
= 415,178 63626216.5
= 0.01 = 0.65 = 0.65%
ROA will tells company what earnings were generated from invested capital (assets). ROA for
public companies can vary substantially and will be highly dependent on the industry. The ROA
figure gives investors an idea of how effectively the company is converting the money it has to
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invest into net income. The higher the ROA number, the better, because the company is earning
more money on less investment. From the outcome from three respective years, Hwa Thai does
not show the good ROA because they only got 0.68% for 2010, 3.43% in 2009 and 0.65% in
2008. We can conclude that, Hwa Tai earning less money on high investment.
Return on Common Stockholders’ Equity
This ratio show how many ringgit of net income the company earned for each ringgit invested by
the owner.
Return on common 2010 = Net Income - Preffered DividendsStockholder's Equity Average Common Stockholders' Equity
= 385,127 40042400
= 0.01 = 0.96 = 0.96%
Return on common 2009 = Net Income - Preffered DividendsStockholder's Equity Average Common Stockholders' Equity
= 2,051,989 40042400
= 0.05 = 5.12 = 5.12%
Return on common 2008 = Net Income - Preffered DividendsStockholder's Equity Average Common Stockholders' Equity
= 415,178 40042400
= 0.01 = 1.04 = 1.04%
From the result, it seems that in 2009, the owner of the company gain more profit compared to
year 2010 and 2008.
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2010 2009 20080.00%
200.00%
400.00%
600.00%
800.00%
1000.00%
1200.00%
Return on Common Stockholders' Equity
Column2
Perc
enta
ge
From the graph, it shows that this company is not doing well because the percentages keep on
fluctuating from three respective years.
Earnings Per Share
The portion of a company's profit allocated to each outstanding share of common stock. Earnings
per share serve as an indicator of a company's profitability. Earnings per share are generally
considered to be the single most important variable in determining a share's price. It is also a
major component used to calculate the price-to-earnings valuation ratio. From the company’s
annual report, it already stated that the Earning Per share for Hwa Tai company’s is RM1 for
2010, RM5 for 2009 and RM1 for 2008. From here we can conclude that, Hwa tai shows
increasing rate during 2009.
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Price Earnings Ratio
A valuation ratio of a company's current share price compared to its per-share earnings.
Price Earnings Ratio 2010 = Market Price per Share of StockEarnings Per Share
= 0.561
= 0.56= 0.56 times
Price Earnings Ratio 2009 = Market Price per Share of StockEarnings Per Share
= 0.565
= 0.112= 0.11 times
Price Earnings Ratio 2008 = Market Price per Share of StockEarnings Per Share
= 0.561
= 0.56= 0.56 times
In general, a high price earning suggests that investors are expecting higher earnings growth in
the future compared to companies with a lower price earning. However, the price earnings ratio
doesn't tell us the whole story by itself. It's usually more useful to compare the price
earnings ratios of one company to other companies in the same industry, to the market in general
or against the company's own historical price earning. It would not be useful for investors using
the price earnings ratio as a basis for their investment to compare the price earning of a
technology company (high price earning) to a utility company (low price earning) as each
industry. It is important that investors note an important problem that arises with the price
earning measure, and to avoid basing a decision on this measure alone. The denominator
(earnings) is based on an accounting measure of earnings that is susceptible to forms of
manipulation, making the quality of the price earning only as good as the quality of the
underlying earnings number.
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Payout Ratio
The amount of earnings paid out in dividends to shareholders. Investors can use the payout ratio
to determine what companies are doing with their earnings. For Hwa Tai, no dividend was paid
or declared by the company since the end of the previous financial year. The directors do not
recommend the payment of any dividends in respect of the financial year ended 31st December
for the three respective year.
Debt to Total Asset Ratio
A ratio that 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 to Total Assets Ratio 2010 = Total Debt
Total Assets
= 16,029,961 55,460,793
= 0.289032308= 28.90323079= 28.90%
Debt to Total Assets Ratio 2009 = Total Debt
Total Assets
= 15,632,505 57,544,708
= 0.271658429= 27.16584295= 27.10%
Based on the information of debt to total assets ratio for 2010 and 2009, the percentage of Hwa
Tai is below than 30%. For this ratio, the higher percentage, it will give no benefits to the
company because the company has to pay the higher interest to all their debt. Because of this
matter, Hwa Tai have to pay less than 30% of their interest.
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Time Interest Earned
A metric used to measure a company's ability to meet its debt obligations. It is calculated by
taking a company's earnings before interest and taxes (EBIT) and dividing it by the total interest
payable on bonds and other contractual debt. It is usually quoted as a ratio and indicates how
many times a company can cover its interest charges on a pretax basis. Failing to meet these
obligations could force a company into bankruptcy. Also referred to as "interest coverage ratio"
and "fixed-charged coverage".
Times Interest Earned 2010 = Income before Income Taxes and Interest ExpensesInterest Expenses
= 722,004 (336,877)
= -2.14322735= 2.14times
Times Interest Earned 2009 = Income before Income Taxes and Interest ExpensesInterest Expenses
= 2,221,382 (169,393)
= -13.11377684= 13.11times
Times Interest Earned 2008 = Income before Income Taxes and Interest ExpensesInterest Expenses
= 457,177 (41,999)
= -10.88542584= 10.88times
From these three respective years result, we noticed that ratio for TIE is decrease from year 2008
to 2010. We can say that this company has to struggle in order to survive the company
performance and to gain higher profit margin. Basically, for a good company, they need to have
higher TIE because they will become easier for them to pay all the interest.
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RATIO 2010 2009 2008
Current Ratio 0.99:1 0.98:1 0.79:1
Acid Test ratio 0.80:1 0.83:1 0.65:1
Receivables Turnover 3.03times 2.6times 2.75times
Average Collective Period 120days 140days 132days
Inventory Turnover 9.48times 8.76times 10.9times
Days in Inventory 38days 41days 33days
Profit Margin 0.50% 2.85% 0.52%
Assets Turnover 1times 1times 1times
Return on Assets 0.68% 3.43% 0.65%
Return on Common Shareholder Equity
0.96% 5.12% 1.04%
Earnings Per Share RM1 RM5 RM1
Price Earnings Ratio 0.56times 0.11times 0.56%
Debt to Total Assets Ratio 28.9% 27.10%
Time Interest Earned 2.14times 13.11times 10.88times
1.1 Summary for Liquidity Analysis, Profitability Analysis and Solvency Analysis
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Conclusion & Suggestion
Based on the summary from financial statement analysis above, we can conclude that this
company Hwa Tai has a very crucial time in 2008. The reasons why this company did not
performance well is because of the economic condition that affect it production. Other than that,
Hwa Tai have to compete with biggest competitors such as Hup Seng, Munchy and London
Biscuits. As we looked at the current and acid test ratio, in three respective years, Hwa Tai just
got below than1. From this result, we can say that, Hwa Tai is having a problem and unable to
pay off all its obligations. In this three years (2008, 2009, 2010), the receivables turnover is
around two to three times only. Meaning that, Hwa Tai collected their debts from the creditors in
around 120 days to 140 days. It is a long period to regain the capital. Haw Tai also took a long
period to store their inventory. They took 33 days to 41 days. The good inventory management
can be implement if Hwa Tai take at least a week for their product to be store. Higher profit
margin indicates a more profitable company that has better control over its costs compared to its
competitors. Hwa Tai highest profit margin is during 2009 (2.85%). The company did not gain
many profit compare to others competitors. Asset turnover measures a firm's efficiency at using
its assets in generating sales or revenue. The higher the number the better. For Hwa Tai, they
only got one times for assets turnover for the three respectively years and return on assets for
Hwa Tai is higher at 2009. It shows that, Hwa Tai effectively converting their money in 2009
compared to 2008 and 2010.
From the conclusion above, Hwa Tai must make sure that they are efficiently managed
their assets to gain higher profit. They also need to sell their inventory and not to collect the bad
debt for a long period. Besides that, they need to manage the creditors in order to make sure they
pay all the credit at a given period. In order to fully maximize their assets, they have to generate
more income from collecting debt, reduce the days in inventory, reduce the average collective
period and increase the current ratio and acid test ratio. The credit management must be well
organized in order to success.
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