1. Ratio Analysis Group Leader : Ng Mei Jin Member : Kok Yee Won Ng Mun Yi Tang Yi Ru Group : M2 Date : 23th August 2010 Lecturer : Ms Yong

2. Profitability (Return)

3. Gross Profit Margin Gross profit margin = Gross profit_ x 100% Net Sales profit - cover operating expenses 2003 - 40.0% 2004 - 45.0% 2005 - 42.5%. 2003 to 2004 5.0% 2004 to 2005 2.5%

4. Expense ratio Selling Expense = Individual expense x 100% Net sales 2003 - 23.9%, 2004 - 25.5% 2005 - 27.7%. Admin expense = Individual expense x 100% Net sales 2003 – 8.20% ，2004 – 7.10% 2005 -8.00%. Finance expense = Individual expense x 100% Net sales 2003 – 2.70%, 2004 – 2.00% 2005 - 16%

5. Net profit margin Net profit margin = Net profit x 100% Net Sales amount of profit generated from each dollar of sales 2003 - 5.2% 2004 - 10.3% 2005 - 5.3% 2003 to 2004 5.1% 2004 to 2005 5% net profit margin - net profit / net sales

6. Return on equity & Return on total assets Return on total assets = Net profit + interest expense x100% Total assets 2003 - 4.7%, 2004 - 7.7% 2005 - 4.2%. 2003 to 2004 3% 2004 to 2005 3.5% Overall 0.5% Return on equity = Net Profit___ x 100% Owner’s equity The higher the return on OE - better 2003 - 4.1% , 2004 - 8.2% 2005 - 4.2%. Overall trend 0.1%.

7. Financial Stability

8. Liquidity Working capital ratio = Current Assets__ Current liabilities Generally ratio - 2:1 2003 - 2.75:1 , 2004-4.33:1 2005 - 2.60:1 2003 - 2004 1.58 2004 - 2005 1.73 Quick assets ratio /acid test = current assets-stock current liabilities-overdraft 2003 - 1:1 2004 - 2:1 2005 - 1:1

9. Solvency Total debt/total assets = liability x100% total assets 2003 - 25.5%, 2004 - 21.5% 2005 - 23.2% 2003~ 2004 4% 2004~ 2005 1.7% Debt/equity ratio = liabilities . Owner’s equity > than 100%-highly geared 2003 - 34.2% , 2004 - 27.4% 2005 - 30.3% 2003 – 2004 6.8% 2004 – 2005 2.9%

10. Management Effectiveness &Procedure

11. Management effectiveness & procedure Stock turnover = cost of goods sold inventory 2003 & 2004 (4 times) 2005 (3times). Debtor’s turnover = cost of goods sold Inventory 18times(2003) to 12times(2004 & 2005) positive outcome Time interest earned = Net profit +Interest expense Interest expense 2003- 3 , 2004-6 , 2005- 4 (times) 2003-2004~ double 2005 to 4time

12. Ways to Improve the Performance of the Business

13. Stock Turnover Comparison with turnover in previous reporting period Consideration of the type of inventory sold -reduce price, promotions Owner could sell more stocks - targeting customers via phone sales, advertising , changing price policy

14. Debtors Turnover Compare the ratio with actual credit terms Consider about setting a target for such ratios Tightening credit policy and communicating to debtors

15. THANK Y U