Dutch Lady Company

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The total liabilities of the company are increasing steadily over the years. It started to increase from year 2010, RM 110 million till year 2013, RM 228.5 million. The growth of the companies is seen through assets in possession and liabilities to pay off. The positive thing about Dutch Lady is that the company has a healthy cash flow as it does not spend much in terms capital expenditure to sustain its operation. The company uses little or no debt to finance its expansion. The current liabilities are mainly in the form of trade and other payables. Assets and liabilities increment year after year does mean that turnover is higher than before, company is growing progressively.

As for the retained earnings, it fluctuated. It shows RM 133.5 million in 2010 then increases to RM 195.2 million in 2011 and following by a drop to RM 152.1 million in 2012 and RM 124 million in 2013. It is because the dividend given out to the investor is higher than the earning per share, where the dividend cost RM 2.60 while the earning per share is just RM 1.93.

Similar to retained earnings, the total liability and equity shows increment in year 2010 and 2011 and it decreases in year 2012 and raises in 2013. We discovered that it is because of the dividend paid is higher than the earning per share as well.

4.0 Analytical Financial Ratios for Dutch Lady Milk Industries Bhd.

Fiscal year ended

2010

2011

2012

2013

Liquidity ratios

Quick ratio

1.52

1.71

1.37

1.01

Current ratio

2.20

2.40

1.91

1.52

Leverage ratios

Debt-to equity

0

0

0

0

Debt-to-capital

0

0

0

0

Time interest earned

-

153.44

56.07

55.82

Assets to equity

1.56

1.54

1.77

2.22

Activity ratios

Receivables turnover

9.43

23.43

62.13

27.68

Inventory turnover

6.16

5.42

6.17

5.38

Asset turnover

2.27

2.03

2.30

2.36

Cash turnover

8.13

4.20

4.31

5.24

Profitability ratios

Return on assets

20.78%

27.13%

32.24%

33.21%

Return on equity

32.35%

41.71%

57.10%

73.56%

Operating profit margin

12.85%

17.04%

18.43%

18.74%

Net profit margin

9.17%

13.34%

13.99%

14.07%

4.1 Liquidity ratios

Liquidity ratio determines a company’s ability to meet its short-term debt obligation. It is a good measure of whether a company will able to comfortably continue as a going concern.

As for current ratio, it increases from 1.52 times in 2010 to 1.71 times in 2011 and dramatically decreases to 1.01 times in 2013. The ability of Dutch Lady to meet short term obligation decreases from year 2011 to 2013 but in overall, Dutch Lady would still be able to pay back its short term obligation.

Fluctuation occurs to quick ratio; it increases from 2.20 times in 2010 to 2.40 times in 2011 but decreases to 1.52 times in 2013. The decreasing ratio gives assumption that Dutch Lady might not have enough quick assets to meet the short term obligation

4.2 Leverage ratios

Leverage ratio is used to evaluate a company’s debt levels. The investors can know the financing heath for the company by looking at leverage ratio.

Both the debt-to-equity ratio and debt-to-capital ratio are 0. This is because Dutch Lady has zero long term debt and does not depends on the dept to finance the expansion on the business.

Time interest earned showed a negative trend from 2011 to 2013; from