Financial Analysis

for Panasonic Manufacturing Malaysia Bhd and Pensonic Holding Bhd for Year 2011 and 2010
Prepared for: Dr Amina Josetta Kayani
Managerial Accounting (ACC 720)

Prepared by:
Nurul Hazren Mohd Hashim (2011680988) Nur Zahraatul Lail Md Supaat () Nurulafzan Salehuddin (2011818994) Wan Nurul Hidayah Wan Mohamed Sharif (2011891284) Master of Business Administration Arsyad Ayub Graduate Business School Universiti Teknologi Mara Shah Alam 31 October 2011

Overview of Panasonic Manufacturing Malaysia Berhad Panasonic Manufacturing Malaysia Berhad is the leading manufacturer of sophisticated electrical appliances in Malaysia. It is engaged in the production and distribution of electrical home appliances, batteries and related components under the brand name Panasonic. The company was established in 1965 as Matsushita Electric Company (Malaysia) Berhad (MELCOM) and changed its name to Panasonic Manufacturing Malaysia Berhad in 2005. Its registered head office and main plant is located in Shah Alam, Selangor Darul Ehsan, Malaysia. Panasonic Manufacturing Malaysia produces a wide range of products which is Television and player, home appliance, kitchen appliance, camera and camcorder. The company aims to commit itself to the progress and development of society and the well being of people through its business activities, thereby enhancing the quality of life throughout the world. The company also has operations in Japan, Asia, and the Middle East. Overview of Pensonic Holdings Bhd Pensonic Holdings Berhad is a Malaysian investment holding company that being established in 1965. The foundation of Pensonic was planted in 1965 when Keat Radio Co. Sdn Bhd was setup by Dato' Chew to sell electrical appliances. His initial setup Keat Radio Co. Sdn Bhd has profited well to enable him to expand into his first branch in 1974. Nowadays Pensonic offers air conditioners, televisions, VCD and DVD players, home theaters, radio cassettes, CD players, food processors, fans, cookers, hair dryers, irons, washing machines, vacuum cleaners, rice cookers, steamers, thermo flasks and toasters. It also sells products such as water filters and purifiers, air purifiers and filters, natural pure water systems, and water heaters. The company markets its products under its own brand Pensonic. Beside that Pensonic also export and import their product to India, Sri Lanka, Vietnam, Iran, Yemen, China, Hong Kong, Kuwait, Lebanon, Myanmar, Indonesia and Thailand. Approximately 10% of its products are exported to other countries.

Financial Ratio for Pansonic Manufacturing Malaysia and Pensonic Holding Bhd for year 2011 and 2010.
2011 PANASONI C LIQUIDITY RATIO Current Ratio CA /CL Acid-Test Ratio (CA-Inventory)/ CL Receivable Turnover Sales/Average Receivable Inventory Turnover COGS/ Average Inventory 4.43 times 1.45 times 4.01 times 1.42 times 2011 PENSONIC 2010 2010 PANASONIC PENSONIC

4.28 times

0.74 times

3.95 times

0.74 times

0.67 days

74 days

0.55 days

74 days

11 days

133 days

9 days

122 days

SOLVENCY RATIO Total Debt Ratio Total Debt / Total Assets

2011 PANASONI C 17.05

2011 PENSONIC 56.6

2010 2010 PANASONIC PENSONIC 18.68 56.63

PROFITABILITY RATIO Gross Profit Margin Sales / Gross Profit Net Profit Margin Sales / EAT ROA EAT / Average Total Assets ROE EAT / Shareholder Fund TATO Sales / Average Total Assets EPS EAT / Average Capital

2011 PANASONI C 22.43%

2011 PENSONIC 21.89%

2010 2010 PANASONIC PENSONIC 24.66% 18.97%

10.86% 11.33% 13.05% 98.75 times RM 1.36

1.01% 1.36% 3.14% 1.35 times RM 0.034

9.50% 8.89% 10.62% 93.15 times RM 1.07

1.04% 1.45% 3.38% 1.39 times RM 0.04

FINANCIAL RATIO ANALYSIS LIQUIDITY RATIO Current Ratio For the year of 2010, Panasonic current ratio resulted 4.01 indicated that every RM 1 of current liabilities will be covered by RM 4.01. Meanwhile Pensonic current ratio is 1.42. It means that for that every RM 1 of current liabilities will be covered by RM 1.04. For the year 2011, Panasonic current ratio resulted 4.43 indicated that every RM 1 of current liabilities will be covered by RM 4.43. Meanwhile Pensonic current ratio is 0.74. It mean that for that every RM 1 of current liabilities will be covered by RM 0.74. This comparison show that Panasonic can easily converted their current asset into cash. Acid-test Ratio For the year 2010, Panasonic acid test ratio was 3.95 while for 2011 it increased to 4.28. Meanwhile Pensonic, have constant acid-test ratio at 0.74. This result shows that Panasonic able to meet their current liabilities without depending on their inventories. Receivable Turnover / Average Collection Period For Panasonic, their receivable turnover based on collection day is approximately 1 day for both respective yeasr. However, Pensonic have approximately 74 days for both years. It shows that Panasonic is more effective in handling and collecting their debts from debtors. With a small amount of debt, definitely Panasonic manage to collect the debt faster than Pensonic which have bigger amount of debt created by debtors. Inventory Turnover For the year 2010, Panasonic manage to turnover their inventories for every 9 days as compared to Pensonic which required 122 days. Unfortunately for the year 2011, Panasonic can only turnover their inventories within 11 days while Pensonic needs 133 days.

This figure explained that, Panasonic products are higher on demand and they have an excellence marketing strategies to ensure that their stocks can be sold less than two weeks. In contrary with Pensonic which require longer days which is 4 to 5 months to sell their inventories. In a nutshell, Panasonic has better ability to meet their day-to-day operating expenses and satisfy it short term obligations when their due. It also shows Panasonic has more than adequate cash on hand to serve it debt and operate in efficient manners. This phenomenon happened due to the strong brand name and the quality of the product possess by the Panasonic. Consumers’ perceptions already associate that Panasonic producing high quality product, on the other hand Pensonic synonyms with cheaper price offered.

SOLVENCY RATIO Total Debt Ratio For 2010, Panasonic financed its assets by 18.68% by creditors and it was decreased to 17.05% in 2011. Pensonic have 56.63% depending on creditors to finance its assets and it also shows declined percentage by 0.03%. Through this result, Panasonic bare less solvency risk compared to Pensonic since Panasonic depending more on their equity instead of debt. Therefore, the position of Panasonic is much stronger than Pensonic. The high dependent on equity shows by Panasonic is due to the attractive dividend paid. It proved that the investors believe in the performance of Panasonic. Therefore, they do not seem to be interested in shifting their investment to another company.

PROFITABILITY RATIO Net Profit Margin From the Net Profit margin Ratios calculated, it means that, every RM 1 generated, Panasonic gained 9.5% profit margin in 2010 and it is increased to 10.86 %. The positive result is due to the increase in sales as well as declined in operating expenses. Compared to Pensonic, the profit margin contribution is small which only 1.04% in 2010 for every RM 1 of sales made. This margin is even decline in the next year to 1.01% synchronize with the decreasing on sales. Total Asset Turnover Panasonic have 98.75 times the total asset turnover on 2011 while Pensonic have only 1.35 times. This figure show incrisement from year 2010, where Panasonic only have 93.15 time the total asset turnover, while Pensonic show decreasement from 1.39 times. Total assets turnover show how much company generate their revenue from each asset invested. Here, Panasonic manage to generate RM98.75 revenue for every Ringgit invested in the asset. These are quite a high number in revenue and give significant impact to their profitability. It shows that Panasonic had well managed resource and company can fully utilize their asset to generate sale. Unfortunately, Pensonic can only generate RM1.35 revenue for every Ringgit invested in the asset. Earning per Share Earning per share is important for investor. For 2010, Panasonic managed to provide RM1.07 for every Ringgit invested while Pensonic could only provide RM0.04 to their investor. For the following year (2011), Panasonic manage to increase their Earning per share to RM 1.36. However, Pensonic could only provide RM 0.034 earning per share. The decrease of dividend paid to Pensonic investors are influence by the profit reduction. The reduction in net income is due to the decreasing in sales and increase in operating expenses.

Return on Asset For every RM 1 of asset utilization, Panasonic generated income of 8.89% and 11.33% for the year of 2010 and 2011 respectively. Pensonic, in contrast, only contribute 1.45% and 1.36% in 2010 and 2011 for every RM 1 of asset. The result shown by Pensonic is much lower than Panasonic result. Meaning that Panasonic utilized their assets efficiently to ensure that the asset they bought and possess is worth and contribute income to the firm. The larger the ROA value, the more efficient the firm in utilizing the asset in order to produce the income. Return on Equity For Panasonic, every RM 1 of equity invested by the shareholders is compensated with 10.62% income in 2010 and 13.05% in 2011. Compared to Pensonic, the contribution of the equity invested only returned by 3.38% of income in 2010 and 3.14% in 2011. From that, we can say that Panasonic very efficient in managing and utilizing their equity so that more income can be made and it was proven by the increase of sales volume generated. Hence, the shareholders will satisfy with the performance of Panasonic. Meanwhile for Pensonic, they should be aware of the decreasing of their ROE in 2011 because the equity invested did not showing increasing in income. This will lead to the less attractiveness of their share to the shareholders. The existing shareholders might not be interested anymore to invest in the firm. ROE is significant to shareholder to measure whether the organization they invested in utilize wisely the money invested by them in generating sales as well as profit.