3.

FINANCIAL LEVERAGE MANAGEMENT RATIO

Financial leverage management ratio is used to measure a company’s ability to meet its
financial obligations.

𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
Debt Ratio =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡

Debt ratio indicates what proportion of debt a company has relative to its assets.

a) Astro Malaysia Holdings Berhad

2016 2017

𝑅𝑀6,287,176,000 RM5,636,046,000
Debt Ratio = × 100% Debt Ratio = × 100%
𝑅𝑀6,900,972,000 RM6,265,858,000

= 91.11% = 89.95%

Based on the analysis, it shows that the comparison of debt ratio in Astro Malaysia
Holdings Berhad 2016 and 2017. In 2016, the company has 91.11% of its assets with debts
while the company has 89.95% of its assets with debts in 2017. Thereby, the debt ratio of
Astro Malaysia holdings Berhad in 2016 is greater than 2017 it mean that The debt ratio has
decrease 1.16% from 2016 to 2017(91.11%-89.95%). Moreover, the debt ratio of Astro
Malaysia Holdings Berhad had decrease is due to the decreasing of total debt from
RM6,287,176,000- RM5,636,046,000 , which is RM651,130,000 . Additionally, the total
assets in 2016 to 2017 also have slightly decrease which mean from RM6900972000 to
RM6265858000 and it have affect the debt ratio of Astro Malaysia holdings Berhad decrease
from 2016-2017.
b) Media Prima Berhad

2016 2017

300,108,000 314,153,000
𝐷𝑒𝑏𝑡 𝑅𝑎𝑡𝑖𝑜 = 𝑥100% 𝐷𝑒𝑏𝑡 𝑅𝑎𝑡𝑖𝑜 = 𝑥100%
2,151,777,000 1,582,262,000

=13.94% =19.85%

Based on the analysis that I have analyse,The Debt Ratio for Media Prima Berhad is
13.94% in 2016 and 9.85% in 2017. Which have slightly increase with the percentage of
5.91%. The debt ratio will increase is due to the increasing of total debt (RM300,108,000 –
RM314,135,000),which is RM14,945,000 also equivalent to 4.96% from the total debt of
2016. Additionally, the total assets of Media Prima Berhad also decrease in one accounting
year RM12,045,000 also knows as 26.47% from the total assets in 2016 (RM2,151,777,000
to RM1,582,262,000). In a nutshells, Media Prima Berhad currently is having more assets to
its own debt although the debt have increase and the total assets have decrease.

Comparison:

Debt ratio gives an idea to the leverage of the company along with the potential risks
the company faces in terms of its debt-load. Based on the analysis of two company which is
Astro Malaysia Holdings Berhad and Media Prima Berhad, the performance of Media Prima
Berhad is better than Astro Malaysia Holdings Berhad in 2016-2017. This is due to the debt
ratio of Media Prima Berhad is having the lower percentage of debt ratio compare to Astro
Malaysia Holdings Berhad in year 2016 and 2017. In year 2016, Media Prima Berhad is
having 13.94% of debt ratio while Astro Malaysia Holdings Berhad have 91.11% of debt
ratio, which have the different of 77.17%. In year 2017, Media Prima Berhad is having 19.85%
and Astro Holdings Berhad have 89.95% of debt ratio which have the different of 70.1%.
Thus, a lower debt ratio usually indicates that the company will having a lesser risk and more
stable business as it have more assets to cover the risk of debt. Thereby, Media prima Berhad
is better performance then Astro Malaysia Berhad as it have lower debt ratio in this two year
although the ratio of Media Prima Berhad have increase but it still having a lower ratio
compare to Astro Malaysia Berhad.