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Full name and IC No: NUR HIDAYAH BT MOHD ABU BAKAR (940424075170)
Date: 18/06/2021

Assignment (Asgmt) Declaration Form

Semester/Year JAN 2021

Student’s Name NUR HIDAYAH BT MOHD ABU BAKAR

Student’s ID No: 041170619

Course Code BBF201/03

Course Title INTRODUCTION TO FINANCIAL MANAGEMENT

Class Code 4-IFN1

Assignment No: 1

No. of pages of this 24

Assignment (including
this page)

Tutor ARUNAGIRI A/L SHANMUGAM

Course Coordinator HIZAM BINTI TENKU TENKU NUR IZHAM SHAHRUL

TASK 1
QUESTION 1

1. Name and background of company.

The name of the company is Top Glove Corporation Berhad

Incorporated in Malaysia [Registration No.:199801018294 (474423-X)]
A Public Company Listed on the Main Market of Bursa Malaysia and Main Board of
Singapore Exchange

Background

Established in 1991 and headquartered in Malaysia, Top Glove Corporation Bhd is

the world’s largest manufacturer of gloves. What started as only a local business
enterprise with 1 factory and 1 glove production line, has today captured 26% of the
world market share for rubber gloves. The company has manufacturing operations in
Malaysia, Thailand, Vietnam and China. It also has marketing offices in these
countries as well as USA, Germany and Brazil and exports to over 2,000 customers in
195 countries worldwide. Listed on the Malaysian Bourse (2001) and Mainboard of
the Singapore Exchange (2016), Top Glove has demonstrated steady growth with a
compound annual growth rate (CAGR) of 23.1% for revenue and 28.2% for profit
after tax over the past 20 years. It is also a component stock of the MSCI Global
Standard Index, FTSE Bursa Malaysia KLCI Index, FBM Top 100 Index, FBM Emas
Index, FBM Hijrah Syariah Index, FBM Emas Syariah Index and the Dow Jones
Sustainability Index (DJSI) for Emerging Markets. In the year 2021, Top Glove was
also included the Forbes Global 2000 and is the only Malaysian glove company on the
prestigious list.

Top Glove offers a comprehensive product range, which now includes a non-glove
segment comprising condoms, face masks, dental dams, exercise bands and household
products, fulfilling demand in both the healthcare and non-healthcare segment. In line
with its commitment to sustainability, Top Glove will continue to level up its
practices in the ESG space particularly in terms of labour practices.
The company’s outstanding achievements and global recognition are credited largely
to its founder Tan Sri Dr Lim Wee Chai, the visionary and driving force, who within a
short span of time, has built the company into a resounding global success.

With the help of its 22,000 employees, Top Glove continues to produce high quality
gloves at an efficient low cost in line with its time-tested Business Direction. Not
content to rest on its laurels, Top Glove has set its sights on higher aspirations which
include becoming a Fortune Global 500 Company by 2030. Accordingly, it continues
to expand its business scope and to be on the lookout for M&A opportunities in
similar and related industries.
 QUESTION 2

2. Using the annual report, provide and comment on the following: The
performance of the company as compared to previous year. You need to analyse
the items under the consolidated statement of profit or loss for both years 2019
and 2020 in order to provide a detailed analysis on this part.

The first income measure is gross profit, the amount by which sales revenue exceeds
the cost of goods sold (the direct cost of producing or purchasing the good sold. The
revenue of the Top Glove Company for the year 2019 is RM 4 801 139 000 and for
the year 2020 is
RM 7 237 427 000. The amount for the cost of goods sold for the year 2019 is RM 3
917 144 000 and for the year 2020 will be RM 4 387 010 000. The gross profit is
when revenue deduct cost of goods sold so the gross profit for the year 2019 will be
RM 883 995 000 and for the year 2020 will be RM 2 850 417 000.

Next, the gross profit will be added with other items of incomes like interest income
and other income. For the year of 2019, the interest income will be RM 10 611 000
and other income will be RM 38 552 000. For the year 2020, the interest income will
be RM 23 889 000 and other income will be RM 33 116 000.

After that, deduct other items of expense. For the year 2019, the administrative and
general expenses will be RM 293 938 000 and for the year 2020, the administrative
and general expenses will be RM 551 023 000 and finance cost for the year 2019 will
be RM 79 601 000 and for the year 2020 will be RM 34 399 000. The distribution and
selling costs expense for the year 2019 will be RM 133 357 000 and for the year 2020
will be RM 155 021 000. The profit before tax for the year 2019 will be RM 423 588
000 and for the year 2020 will be RM 2 165 551 000.

The profit before tax will be deducted with income tax expenses to get profit net of
tax. The income tax expenses for the year 2019 will be RM 56 042 00 and for the year
2020 will be RM 376 721 000. Therefore, the profit net of tax for the year 2019 will
be RM 367 546 000 and for the year 2020 will be RM 1 788 830 00.

Profit attributable to owners of the parent for the year 2019 will be RM 364 678 000
and for the year 2020 will be RM 1 752 584 000. Holder of the Perpetual Sukuk for
the year 2019 is none and for the year 2020 is RM 25 605 000. Non-controlling
interest for the year 2019 will be RM 2 868 000 and for the year 2020 will be RM 10
641 000.

QUESTION 3
3. Calculate the profitability, liquidity and efficiency ratios of the company (use the
following ratios: gross profit margin, net profit margin, return on capital employed,
quick ratio, current ratio, accounts receivable turnover, accounts payables turnover,
inventory turnover) for year 2019 and 2020.

LIQUIDITY RATIO

Year 2019
Current ratio =current assets
Current liabilities

= RM 1 779 097 000

RM 1 591 791 000

= 1.12

Year 2020

Current ratio =current assets

Current liabilities

= RM 4 287 653 000

RM 2 132 524 000

= 2.01

A current ratio for 2019 of 1.0 would be acceptable for a utility but might
unacceptable for a manufacturer. The more predictable a firm’s cash flows, the lower
the acceptable current ratio. Because the business of manufacturing unpredictable
annual cash flows, Top Glove Corporation Berhad current ratio of 1.10 indicates that
the firm takes a fairly aggressive approach to managing its liquidity. However for the
year 2020, the current ratio is 2.01 which is higher than 2019 which is actually good.
The quick (acid test) ratio is similar to the current ratio except that it excludes
inventory, which is usually the least-liquid current asset. The generally low liquidity
of inventory results from two factors. First many type of inventory cannot be easily
sold because they are partially completed items, special-purpose items and the like.
Second, inventory is typically sold on credit, so it becomes an account receivable
before being converted into cash. The quick ratio is calculated as follows.

Year 2019

Quick ratio = current assests - inventory

Current liabilities

= RM 1 779 097 000 – RM 629 896 000

RM 1 591 791 000
= 0.72

Year 2020
Quick ratio = current assests - inventory
Current liabilities
= RM 4 287 653 000 – RM 530 729 000
RM 2 132 524 000

= 1.76

The quick ratio for Top Glove Corporation Berhad in year 2019 is 0.72. However, for
the year 2020, the quick ratio will be 1.76. The quick ratio provides a better measure
of overall liquidity only when a firm’s inventory cannot be easily converted into cash.
If inventory is liquid, then the current ratio is a preferred measure.

ACTIVITY RATIO
Activity ratios measure he speed with which the firm converts various accounts into
sales or cash. Analysts use activity ratios as guides to assess how efficiently the firm
manages its assets and its accounts payable. Inventory turnover provides a measure of
how quickly a firm sells its goods. Here is the calculation for Top Glove Corporation
Berhad 2019 and 2020 inventory turnover ratio.

Year 2019
Inventory turnover = cost of goods sold
Inventory

= RM 3 917 144 000

RM 629 869 000

= 6.22

Year 2020
Inventory turnover = cost of goods sold
Inventory
= RM 4 387 010 000
RM 530 729 000

= 8.27

In the numerator we used costs of goods sold, rather than sales, because firms value
inventory at cost on their balance sheets. Note that also in the denominator we use the
ending inventory balance of RM 629 869 000 for the year 2019 and RM 530 729 000
for the year 2020. If inventories are growing over time or exhibit seasonal patterns
then analyst sometimes use the average level of inventory throughout the year rather
than the ending balance to calculate this ratio.

The resulting turnover of 6.22 for the year 2019 indicates that the firm basically sells
outs its inventory 6.22 times each a year or slightly more than once per month and for
the year 2020 will be 8.27 and it means the firm sells out its inventory 8.27 times each
a year. This value is most meaningful when compared with past inventory turnover.

We can easily convert inventory turnover into an average age of inventory by dividing
the turnover figure into 365 (the number of days in a year), for Top Glove
Corporation Berhad the average age of inventory for the year 2019 (365/6.22) = 58.68
meanings that balance turnover about every 58.68 days. For the year 2020 (365/8.27)
= 44.12 meanings that balance turnover about every 44.12 days.

DEBT RATIO
A measure of the proportion of total assests financed by a firm’s creditors. The debt
ratio measures the proportion of total assets financed by the firm’s creditors. The
higher the ratio, the greater the firm reliance on borrowed money to finance its
activities. The ratio equals total liabilities divided by total assets.

Year 2019
Debt ratio = total liabilities
Total assets

= RM 1 591 791 000

RM 5 688 205 000

= 0.280 = 28%

Year 2020

Debt ratio = total liabilities

Total assets
= RM 2 132 524 000
RM 8 705 964 000

= 0.255 = 25.5%

The Top Glove Corporation Berhad debt ratio for the year 2019 will be 28% and for
the year 2020 will be 25.5%.

PROFITABILITY RATIOS
The gross profit margin measures the percentage of each sales ringgit remaining after
the firm has paid for its goods. The higher the gross profit margin, the better.

Year 2019
Gross profit margin = gross profit
Sales

= RM 883 995 000

RM 4 801 139 000

= 0.184 = 18.4%

Year 2020

Gross profit margin = gross profit

Sales

= RM 2 850 417 000

RM 7 237 427 000

= 0.394 = 39.4%

Top Glove Corporation Berhad gross profit margin in 2019 is 18.4% and for the year
2020 is 39.4 %.

The operating profit margin measures the percentage of each sales ringgit remaining
after deducting all costs and expenses other than interest and taxes. As with the gross
profit margin, the higher the operating profit margin the better. The ratio tells analyst
what a firm’s bottom line looks like before deduction for payments to creditors and
tax authorities.

Year 2019
Gross profit margin = operating profit
Sales

= RM 933158000
RM 4 801 139 000

= 0.194 = 19.4%

Year 2020

Gross profit margin = operating profit

Sales

= RM 2 907 422 000

RM 7 237 427 000

= 0.402 = 40.2%

The gross profit margin for the year 2019 is 19.4% and for the year 2020 is 40.2%.
The net profit margin measures the percentage of each sales ringgit remaining after
deducting all costs and expenses including interest, taxes and preferred stock
dividends.

Year 2019

Net profit margin = earnings available for common stockholder

Sales

= RM 367 546 000

RM 4 801 139 000

= 0.077 = 7.7%

Year 2020

Net profit margin = earnings available for common stockholder

Sales

= RM 1 788 830 000

RM 7 237 427 0000

= 0.247 = 24.7%

The net profit margin for the year 2019 is 7.7% and for the year 2020 is 24.7%
The earnings per share measure represents the number of ringgit earned on behalf of
each outstanding share of common stock. Earnings per share are calculated as below

Year 2019

Earnings per share = stock holder earnings available for common

Number of shares of common stock outstanding

= RM 367 546 000

17 000

RM 21620.2

Year 2020

Earnings per share = stock holder earnings available for common

Number of shares of common stock outstanding

= RM 1 788 830 000

17 000

= RM 105225.3
The return on total assets (ROA) often called the return on investment (ROI)
measures managements overall effectiveness in using the firm assets to generate
returns to common stockholders.

Year 2019

Return on total assets = earnings available for common stockholders

Total assets

= RM 367 546 000

RM 5 688 205 000

= 0.0646 = 6.46%

Year 2020

Return on total assets = earnings available for common stockholders

Total assets

= RM 1 788 830 000

RM 8 705 964 000

= 0.205 = 20.5%
The return on total assets for the year 2019 is 6.46% and for the year 2020 is 20.5%.
https://www.topglove.com/App_ClientFile/7ff8cb3f-fbf6-42e7-81da-
6db6a0ab2ef4/Assets/anual_report/Financial%20Statements_IAR2020_1011.pdf
 REFERENCE

1. WAWASAN INTRODUCTION TO FINANCIAL MANAGEMENET COURSE

MATERIAL
2. https://www.topglove.com/App_ClientFile/7ff8cb3f-fbf6-42e7-81da-
6db6a0ab2ef4/Assets/anual_report/Financial%20Statements_IAR2020_1011.pdf
3. https://www.topglove.com/annual-report/