Analyses and Comment about the Profitability of Top Glove

Net Profit Margin

Net Income before Minority Share of Earnings ,
Calculation of Net Profit margin: Equity Income∧Nonrecurring Item
×100
Net Sales

Net Income before Minority Share of Earnings,

Year Net Sales Net Profit Margin
Equity Income and Nonrecurring Item
2017 327,273 333,815 98.04%
2018 233,759 243,942 95.83%
2019 209,218 220,964 94.68%
2020 1,637,122 1,636,614 99.85%
2021 6,461,350 6,493,369 99.51%

Net profit margin is to determine the net income generated by net sales. The profitability of Top
Glove is decrease from 2017 until 2019 and increase in 2020. From the calculation above, we
can see that profitability of 2020 had reached the highest value which is 99.85% because of the
net sales is decrease from 2017 until 2019 and increase in 2020. This is because in 2020, the
pandemic Covid-19 had begun seriously and the medical institutions require a lot of gloves to
treat patients.

Total Asset Turnover

Net Sales
Calculation of Total Asset Turnover:
Total Asset

Year Net Sales Total Asset Total Asset Turnover

2017 333,815 833,760 0.40 times

2018 243,942 5,270,560 0.05 times
2019 220,964 5,688,205 0.04 times
2020 1,636,614 8,705,964 0.19 times
2021 6,493,369 9,782,424 0.66 times

Total asset turnover is to determine how effectively a company utilizes its assets to produce
revenue. From the calculation above, we can see Top Glove company is not efficient to turn their
assets in to revenue because of their total asset turnover is low especially in 2019. This is
because the total asset of Top Glove company is high, and the net sales is low. Therefore, to
increase the total asset turnover, Top Glove company can sell some assets and increase the
revenue.

Return on Assets

Net Income before Minority Share of Earnings ,

Calculation of Return on Assets: Equity Income∧Nonrecurring Item
×100
Total Asset
Net Income before Minority Share of Earnings,
Year Total Asset Return on Asset
Equity Income and Nonrecurring Item
2017 327,273 833,760 39.25%
2018 233,759 5,270,560 4.4%
2019 209,218 5,688,205 3.68%
2020 1,637,122 8,705,964 18.80%
2021 6,461,350 9,782,424 66.05%

Return of assets is a measure to estimate a company’s capacity to profit from its assets. From the
calculation above, we can see that the return on assets is decrease from 2017 until 2019 and
increase from 2020 to 2021. The return on assets on 2021 also reached the highest value among
these five years. The increase of sales or decrease of assets will cause the return of assets
increase, so we can see that the sales of Top Glove company had highly increase from 2020 to
2021 which is RM1,637,122 to RM6,461,350. This is because some nations have increased their
glove stock due to the spread of new genetic Omicron strain in 2021.

Operating Income Margin

Operating Income
Calculation of Operating Income Margin: ×100
Net Sales

Year Operating Income Net Sales Operating Income Margin

2017 325,402 333,815 97.48%

2018 233,542 243,942 95.74%
2019 207,117 220,964 93.73%
2020 1,627,591 1,636,614 99.44%
2021 6,436,089 6,493,369 99.12%

Operating income margin is to determine a company’s profit generates on sales revenue after
paying for variable expenses such as raw material and before paying interests or tax. The better a
company can control their expenses, the higher the operating income margin of their company.
From the calculation above, the profitability of Top Glove company has dropped from 2017 until
2019 and increased from 2020. This is because the sales from 2020 to 2021 had increased due to
the Covid-19 pandemic.

Return on Total Equity

Net Income before Nonrecurring item

Calculation of Return of Total Equity: −Preferreds Dividens
× 100
Total Equity

Net Income before Nonrecurring Item Average of Total Return on Common

Year
– Preferred Dividends Equity Equity

2017 327,273 831,194 39.37%

2018 233,759 1,020,687 22.90%
2019 209,218 1,036,937 20.18%
2020 1,637,122 3,187,273 51.36%
2021 6,461,350 2,955,175 218.65%

Return of total equity is a statistic of a company profitability that reflects the rate of return on
capital contributed by shareholder after other capital providers have been paid. From the
calculation, the return on shareholder investment of Top Glove company had decreased from
2017 until 2019 and increased from 2020, especially the return of total equity in 2021 had
reached the highest value which is 218.65%. The higher the return of total equity, the better the
company creating profits and assets from its equity investment. Therefore, the shareholder of
Top Glove company has a higher return on investment especially in 2021.