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Contents

INTRODUCTION ............................................................................................................................................. 2
BACKGROUND OF THE STUDY ....................................................................................................................... 2
PROBLEM STATEMENT .................................................................................................................................. 4
JUSTIFICATION OF THE STUDY ...................................................................................................................... 5
LITRETURE REVIEW ....................................................................................................................................... 6
IMPORTANCE OF FINANCIAL STATEMENT .................................................................................................... 6
FINANCIAL RATIO AS A SOURCE OF ANALYZING STETMENT ........................................................................ 8
RESEARCH METHODOLOGY .......................................................................................................................... 9
DESIGN OF THE RESEARCH .......................................................................................................................... 10
ANALYSIS OF THE RATIOS............................................................................................................................ 12
PROFITABILITY RATIO .............................................................................................................................. 12
GROSS PROFIT MARGIN .......................................................................................................................... 13
PROFIT MARGIN ...................................................................................................................................... 13
CASH FLOW TO SALES ......................................................................................................................... 14
LIQUIDITY RATIOS ................................................................................................................................... 17
CURRENT RATIO .................................................................................................................................. 17
Acid test Ratio ..................................................................................................................................... 17
CAPITAL STRUCTURE RATIO .................................................................................................................... 18
Gearing Ratio ...................................................................................................................................... 18
ASSET EFFICIENCY RATIO ........................................................................................................................ 19
EFFICIENCY RATIO ............................................................................................................................... 19
Asset Turnover .................................................................................................................................... 19
Inventory Turnover ............................................................................................................................. 20
MARKET PERFORMANCE RATIOS .................................................................................................. 21
a) Earnings per Share ...................................................................................................................... 21
b) Dividend per Share ..................................................................................................................... 22
c) Price Earnings Ratio ................................................................................................................... 23
2) CONCLUSION ................................................................................................................................... 24

INTRODUCTION
The purpose oI Iinancial analysis is to try and bring out a meaning Irom the Iinancial statements
by analyzing them in and out. Usually the data given in Iinancial statements is complicated. so aI
ter doing an analysis. the next step would be to present it in an easy and understandable way. The
data is analyzed in order to check the proIitability. asset eIIiciency. liquidity. capital structure. a
nd also the market perIormance. There are two types oI Iinancial analysis. which are horizontal a
nd vertical analysis. However this research will mainly Iocus on horizontal approach where we c
ompare the perIormance oI dialog group Berhad Ior 2 years.
A ratio can be deIined as a number expressed in terms oI another. Ratios can only make sense w
hen they represent a relationship between two variables. For example ratios can be used to show
the relationship between proIit and sales. Ratios can be expressed as a percentage. rate/times. and
Iraction. Ratios have got their advantages and disadvantages. For example one advantage oI rati
os is they make the data provided in Iinancial statements simple and understandable. Ratios are a
lso oI advantage when it comes to comparing the perIormance oI a Iirm with that oI other Iirms i
n the same industry. However. ratios have got their limitations. For example when the data is bia
sed the ratio becomes biased as well and also ratios are not adequate enough to bring the most pr
oper conclusion.
Basically there are 5 groups oI Iinancial ratios which will be used in this study. proIitability ratio
s. liquidity ratios. leverage ratios. activity ratios and market ratios. These ratios will enable the re
searcher to assist the stakeholder to make inIormed business decision.
BACKGROUND OF THE STUDY
Preamble
This section discusses the background oI the study. We will look into the background oI t
he company. the research problem. the research questions. the scope oI the study.



Dailog Group Berhad profile

Dailog group was commenced in 1984; Dialog Group Berhad (DIALOG) has grown into one oI
Malaysia`s leading integrated specialist technical services providers to the oil. gas and petrochem
ical industry. The services provided range Irom upstream to downstream activities encompassing
such as :


Logistic Services Tank Terminals & Supply Base.


Specialist Products and Services.


Catalyst Handling Services.


Plant Maintenance.


Engineering & Construction.


Fabrication.


E-Payment Technology & Solutions.

Based in Kuala Lumpur. with oIIices and Iacilities in Malaysia. Singapore. Thailand. Indonesia.
Vietnam. China. Hong Kong. Australia. Saudi Arabia. United Kingdom and USA. DIALOG has
business interests and customers throughout the Asia PaciIic region. the Middle East. Europe. AI
rica. USA and South America.
Among its customers are multi-national oil maiors. national oil companies as well as multi-natio
nal engineering and services providers.
DIALOG was Iirst listed on 6 May 1996 on the Second Board oI the Kuala Lumpur Stock Excha
nge (KLSE) under the sector oI Trading/Services. Four years later on 21 March 2000. DIALOG
was transIerred to the Main Board oI the KLSE |now known as Main Market. Bursa Malaysia Se
curities Berhad| and was included as a component stock oI the Kuala Lumpur Composite Index I
rom 22 April 2002 to 5 July 2009 prior to the conversion oI the KLCI to FBM KLCI on 6 July 2
009.
SIGNIFICANCE OF THE STUDY
This research is oI great use to the real world oI accounting inIormation oI dialog group
Berhad to whom it is conducted. The research looks into diIIerent aspects oI this organiza
tion which include the Iinancial perIormance. weaknesses and some areas which require i
mprovement.
OBJECTIVES OF THE STUDY
To carry out an analysis oI Dialog Group Berhad Iinancial statements using ratios and Iin
d out its Iinancial position
To Iind out the weaknesses in Dailog Group Berhad
To Iind out whether Dailog Group Berhad is operating well in 2 years
To bring to the attention oI management the Iinancial conditions oI their company
PROBLEM STATEMENT
To carry out an analysis oI Dialog Group Berhad Iinancial statements. provide the manag
ement with an insight oI the Iinancial condition oI the company. The research will look in
to various areas and aspects oI the Iirm. It will look into areas such as liquidity oI the co
mpany. asset eIIiciency. capital structure. and market perIormance in the use oI resources
and the proIitability oI the company.




LIMITATION OF THE STUDY
Due to limited time we will only analyze the perIormance oI the Iirm Ior only 2 years
The research will only be limited to secondary data
Not able to access the industry ratios but comparisons will be made with the competitor c
ompany.
RESEARCH QUESTION
To what extent will the research show the liquidity oI the company
To what extend will the research show the proIitability oI the company.
To what extend will the research help shareholders in decision making
JUSTIFICATION OF THE STUDY
It is essential to know that Iinancial statements are primarily prepared Ior decision makin
g. They help various stakeholders in making decisions in an organization. However. the Ii
nancial statements provide inIormation which might be meaningless until an analysis Ioll
owed by interpretation is done. It is only aIter the analysis and evaluation oI the Iinancial
statements that the management will be able to see the areas oI an organization which nee
d improvements. So by doing this research . we will be able to assess the perIormance oI
Dialog Group Berhad. Iind out where the company lacks and where improvement is need
ed and above all inIorm various stakeholders oI Dialog Group Berhad on our Iindings. O
ur Iindings will help the stakeholders in making decisions.







LITRETURE REVIEW
Preamble
This section will review literatures about Iinancial statements. Iinancial statements analysis. r
atio analysis. research design. sampling. and various materials needed in carrying out this res
earch. In this research. we have obtained a lot oI inIormation about the subiect Irom various s
ources. We got very useIul inIormation Irom books. published articles. iournals and other we
bsites which we used in this research. For example we got inIormation about. importance oI I
inancial statements. ratio analysis and interpretation. sampling and use oI statistics.
IMPORTANCE OF FINANCIAL STATEMENT
In the book by Charles. S Gibson. 2009. 'Financial statements and analysis. pg 450-51 we h
ave obtained the inIormation we used to iustiIy the use oI ratios as useIul to show the perIor
mance oI a company.
P Paul Heppner. Bruce E Wampold and Dennis M. Kivlighan (2001). in the book . 'Research
Design in Counseling. pg 345. explain why it is important to choose a sample when ever ca
rrying out a research. The book goes on in pg 347 to explain how a sample is Iormed. In page
348 it talks about Iormulating hypothesis.
Delmon. (2002) 'International Proiect Finance and public private partnership. page 9 . expla
ins various groups oI ratios such as proIitability. liquidity and debt ratios and tells what each
ratio measures. For example the debt ratio according to the book measures the ability oI a Iir
m to repay its long term debts.
Catherine Hakim (2005). Research Design. pg 1 gives a clear deIinition oI a research desig
n . It deIines a design using an example oI an architecture .The book says a design is concern
ed about the aim. purposes. intentions. constraints. time and money. In pg 24 it deIines the se
condary analysis as using data that has been collected by another researcher as in the case oI
our research.
Ideal Standard of Financial Analysis
Judith J Baker. R.W Baker (2003) . 'Health Care Finance. pg 117 .go Iurther to explain the r
atios and the ideal or standard ratio needed Ior every ratio. The inIormation provided in the b
ook can be presented as Iollows:
TABLE 3.1
Ratio name Standard ratio
Current ratio 2:1
Quick ratio 1:1

Ronald W. Melicher. Edgar A. Norton. 'Introduction to Finance. pg 389 -402 explain the tre
nd analysis which is the interpretation oI ratios oI many years. The book explains how to inte
rpret ratio changes over the years with solved examples and charts.
Meeru Bhatia. 2009. Financial analysis oI HDFC BANK. We have gained an insight about
a structure oI a good research. The proiect as presented on that iournal helped us in producin
g a well structured report.
In the book oI Charles H. Gibson (Financial Reporting and Analysis)pg 11. explains how a c
ompany generate its earnings.


FINANCIAL RATIO AS A SOURCE OF ANALYZING STETMENT

Rao M.E. Thukaram (Management Accounting) pg 99. explain ratios such as Gross proIit rati
o. Net ProIit ratio. Operating ProIit Ratio as a source oI analyzing any Iinancial statement oI
a company or organization
According to the books oI Khan and Jain (Management Accounting) pg 67. we Iind out that t
hey explain current ratio as main source were a company can meet up all the required obligati
ons


RESEARCH METHODOLOGY
Preamble
This section discusses the method used to conduct the research. A special attention should be
paid to the procedure that was used to conduct this research because the accuracy and reliabil
ity oI it depends on the procedures used to carry it out. It is against that background that the v
arious methods used to conduct this research are clariIied. Generally. in order Ior a researcher
to claim that his study is well and useIul Ior the purpose oI assisting to give inIormed busine
ss decision. he needs to explain the methodology that was used to carry out the research. By s
o doing. it will be easy Ior other readers to iudge whether the research is scientiIically accurat
e. reliable. valid and useIul. This research is deIined using the Iollowing methodology.
Problem statement
Design oI the research
Sampling design
Methods used to collect data
Analysis. evaluation and interpretation oI data









Problem statement
A research is concerned about searching Ior inIormation about a speciIic topic. As a result oI
that. it requires a clear deIinition oI the problem and suggestion oI solutions. The Iirst step in
a research is to deIine the research problem. This helps the researcher to know what type oI i
nIormation and problems likely to be Iaced in the process oI carrying out the research. The p
roblem statement Ior this research is. 'To carry out an analysis of Dialog Group Berhad f
inancial statements and provide the management and the investors with an insight of th
e financial condition of the company for 2 years
DESIGN OF THE RESEARCH
BeIore carrying out a research. the researcher has to sit down and plan Ior the research. The resea
rch design involves the approach used in gathering the inIormation. cost likely to be incurred and
time to be consumed in carrying out the research. As a result. the researcher has to ask himselI s
everal questions such as why the study is being made. place. type oI data to be used. where to obt
ain the data. how long the study will take. the sample design to be used. techniques to be used in
collecting data. how the data will be analyzed and the style to be used in preparing the report.
Basically there are three types oI research designs which are exploratory. descriptive and cas
ual. However as part oI this research we are going to use descriptive research design because
we will carry out this research based on the previous understanding oI the research topic.



Sample design
Due to limited time we have Ior this research . we have Iound it impossible to calculate the Ii
nancial ratios Ior Dialog Group Berhad Irom 2009 to 2010 where the Iinancial statements hav
e been published. UnIortunately the company has not yet published its annual reports Ior 201
1. We have chosen 2 years (2009-2010) out oI the 26 years the company has been operating u
p to 2010. The sample we have chosen Ior this research is manageable and can bring clear. u
pdated results.
Sample
We chose to use the Iinancial statements Ior the latest 2 years (2009-2010)
Types of Data used in a research.
There are two types oI data which can be used when carrying out a research. These are prima
ry data and secondary data.
APPROACHES
Primary Data
Secondary Data
Primary Data
This is known as Iirst hand inIormation which is obtained by a researcher. This data is more a
ccurate and realistic as compared to secondary data in the sense that it is based on investigati
on and observations. The Iollowing are methods used in obtaining primary data.
Observing
Questionnaire
Interviews
Secondary Data
The data that used in this research was obtained Irom the company websites. We used Dialog
Group Berhad Iinancial statements Ior 2009 to 2010.



ANALYSIS OF THE RATIOS
PROFITABILITY RATIO
These ratios show how a Iirm is able to generate proIit and how it eIIiciently uses its assets.
Examples oI proIitability ratios are net proIit ratio. gross proIit ratio. operating proIit ratio. re
turn on total assets. and return on equity which are all calculated in this research.
Analysis of Profitability: Dialog Group Berhad
In this section we will calculate the proIitability ratios Ior Dialog Group Berhad Ior the 2010 an
d 2009 reporting periods. interpret the inIormation that they convey and comment on their adequ
acy.
These ratios show how a Iirm is able to generate proIit and how it eIIiciently uses its assets. E
xamples oI proIitability ratios are return on equity. return on assets. gross proIit margin. proIit m
argin and cash Ilow to sales which are all calculated in this research.
Analysis oI Dialog Group Berhad proIitability
Note: All numbers are in RM000s.
2010 2009
Returns on Equity (ROE)
RM124 659 934 X 100 RM101 485 285 X 100
(RM512 181 827RM471 412 594)/2 (RM471 412 594RM401 397 571)/2

25.35 23.26

Return on Assets (ROA)
RM150 013 6172 182 099 X 100 RM123 455 9091 047 573 X 100
(RM893 714 959756 682 822)/2 (RM756 682 822RM593 319 496)/2

152 195 716 X100 124 503 482 X100
852 198 890.5 675 001 159

18.44 18.44
GROSS PROFIT MARGIN
140 756 527 X100 113 748 951 X100
1 139 145 582 1 104 520 611

12.35 10.30

PROFIT MARGIN
152 195 716 X100 124 503 482 X100
1 139 145 582 1 104 520 611

13.37 11.27
GPM
2009
2010

CASH FLOW TO SALES
200 901 373 X100 151 321 015 X100
1 139 145 582 1 104 520 611

17.64 13.70

If net interest cash flows and income taxes paid are excluded. this ratio is:
2010:
200 901 373+1 010 912-2 348 501+23 220 543 X100
1 139 145 582

222 784 327 X100
1 139 145 582
19.56

2009:
151 321 0150-1 035 18521 287 444 X100
1 104 520 611

171 573 274 X100
1 104 520 611
15.53

Expenses ratios

Marketing and Distribution Expenses:
2 049 829 X100 1 742 353 X100
1 139 145 582 1 104 520 611

0.18 0.16

Administration Expenses:
22 966 907 X100 18 273 259 X100
1 139 145 582 1 104 520 611

2.01 1.65

Other Operating Expenses:
3 389 655 X100 1 096 855 X100
1 139 145 582 1 104 520 611

0.30 0.09


Finance Expenses:
2 182 099 X100 1 047 573 X100
1 139 145 582 1 104 520 611

0.19 0.09



Profitability ratios 2010 2009
Return on equity (ROE) 23.35 23.26
Return on assets (ROA) 18.44 18.44
Gross proIit margin 12.35 10.30
ProIit margin 13.37 11.27
Cash Ilow to sales 17.64 13.70

INTERPRETATION OF THE RESULTS
The proIitability ratios Ior Dialog Group oI Berhad are reIlecting positively on the Company. Th
e proIitability position oI the Iirm is very good. It has increased Irom








LIQUIDITY RATIOS
These ratios measure the ability oI a Iirm to meet its short term obligations. For example the r
atios can be used to measure the ability to pay its debts which mature within a year. Example
s oI liquidity ratios are current ratio. quick ratio and cash ratio oI which current ratio and quic
k ratio are the only ones calculated in this research.
LIQUIDITY
- Current ratio = current asset (CA)
Current liability (CL)

577,189,501 476,507,518
309,535,620 236,140,050
=1.9 = 2.0

CURRENT RATIO
The current asset of DIALOG GROUP does not meet the International Accounting
Standard of 2:1:1 as the current asset does not cover the current liabilities. This implies
that have loyalties customers as goodwill and most of the cash are tight in the inventory
and debtors. See from the chart above DIALOG GROUP Current Ratio drops slightly in
2010 by 0.1%.



-
Quick Ratio = current asset inventory (Acid test ratio)
Current liability

577,189,501 20,667,095 476,507,518 21,132,350
309,535,620 236,140,050

=1.8 =1.9

Acid test Ratio
DIALOG GROUP acid test ratio follow the same trend with the Current Ratio but Acid Test
Ratio met the standard of 1:1:1 the reason is seen in the cash flow analysis.





CAPITAL STRUCTURE RATIO
These ratios measure the Iinancial strength oI a Iirm. These measure its ability to meet its lon
g term obligations such as payment oI its interest. and repayment oI its debt. Examples oI lev
erage ratios are capital gearing. interest coverage and debt to equity ratio oI which interest co
verage and debt to equity ratios are calculated in this proiect.
CAPITAL STRUCTURE (Gearing, Solvency, Leverage Ratio)
- Gearing ratio= Debt (Long term NCL) 100
Debt + Equity

Gearing Ratio:- DIALOG GROUP has a low gearing ratio see the above chart it showed
that they the companys does not borrows too much money from their creditors
(gearing) .

65,863,772 100 44,811,547 100
477,493,474 + 65, 863, 772 440,596,595 + 44,811,547
=12.1% = 9.2%






GEARING
2009
2010
ASSET EFFICIENCY RATIO
These ratios measure the eIIiciency oI a Iirm in using its resources. Examples oI activity ratio
s are receivables turnover. inventory turnover. and total assets turnover which are all calculat
ed in this research.

EFFICIENCY RATIO
- Asset Turnover = Revenue
Capital Employed

1,139,145,582 1,104,520,611
477,493,474 + 65, 863, 772 440,596,595 + 44,811,547

=2.1% =2.3%

Asset Turnover
Asset turnover in DIALOG GROUP is 2times to it revenue. This implies that there is
managerial efficiency to deploy and using the asset to generate revenue and the growth
in asset turnover is constant.






ASSET RATIO
2009
2010


- Inventory Turnover = Ave inventory 100
Cost Of Sales
20,667,095 365 21,132,350 365
998,389,055 990,771,660

=7.6 days =7.8 days

Inventory Turnover
DIALOG GROUP inventory turnover is between 7days to 8days. This means that DIALOG
GROUP stock are more out of store at past rare and this is the reason DIALOG GROUP
deal with technical services.




- Average Trade Receivable Collection Period.
=Trade Receivables
Credit sales Or revenue
261,168,803 365 232, 780,022 365
1,139,145,582 1,104,520,611
=84days =77days


- Payable Payment period
= Trade payable 354days
Purchases (COS)
285,994,848 365 217,649,543 365
998,389,055 990,771,660
=105days =80days






MARKET PERFOMANCE
These ratios are usually used by investors and they help to tell what they think about a Iirm.
Examples oI market ratios are earnings per share and price earnings ratio which are all calcul
ated in this research.
MARKET PERFORMANCE RATIOS
Market Performance ratios are relevant only for entities listed on organized stock market
exchanges, as they relate reported numbers to the number of shares on issue or the market price
of the share. The common market performance ratios that include: Earnings per Share, Dividend
per share, the dividend payout ratio and the price earnings ratio. It is common practice to
compare these ratios with those of the entitys competitors, and to assess the trend in the ratios.
a) Earnings per Share
DAYS
2009
2010
EPS is the organizations net profit expressed relative to the number of ordinary share on
issue. It is a measure of the profit generated for each ordinary share on issue. A high ratio means
it has the ability to generate more profit.
FORMULA OF EARNING PER SHARE:
Net profit available to ordinary shareholders
Weighted No. of ordinary shares on issue

2009 2010
118,296,732*100
1,957,840,426
91,936,553*100
1,967,564,140
6.0 4.7


The EPS for the company reduced from 6.0 in 2009 to 4.7 in 2010. This means that its ability
to generate profits decreased in comparison to the previous year. This is bad for the company
since it could scare away potential investors.
b) Dividend per Share
DPS is the former measure of return, and indicates the distribution of the companys profits
in the reporting period via dividends expressed relative to the numbers of ordinary share on
issue.
0.0
2.0
4.0
6.0
8.0
1 2
Earnings per Share
Earnings per Share
FORMULA OF DIVIDEND PER SHARE:
Dividend paid or provided to ordinary shareholders in the current year
Weighted no. of ordinary shares on issue
2009 2010
33,283,416*100
1,957,840,426
44,191,775*100
1,967,564,140
1.7 2.2


c) Price Earnings Ratio
PER is the market value indicator that reflects the number of years of earning that investors
are prepared to pay to acquire a share at its current market price. It is the tool used to estimate the
current stock price i.e. whether it is on a reasonable level or not. Lower than 10 is usually low
risk and good to buy but the return should be lower. If this figure seems higher that it should be
an investor is required to think carefully on investing.
FORMULA OF PRICE EARNINGS RATIO:
Current market price
Earnings per share

0.0
0.5
1.0
1.5
2.0
2.5
1 2
Dividend per Share
Dividend per Share
2009 2010
2.7
0.06
2.7
0.47
45x 57.4x

2) CONCLUSION

From the highlighted figures, the overall performance of the company improved in 2010
compared to its performance in 2009. Most of the its ratios are in line with the construction and
engineering industry's requirements. Additionally, an examination of near-term assets and
liabilities shows that there are enough liquid assets to satisfy current obligations.
Recommendations
Improving the average collection period for accounts receivable (trade debtors)
Improving/increasing inventory turnover
Reducing prepayments and perhaps increasing inventory levels




REFRENCE
1) Books
Wood, F and Sangster, A, (2005) Business Accounting 2 (10
th
edn), FT prentice Hall, England
2) Websites
Annual Report [online] (cited 1
st
May, 2011) Available from:
http://www.nestle.com/INVESTORS/REPORTS/Pages/Reports.aspx
Financial Ratios [online] (cited 24 April, 2011) Available form:
<http://www.netmba.com/finance/financial/ratios/>
http://www.dialogasia.com/i_annual/DIALOG2010-Financial.pdf
http://www.dialogasia.com/i_annual/DIALOG201 o-Main.pdf