Scope 3: Financial Statement Analysis – Trend, Ratio, Comparative etc.

3.1 Liquidity, Capital Structure and Solvency Ratios.

3.1.1 Liquidity Ratio

2020 2021

Current Ratio 2.01 1.98

Acid-Test Ratio 1.73 1.4

Collection Period 40.57 Days 15 Days

Days to Sell Inventory 47.62 Days 57.34 Days

3.1.2 Capital Structure and Solvency Ratio

2020 2021

Total Debt to Equity 2.01 1.98

Long-term debt to equity 1.73 1.4

Times Interest Earned 40.57 Days 15 Days

Capital Structure and solvency, the ratio is used to assess a company's capacity for long-
term obligations and future revenue generation.

Debt-to-Equity ratio used in order to determine whether a firm finances its operations with
debt rather than its own resources, to assess the company's financial leverage. high
percentage indicates that the company largely uses debt financing and is frequently linked to
high investment risk. For 2020 and 2021, Top Glove has a low debt-to-equity ratio (less than
1), indicating it is a low-risk investment.

The same is applicable for Top Glove's long-term debt to equity ratio, which was low,
suggesting a lesser chance of bankruptcy for the business.

Times Interest Earned is a measurement of a company's solvency that helps evaluate

whether a company is earning enough money to pay its debt and demonstrates that the
company can earn multiple times as much as its annual debt obligation. Times Interest
Earned can be found on a company's income statement. In comparison to 2020, Top Glove
reported much higher times of interest earned in 2021.
3.2 ROI, OPERATING PERFORMANCE AND ASSET UTILIZATION

3.2.1 Return on Investment

2020 2021

Return on Assets 19.25 64.35

Return on Common Equity 41% 116.68%

3.2.2 Operating Performance

2020 2021

Gross Profit Margin 67.86%

Operating Profit Margin (pre-tax) 61.34%

Net Profit Margin 47.82%

3.2.3 Asset Utilization

2020 2021

Cash Turnover 15.68

Accounts Receivable Turnover 23.97

Inventory Turnover 6.28

Working Capital Turnover 7.61

PPE Turnover 4.7

Total Assets Turnover 1.77

The cash turnover ratio, an efficiency ratio, measures how frequently cash is transferred
within a certain accounting period. Companies without credit sales benefit most from using
the cash turnover ratio. Top Glove reported a higher cash turnover ratio for the year 2021
compared to the year 2020, which denotes a more frequent frequency of replenishing cash
through revenue.
The average number of times a company collects its accounts receivable balance is
measured by the accounts receivable turnover ratio. It is a measurement of how well a
business manages its line of credit process and collects unpaid bills from customers. A low
ratio might be the result of ineffective collection practises, insufficient credit policies, or
customers who are not financially viable or creditworthy. Conversely, a high ratio might
indicate that corporate collection practises are effective with quality customers who pay their
debts quickly.

By dividing the average inventory value throughout the time period by the cost of products
sold, inventory turnover calculates how effectively a business utilises its inventory.
Businesses can improve their decisions on pricing, manufacturing, marketing, and
purchasing by using the inventory turnover ratio. It is one of the efficiency ratios that
assesses how well a business utilises its resources.

Working capital turnover is a ratio that assesses how well a company uses its working
capital to promote sales and growth. A high turnover ratio indicates that management uses a
company's short-term assets and liabilities to drive sales very efficiently. A low ratio, on the
other hand, may suggest that a company is investing in too many accounts receivable and
inventory to sustain its sales, which may result in an excess of bad debts or obsolete
inventory.

PPE turnover ratio depends on all three assets; property, plant, and equipment It measures
your ability to generate money from fixed assets such as buildings, cars, and machinery. The
greater our PPE turnover, the more efficient our capital investments.

Total asset turnover measures how well a corporation uses its assets to produce income.
Top Glove generates more revenue from its assets in 2021 than it did in 2020.

3.2 MARKET MEASURE

2020 2021

Price-to-earnings 15.68

Earnings Yield 23.97

Dividend Yield 6.28

Dividend Pay-out Rate 7.61

Price-to-book 4.7

The price-to-earnings ratio is one of the most generally used methods for determining a
stock's relative valuation among investors and analysts. The P/E ratio can be used to identify
whether a stock is over-priced or under-priced. A high ratio may indicate that a company's
stock is overvalued or that investors anticipate rapid growth in the future.
Earnings yield indicates a company's earnings per share as a percentage. Many
investment managers use earnings yield to determine optimal asset allocations, while
investors use earnings yield to judge which assets appear under-priced or over-priced.
Dividend yield is a financial measure that shows the return on an investment based purely
on dividend payments.

The dividend payout ratio compares the amount of dividends given to shareholders to the
total amount of net income generated by the company. A high yield indicates that the
company is reinvesting less money back into its operations, whereas a low yield can make a
stock appear less competitive in comparison to its industry.

The price-to-book ratio is a financial measure used to determine if a company's current

market value is undervalued or overvalued based on its book value. A price-to-book ratio
greater than one could indicate that the equities are selling at a premium.