INTRODUCTION

Financial ratios are the tool that can be used by financial analyst to evaluate the
performance of a company. There are two type of financial ratios which are internal and
external. Internal financial ratios are for historical comparison which financial manager
compare financial statement by analyze past and current financial statements. The result of
analyze can see how company performing over the time. By using financial ratios also can
help financial managers estimate how future performance will come. Indirectly, financial
ratios help financial managers to do planning and forecasting how to make their company
performance increase (BLOOMENTHAL, 2022)

Meanwhile, external financial ratio is for competitive analysis where financial manager
compare their financial statement with other companies. External financial ratios are to help
financial manager made an investment decision making. So that, financial managers can
choose which company industry can be a place to invest and gained a lot of return back.
Other than that, financial ratios can analyze strength and weakness once company, so that,
managers know how to compete with other companies (wikipedia , 2022)

Lastly, financial ratio is important to understand by financial managers, so that managers

can manage company assets and cash flows very well. Other than that, managers also can
plan what the best for the company like which industry company that suit to do an investment
and company not easily give lend to company that have a high risk to make a bad debt which
can be a burden to company.
ASSETS MANAGEMENT

Inventory turnover: COGS

Average/closing inventories

: 800,437
119,243
: 6.71X (2020)

Inventory turnover: COGS

Average/closing inventories

: 612,958
186,395
: 3.29X (2021)

Regarding to calculation, 2021 has less firm restock inventory compared to 2020
which near 4 times La’Flora Berhad do restock while in 2020 La’Flora Berhad
do restock near 7 times. This is mean, La’Flora Berhad inventory in 2021 more
efficient because La’Flora Berhad can save more cost. As we know, everytime
company made an inventory restock, it will take a lot of cost, this is because
company have to pay shipping, raw material, employees, bill, and more. In my
opinion, La’Flora Berhad do less return of inventory in 2021 because they want
to save more cost.
 Average collection period: A/C Receivables
Credit sales / 360

: 296,888
1,195,045.20 / 360

: 296,888.00
3,319.57
: 89.44 / 89 days (2020)

Average collection period: A/C Receivables

Credit sales / 360

: 323,985
856,696.50 / 360

: 323,985.00
2,379.71
: 136.14 / 136 days (2021)

Regarding to calculation above, La’Flora Berhad in 2021 need more time to collect
their debt compared to 2020. During 2020, only 89 days La’Flora berhad take time to
collect all the debt while at 2021, La’Flora Berhad take time 136 days which almost 5
month. This situation can happen either because La’Flora Berhad not strict when
collecting debt or not approach clients closely like give reminder to them. If La’Flora
Berhad have take 136 days to collecting their debt, big possibilities La’Flora Berhad
has less assets on their account. I’m suggesting La’Flora Berhad to use cash discount
to clients so clients would like to pay cash or use credit period. As example, 2/10 net
30 which means clients who pay within 10 days can get 2% discount and have to pay
full after 10 days, this method can help clients to pay their loan early. Other than that,
La’Flora Berhad management have to do credit monitoring and collection policy, so
that management can be more alert when slow or non-payment of accounts occurs.

Non-current assets turnover: sales

net non-current assets

: 1,327,828
218,890
: 6.04X (2020)

Non-current assets turnover: sales

net non-current assets

: 951,885
248,716
: 3.83X (2021)

As we can see the calculation above, at 2021, La’Flora Berhad had lower non-current
assets turnover compared at 2020. At 2020, La’Flora Berhad seems like know how to
use their non-current assets or fixed assets to generate sales but, at 2021, maybe
because of the pandemic, La’Flora Berhad don’t use their fixed assets very well. We
can see the big comparison between a year. At 2020, La’Flora Berhad can generate
sales by using non-current assets 6.04 times while at 2021, La’Flora Berhad only
generate 3.83 times. Indirectly, it reflects La’Flora Berhad had more inventory than
current consumer demand. I’m suggesting for La’Flora Berhad try to match inventory
with current markets demand so, La’Flora Berhad can generate more sales.
 Total assets turnover: sales
total assets

: 1,327,828
834,145
: 1.59X (2020)

Total assets turnover: sales

total assets

: 951,885
969,154
: 0.98X (2021)

Based on calculation I’ve made, La’Flora Berhad has less total assets turnover at
2021 compared to 2020. It reflects, La’Flora Berhad total assets turnover at 2021 not
very efficient which La’Flora company not use their all assets to generate sales very
well. In order to increase total assets turnover, La’Flora Berhad should know how to
increase their sales. This is because, increasing total assets turnover dependent on
company sales. The higher the sales La’Flora Berhad can generate than the assets,
then, the high ratio La’Flora Berhad can get.

In conclusion, with evidence assets management ratio, La’Flora Berhad’s assets

management during 2021 is less efficient than 2020. I can see, La’Flora Berhad not
manage their non-current assets and current assets very well. If La’Flora Berhad
cannot manage their assets, big possibilities La’Flora Berhad has experiencing
decrease in profit. I would like to suggest La’Flora Berhad to match their assets to
markets demand so that, La’Flora Berhad can generate more sales and gained more
profit.
1. References
Andrew Bloomenthal . (2022, August 17). Financial Ratio Analysis: Definition, Types,
Examples, and How to Use. Retrieved from INVESTOPEDIA:
https://www.investopedia.com/terms/r/ratioanalysis.asp

wikipedia . (2022, November 23). Financial Ratio. Retrieved from wikipedia :

https://en.wikipedia.org/wiki/Financial_ratio#:~:text=A%20financial%20ratio%20o
r%20accounting,a%20corporation%20or%20other%20organization.