FUNDAMENTALS OF FINANCE (FIN 242)

DIPLOMA IN BUSINESS STUDIES

GROUP ASSIGNMENT

COMPANY NAME :

POH KONG HOLDING BERHAD

PREPARED BY

MATRIC NUMBER NAME CLASS

2020556959 WAN NUR IZZATI ALYA BINTI WAN RUZILAN DBS 4A

2020539727 ZAWANAH UZMA BINTI MOHD KHAIRUDDIN DBS 4A

2020754535 SYAZLINA AQILAH BINTI AZMAN DBS 4A

2020746705 KHAIRUNNISA IZZATI BINTI MOHD TALHA DBS 4A

LECTURE NAME:
MADAM YUSNIFARINA BINTI YUNUS

DATE OF SUBMISSION:
16 DECEMBER 2021
 TABLE OF CONTENT

NO CONTENT PAGE

1 COMPANY BACKGROUND 1

2 RATIO CALCULATION 2-7

3 RATIO INTERPRETATION 8

4 CONCLUSION 9

5 REFERENCES 10

6 APPENDICES 11 - 12
COMPANY BACKGROUND

Poh Kong Holdings Berhad is a large accessory organization that represents a variety of
jeweller, diamond, and pearl brands and with over 90 stores, it is Malaysia’s largest jewellery
retailer. It is one of the successful companies that has earned the public’s trust by providing
high-quality accessories. Poh Kong has been working since 1976 to create Poh Kong has
been since 1976 to create a meaningful and beautiful company that priorities its customers
and takes care of its employees. Poh Kong has led the Malaysian gold and jewellery market
by focusing on management of operations and the supply chain . Poh Kong’s name refers to
Passion, Originality, Honesty, Kindness, Outshine, Nurture, and Glow.

Poh Kong Holdings Berhad began operations in 1976 under the name Poh Kong Jewellers, in
Petaling Jaya they opened their first branch. Poh Kong is now a leader of investment gold in
Malaysia. Poh Kong was inscribed in the Malaysia Book of Records in 1993 as the biggest
Retail Chain of Jewellery, and their design department received a golden globe at the World
Gold Council Europe's "Golden Design Awards" in Italy. They have shown their quality status
over the years by winning a few competitions as they strive for results.

In 2001, a manufacturing company in Shah Alam was built to manufacture designs that are
mass-produced and also handcrafted Poh Kong's only source of jewellery. Following a focus
on the expansion of Poh Kong into an investment holding and management services company
with manufacturing and distribution companies operating through its concessions, it
successfully listed on the Bursa Malaysia in 2004. The organisation of Poh Kong Holdings
Berhad is divided into six corporate activities: retail, manufacturing, wholesale and distribution,
property investment, overseas investment, and franchising.

1
RATIO CALCULATION

LIQUIDITY RATIOS

1. CURRENT RATIO

2020 2019

Formula Formula

= Current Asset = Current Asset

Current Liabilities Current Liabilities

= 599,646,365 = 619,063,635
155,076,313 177,649,206

= 3.87 times = 3.48 times

2. QUICK RATIO

2020 2019

Formula Formula

=Current Asset - Inventories - Prepaid = Current Asset - Inventories - Prepaid

Expenses Expenses
Current Liabilities Current Liabilities

= 599,646,365 - 548,913,843 - 10,226,020 = 619,063,635 - 573,625,997 - 10,451,956

155,076,313 177,649,206

= 0.26 times = 0.19 times

3. NET WORKING CAPITAL

2020 2019

Formula Formula

= Current Assets - Current Liabilities = Current Assets - Current Liabilities

= 599,646,365 - 155,076,313 = 619,063,635 - 177,649,206

= RM 444,570,052 = RM 441,414,429

2
ACTIVITY OR ASSET MANAGEMENT RATIOS

1. INVENTORY TURNOVER

2020 2019

Formula Formula

= Revenue = Revenue
Inventory Inventory

= 748,801,630 = 1,000,514,281
548,913,843 573,625,997

= 1.36 = 1.74

2. AVERAGE COLLECTION PERIOD

2020 2019

Formula Formula

= Account Receivable ⨯ 360 = Account Receivable x 360

Credit sales Credit sales

= 5,120,561 x 360 = 3,684,358 x 360

748,801,630 1,000,514,281

= 2.46 days = 1.32 days

3. ACCOUNT RECEIVABLE TURNOVER

2020 2019

Formula Formula

= Credit Sales = Credit Sales

Acc Receivable Acc Receivable

= 748,801,630 = 1,000,514,281
5,120,561 3, 684, 358

= 146.23 times = 271.56 times

3
 1. FIXED ASSETS TURNOVER

2020 2019

Formula Formula

= Sales = Sales
Net Fixed Assets Net Fixed Assets

= 748,801,630 = 1,000,514,281
94,948,491 786,669,596

= 7.89 times = 1.27 times

2. TOTAL ASSETS TURNOVER

2020 2019

Formula Formula

= Sales = Sales
Total Asset Total Assets

= 748,801,630 = 1,000,514,281
793,579,661 786,669,596

= 0.94 times = 1.27 times

4
LEVERAGE AND DEBT MANAGEMENT RATIOS

1. DEBT RATIO

2020 2019

Formula Formula

= Total liabilities ⨯ 100 = Total liabilities x 100

Total Asset Total Assets

= 233,354,496 ⨯ 100 = 235,953,916 x 100

793,579,661 786,669,596

= 29.41 % = 30%

2. TIME INTEREST EARNED

2020 2019

Formula Formula

= EBIT = EBIT
Interest Interest

= 47,163,045 = 43,381,270
9,568,908 10,165,278

= 4.23 times = 4.31 times

5
PROFITABILITY RATIOS

1. GROSS PROFIT MARGIN

2020 2019

Formula Formula

= Gross profit x 100 = Gross profit x 100

Sales Sales

= 198,785,978 ⨯ 100 = 208,882,827 x 100

748,801,630 1,000,514,281

= 26.55 % = 20.87%

2. NET PROFIT MARGIN

2020 2019

Formula Formula

= Net Profit = Net Profit

Sales Sales

= 24,433,700 ⨯ 100 = 25,274,896 x 100

748,801,030 1,000,514,281

= 3.26 % = 2.53%

3. RETURN ON INVESTMENT

2020 2019

Formula Formula

= Net Profit = Net Profit

Total Assets Total Assets

= 24,433,706 ⨯ 100 = 25,274,896 x 100

793,579,661 786,669,596

= 3.08 % = 3.21%

6
 1. RETURN ON EQUITY

2020 2019

Formula Formula

= Net Profit x 100 = Net Profit x 100

Total Equity Total Equity

= 24,433,706 ⨯ 100 = 25,274,896 x 100

570,225,165 550,715,680

= 4.28% = 4.58%

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RATIO INTERPRETATION

LIQUIDITY RATIO :

The liquidity ratio of the company in 2020 is higher than 2019. It shows that the company is
able to meet short term obligations on time and not rely on inventories.

ACTIVITY RATIO :

The activity ratio of the company in 2020 is lower than 2019. It shows that Poh Kong Company
is underutilized in asset inefficiency. The company also has a high ratio on collecting debt
compared to the previous year.

LEVERAGE RATIO :

Leverage ratio of the company in 2020 is better than 2019. It means that it is good at managing
assets and has lower financial risk. It will be less likely to fail because business will be able to
pay with liquidity. However the time interest earned in 2020 is lower than previous year,
because of the lower ratio the firm might have difficulty making payment on interest.

PROFITABILITY :

The profitability of the company in 2020 is higher than 2019 . It shows that the company can
earn more money. However, Poh Kong Company cannot earn profit from asset and equity due
to having a lower ratio compared to previous year.

8
CONCLUSION

Based on the above interpretation, we can see that Syarikat Poh Kong Sdn. Bhd. has strength
in liquidity ratios in 2020 compared to 2019. According to Poh Kong company’s liquidity ratio
it has a higher and good ratio.This means the company is able to pay its short -term liabilities
and expenses.The higher the ratio the greater the ability of the company to satisfy its current
bills. Also, it will be safe for the creditors because the company is able to cover their short-
term obligations and the investor will analyze the company to ensure that the company is
healthy and worthy of their investment. Furthermore, Poh Kong net working capital shows a
positive result. It means that the company has enough current assets to pay its current
liabilities. Having more net working capital helps a company run its business. Besides, with
liquidity ratios, there is a balance between a company's ability to pay its debts safely and
inefficient capital allocation. Capital should be deployed in the most efficient way possible to
improve the firm's value for shareholders.

Other than that, the strength in the Poh Kong Company is leverage ratio. In leverage ratio the
company earned a lower debt ratio in 2020 than 2019 it means that the company is good at
managing assets because it has lower financial risk. Leverage ratio is a financial measurement
that assesses the ability of the company to meet its financial obligation,when the debt is higher
it means that the company is using debt to finance its assets and operation.. By having a low
total ratio it will attract more investors to invest in this company because Poh Kong company
is good at managing assets and has low debt and this will reduce the number of others used
to generate profits.

Next, based on the report, the weakness of Poh Kong company Sdn. Bhd is in the activity
ratio. The activity ratios show the connection between sales and a given asset. It indicates the
investment in one particular group of assets and the revenue the assets are producing. The
activity ratios show the speed at which the assets are converted into sales. We can see that
in 2020 the inventory turnover is lower than 2019. This is because a low inventory turnover
can signal poor sales or high inventory levels. A high inventory turnover can signal better sales
or tighter management control. Furthermore, it shows that the company has higher ACP which
is not desirable as it indicates poor sales and slow connections. Moreover, in terms of fixed
asset turnover of Poh Kong Company in 2020 it shows a higher total ratio compared to 2019.
The higher ratio indicates the firm is efficient in generating sales from the available fixed
assets.

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REFERENCES

1. http://ir.chartnexus.com/pohkong/docs/ar/2020.pdf
2. http://ir.chartnexus.com/pohkong/reports.php
3. https://www.pohkong.com.my/poh-kong-story
4. https://corporatefinanceinstitute.com/resources/knowledge/finance/activity-ratios/
5. https://corporatefinanceinstitute.com/resources/knowledge/finance/liquidity-ratio/

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APPENDICES

11
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