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Name: Maria Evelyn Purwoko

Student ID: 0343207

Programme: BACHELOR OF BUSINESS WITH FINANCE AND ECONOMICS

Name of module: INTRODUCTION TO FINANCE Name of tutor:

Module code: F I N 6 0 1 0 4

Assignment title: INDIVIDUAL ASSIGNMENT

Due date & time: 29th Jan 2021, 5PM

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Date: 25/01/2021
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Module Name and Code: INTRODUCTION TO FINANCE

FIN60104

Name of Tutor: Ms. Felicia Chong Hui Ling

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Individual Assignment (35%)

Elsoft Research Berhad

Maria Evelyn Purwoko
0343207
 ELSOFT RESEARCH BERHAD COMPANY’S BACKGROUND

Elsoft Research Berhad company is One of a very unique and interesting company which happens to manufacture
machines to do testing for LED lights, industrial IO board and solar cell tester headquarters in Penang, Malaysia.
Elsoft Research Berhad company is basically engaged with exploration in manufacture, designing computer
software and improvement of test burn-in systems and application explicit installed system. Elsoft for the most part
gives financially savvy ATE answers for the semiconductor, optoelectronic and computerization businesses. Elsof
system has achieved certification of standard ISO 9001:2015 Quality Management System in 16 August 2018 and
valid until 15 August 2012. Elsoft Systems is resolved to accomplish exceptional execution and convey unrivaled
quality items that meet our client's assumption just as the necessities of all appropriate invested individuals. We
accept worker's responsibility and cooperation is key towards accomplishing greatness in quality through ceaseless
improvement.
Elsoft was consolidated in Malaysia on 4 June 2003 as a private limited association under the name of Elsoft
Research Sdn. Bhd. In this way, it was changed over to a public restricted company on 10 August 2004 and from
that point forward accepted its current name (Elsoft Research Berhad, 2019).

DISCUSSION AND ANALYSIS OF THE FINANCIAL PERFORMANCE AND POSITION OF ELSOFT

RESEARCH BERHAD

1. LIQIUDITY RATIO

RATIO FORMULA 2016 2017 2018 2019

LIQUIDITY RATIO Current Ratio 73,012,702 / 81,291,693 / 92,467,209 / 81,131,305 /
= CA / CL 12,781,686 11,293,018 15,977,607 11,788,293
= 5,712,290 = 7,198,402 = 5,787,300 = 6,882,362
Or 5.71 times Or 7.2 times Or 5.78 times Or 6.88 times
Quick Ratio (73,012,702 – (81,291,693 – (92,467,209 – (81,131,305 –
= (CA – Inventory) / 5,115,624) / 3,365,220) / 5,757,537) / 3,680,004) /
CL 12,781,686 11,293,018 15,977,607 11,788,293
= 5,312,059 = 6,900,411 = 5,426,949 = 6,570,187
Or 5.31 times Or 6.9 times Or 5.42 times Or 6.57 times
Cash Ratio 11,642,228 / 12,500,826 / 10,187,456 / 10,441,729 /
= Cash / CL 12,781,686 11,293,018 15,977,607 11,788,293
= 0,910,869 = 1,106,951 = 0,637,608 = 0,885,771
Or 0.91 times Or 1.1 times Or 0.63 times Or 0.88 times

Liquidity ratio is utilized to measure capability of a company to cover short term liabilities including employees’
salary and short-term loan without external capital (Hayes, 2019). Elsoft best liquidity state was in 2017. Current
ratio, quick ratio and cash ratio were at the lowest point in 2016. It improved in 2017 but declined in 2018. In 2019,
it slightly increasing. Its cash ratio is less than one and it means that this company had low number of cash that
could be used to cover increasing value of current liabilities. But considering the table above, this company still had
strong liquidity position (current ratio and quick ratio) means that they had good amount liquid asset available
against the current liabilities. This indicates that Elsoft equipped with enough assets that can instantly liquidate to
pay off its current liabilities.

2. PROFITABILITY RATIO

RATIO FORMULA 2016 2017 2018 2019

PROFITABLITIY Profit Margin 31,103,000 / 27,253,000 / 39,767,000 / 17,004,000 /
RATIO = NI / Sales 63,613,000 61,766,000 78,150,000 33,550,000
 = 0,488,940 = 0,441,229 = 0,508,854 = 0,506,825
Or 48,8% Or 44,1% Or 50,8% Or 50,6%
Return on Assets 31,103,000 / 27,253,000 / 39,767,000 / 17,004,000 /
(ROA) 111,589,159 119,309,235 129,546,848 119,292,203
= NI / TA = 0,278,727 = 0,228,423 = 0,306,970 = 0,142,540
Or 27,8% Or 22,8% Or 30,6% Or 14,2%
Return on Equity 31,103,000 / 27,253,000 / 39,767,000 / 17,004,000 /
(ROE) 98,219,494 107,416,094 112,930,441 106,660,510
= NI / TE = 0,316,668 = 0,253,714 = 0,352,137 = 0,159,421
Or 31,6% Or 25,3% Or 35,2% Or 15,9%

Profitability ratio is monetary measurements utilized by financial specialists to gauge and assess the capacity of a
company to generate earnings based on revenue, assets, and shareholders’ equity (Kenton, 2020) during a particular
timeframe (CFI Education Inc, 2020). Elsoft Research Berhad has unstable profitability ratio throughout the years
but still consider as a healthy company since its profitability ratios are high. Net profit margin, Return on Assets
(ROA), and Return on Equity (ROE) exhibited similar trend: it decreased in 2017, increased in 2018, and declined
significantly in 2019. Its best profitability ratio was in 2018 with profit margin 50,8%, ROA 30,6% and ROE 35,2%.
In 2019, Elsoft drop to the lowest point where they can only have 15,9% shareholders return to their investors which
is not really good. Overall, comparing to other companies, Elsoft has good profitability ratio which lead to
conclusion that this company is capable to pay off its fixed cost, depreciation, operating expenses well while
additionally giving net income to the business and produce money internally (CFI Education Inc, 2020).

3. ASSETS MANAGEMENT

RATIO FORMULA 2016 2017 2018 2019

ASSETS Inventory 29,216,614 / 29,106,504 / 32,177,260 / 17,244,854 /
MANAGEMENT: Turnover 5,115,624 3,365,220 5,757,537 3,680,004
INVENTORY = COGS / Inventory
RATIOS = 5,124,812 = 8,649,212 = 5,578,298 = 4,686,096

Or 5.12 times Or 8.64 times Or 5.57 times Or 4.68 times

Days’ Sales in 365 / 5.12 365 / 8.64 365 / 5.57 365 / 4.68
Inventory = 71 days = 42 days = 65 days
= 365 / Inventory = 77 days
Turnover
ASSETS Receivables 63,613,000 / 61,766,000 / 78,150,000 / 33,550,000 /
MANAGEMENT: Turnover 22,819,387 23,748,051 14,190,995 9,483,608
RECEIVABLE = Sales / AR
RATIOS = 2,787,673 = 2,600,887 = 5,507,013 = 3,537,683

Or 2.78 times Or 2.6 times Or 5.5 times Or 3.53 times

Days’ Sales in 365 / 2,787,673 365 / 2,600,887 365 / 5,507,013 365 / 3,537,683
Receivables = 131 days = 140 days = 66 days = 103 days
= 365 / Receivables
Turnover
ASSETS Payables Turnover 29,216,614 / 29,106,504 / 32,177,260 / 17,244,854 /
MANAGEMENT: = COGS / AP 12,769,406 11,293,018 8,451,916 9,181,146
PAYABLE
RATIOS = 2,288,016 = 2,577,389 = 3,807,096 = 1,878,289

Or 2.28 times Or 2.57 times Or 3.8 times Or 1.87 times

Days’ Costs in 365 / 2.28 365 / 2.57 365 / 3.8 times 365 / 1.87 times
 Payables = 160 days = 142 days = 96 days = 195 days
=365 / Payables
Turnover
ASSETS Total Asset 63,613,000 / 61,766,000 / 78,150,000 / 33,550,000 /
MANAGEMENT: Turnover (TAT) = 111,589,159 119,309,235 129,546,848 119,292,203
ASSETS Sales / Total Assets = 0,570,006 = 0,517,696 = 0,603,256 = 0,281242
TURNOVER Or 0.57 times Or 0.51 times Or 0.6 times Or 0.28 times
RATIOS

Capital Intensity 1 / 0,570,006 1 / 0,517,696 1 / 0,603,256 1 / 0,281242

Ratio = 1/TAT = 1,754,367 = 1,931,635 = 1,657,671 = 3,555,654
Or 1.75 Or 1.93 Or 1.65 Or 3.55

Asset management ratio is the way to breaking down how successfully and proficiently a company is dealing with
its resources for produce earnings (Rosemary Carlson, 2019). Based on the calculation, Elsoft Research Berhad
company’s assets management inventory ratios specially in inventory turnover are consider high. Its inventory
turnover is 5.12 times in 2016 and kept increased in 2017, this means that Elsoft may be in danger stockouts. In
2018 and the following year, it started to decline.

Days’ Sales in Inventory tells how many days the company needs to sell the stock (Rosemary Carlson, 2019). Elsoft
Reaserch Berhad company needed 71 days, on average to sell their stocks on 2016. The inventory fastest sold out is
in 2017 with average 42 days. 65 days on 2018 and 77 days in 2019. Small amount of days’ Sales in Inventory
usually is a good sign.

Receivables turnover ratio shows how frequently every year a company tidy up or thoroughly gather they records
receivable. Elsoft’s Receivables Turnover ratios are greater than 1 throughout the years. As this company exhibit
good number of Receivables Turnover ratios, we can assume that there is nothing wrong with their collection policy
since they are good at collecting their credits.

Days’ Sales in Receivables tells how many days the company needs to collect payment after a product or services
has been done. Days’ Sales in Receivables under 45 viewed low (Mitchell Grant, 2020). In table above, most high
Days’ Sales in Receivables ratio is in 2017 with 140 days. In conclusion, days’ Sales in Receivables ratios of this
company consider high. This happened because there is cash flow problem.

Same as receivable ratios, Elsoft’s payable ratios are not really in a good position as their days’ costs in payables
ratios were considered high. They need 160 days to pay off their suppliers in 2016. They started to pay their
suppliers slightly faster in 2017 and 2018 but they need long time to pay their suppliers in 2019.

Assets turnover ratio shows how effectively an organization is using its resources for create incomes. Elsoft turnover
ratios are consider low especially in 2019. This means that Elsoft is not effective in generate their assets. But it
doesn’t mean that this company is a bad company.

RECOMMENDATIONS FOR THE IMPROVEMENT OF FINANCIAL RATIOS OF THE COMPANY

I. Increase sales.
Elsoft Berhad can do a better marketing and promotion strategies to generate assets and increase sales. They need to
discover approaches to utilize all assets and resources more productively and gain more income.

II. Evaluating company’s finance regulary.

This is crucial to identified if there is any cashflow probems. By taking a long look at the business’s finances, if
necessaries work with the business’s accountant. This should perform the summary of all the incomes and expenses
of the business to see where savings or improvement can be made. As a result, the overhead expenses will be
minimal so not negatively impact the cash flow of the business. Every business should audit expenses regularly to
ensure that overhead expenses stay in place.
III. Improved inventory management system.
Elsoft Researched Berhad need to find a better way for their inventory management system so they will not be
facing any danger stockouts since their inventory turnover are consider risky.

IV. Improve company’s collection department.

As the analyze above, day’s sales in Receivables ratios of this company consider high. This either because their
collection department not working efficiently. To have better company’s collection department, they can send
invoice quickly, improve payment terms and conditions to make everything clear and smooth when its times to
collect payment from customers.

REFELCTIVE WRITING

Particularly during time like this, I need to adapt with new learning system since everything is online. It is
unavoidable that online classes have different issue identified with offline learning cycle. self-coordinated learning
is vital to completely comprehend the task and complete it. Henceforth, I was unable to rely just upon lectures and
the notes given. I accepted that I do so much searching from the internet to finally discover information that I may
miss in the lecturer. I have chosen Elsoft Research Berhad which is a company that I never heard before. But it is a
special challenge for me to complete this assignment. By doing this assignment, I must admit that my knowledge
about business and finance is expanded. I found out that a company may seems doing well on the outside until we
analyze their financial and cashflow statement then we discover that the company may have some problem inside. I
have learned that ratio is really crucial for a company to keep their financial doing well.

REFERENCE LIST

 Corporate Finance Institute. 2021. Profitability Ratios – Calculate Margin, Profits, Return on Equity
(ROE). [ONLINE] Available at:
https://corporatefinanceinstitute.com/resources/knowledge/finance/profitability-ratios/

 Kenton, W., 2020. Profitability Ratios. [Online]Available at:

https://www.investopedia.com/terms/p/profitabilityratios.asp

 The Balance Small Business. 2021. Efficiency and Turnover Ratios. [ONLINE] Available at:
https://www.thebalancesmb.com/use-asset-management-ratios-in-financial-ratio-analysis-393187

 Investopedia. 2021. Days Sales Outstanding – DSO Definition. [ONLINE] Available at:
https://www.investopedia.com/terms/d/dso.asp

 Investopedia. 2021. Accounts Payable Turnover Ratio Definition. [ONLINE] Available at:
https://www.investopedia.com/terms/a/accountspayableturnoverratio.asp

 Asset management (turnover) ratios. 2021. Asset management (turnover) ratio [ONLINE] Available at:
https://www.readyratios.com/reference/asset/

 Company Debt. 2021. Company Cash Flow Problems and How to Solve Them in 2020. [ONLINE]
Available at: https://www.companydebt.com/company-cash-flow-problems/
  Elsoft Research Berhad. 2021. Elsoft Research Berhad – Company Profile. [ONLINE] Available at:
https://elsoftresearch.com/company-profile/

 Urgenthomework.com. 2021. Analysis of Financial Statement Sample Assignment Sample Homework.

[ONLINE] Available at: https://www.urgenthomework.com/sample-homework/analysis-of-financial-
statements-sample-assignment

 Elsoft Research Berhad. 2021. Elsoft Research Berhad –2017 Financial Highlights & Annual Report.
[ONLINE] Available at: https://elsoftresearch.com/investor-relations/2019-financial-highlights/

APPENDIX

2018 and 2019.

2016 and 2017
- END OF ASSIGNMENT-