Universiti Teknologi MARA, Melaka City Campus

Bachelor of Business Management (Hons) Finance

Title

Analysis of Company Performance Based on Financial Ratio

PADINI HOLDINGS BERHAD

FIN430

Introduction to Corporate Finance

Semester March-July 2020

Name: PUTERI NINA FARHANA BINTI MIOR ZORAINI

Matric No: 2020983179
Lecturer Name: NUR JIHAN MD JOHAN
Table of content

1.0 Background of company

2.0 Financial Statement
3.0 Ratio Analysis
3.1 Liquidity ratio
3.2 Activity ratio
3.3 Leverage ratio
3.4 Profitability ratio
3.5 Market ratio
4.0 Conclusion

References

2|Page
1.0 Background of company

Padini Holdings Berhad is a Malaysia based investment holding company. The company sells
both men's and ladies’ shoes and accessories, garments, ancillary products, children’s
garments, maternity wear and accessories through various subsidiaries. Its most prominent
brands are Padini and VINCCI. Its goods are exported to mainly the middle east and southeast
asian countries.

Its goods are sold in retail flagship stores and concept stores. The Padini Concept Store is a
concept which houses all Padini Holdings brands under one roof or “one-stop-shopping”. The
first of such outlets was opened in Johor Bahru City Square, Johor Bahru, Malaysia in 1999.
Padini Holdings Berhad focuses on fast retailing, where new products come online within
weeks. Currently, its stores are scattered all around the country boasting store locations
in Pavilion Kuala Lumpur and Mid Valley Megamall. Padini began operations as Hwayo
Garments Manufacturers Company in 1971, it was affiliated in garment manufacturing and
wholesaling. It entered the retail industry in 1975 with flagship brand Padini. VINCCI was
established to market ladies shoes, bags, belts and other accessories in 1986. Many brands
including (Padini, Seed, Padini Authentics, PDI, P&Co, Miki, Vincci and Vincci Accessories)
and Brands Outlet labels were launched in the following decades.

In 1991, Home Stores Sdn Bhd was launched to hold all the companies involved in the Group's
retail, wholesale and manufacturing businesses. It was subsequently renamed to the present
Padini Holdings a year later. In 1995, Padini Holdings Sdn Bhd was converted to a public
company limited by shares and adopted the name, Padini Holdings Berhad and soon listed
on the Second Board of the Kuala Lumpur Stock Exchange. The year 2000 witnessed the
establishment of Padini Dot Com Sdn Bhd to provide electronic business services and
solutions for the Group. Padini Holdings was transferred to the Main Board of the KLCI Bursa
Malaysia in 2005.

3|Page
2.0 Financial Statement

• Financial Statement 2017

4|Page
5|Page
• Financial Statement 2018

6|Page
7|Page
• Financial Statement 2019

8|Page
9|Page
3.0 Ratio Analysis

2017
1. Liquidity Ratio:
Current Ratio Current Assets
Current Liabilities

725 093 000

310 732 000
= 2.33 Times

Quick Ratio Current Assets – Inventory

Current Liabilities

725 093 000 – 193 212 000

310 732 000
= 1.71 Times

2. Activity Ratio
Inventory Turnover Cost of goods sold
Inventory
952 135 000
193 212 000
= 4.93 Times

Average Collection Period Account Receivable (360)

Net Sales
64 924 000 (360)
1570 722 000
= 14.9 / 15 Days

3. Leverage Ratio
Debt Ratio Total Debts
Total Assets

10 | P a g e
 329 157 000
881 259 000
= 0.37350 x 100%
= 37.35%

Time Interest Earned EBIT

Interest

217 852 000

4663 000
= 46.72 Times
4. Profitability Ratio
Gross Profit Margin Gross Profit
Net Sales

618 587 000

1570 722 000
= 0.4672 x 100%
= 39.38%

Net Profit Margin EAT

Net Sales

157 388 000

1570 722 000
= 0.1002 x 100%
=10%
5. Market Ratio
Earning Per Share Profit after tax
Number of Shares

157 388 000

23.92
= RM 6579 765. 89

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Dividend Per Share Dividend Paid
Number of Share

75 660 000
23.92
= 3163 043. 48

12 | P a g e
 2018
1. Liquidity Ratio:
Current Ratio Current Assets
Current Liabilities

765 413 000

261 430 000
= 2.93 Times

Quick Ratio Current Assets – Inventory

Current Liabilities

765 413 000 – 257 022 000

261 430 000
= 1.94 Times

2. Activity Ratio
Inventory Turnover Cost of goods sold
Inventory
991 288 000
257 022 000
= 3.86 Times

Average Collection Period Account Receivable (360)

Net Sales
55 730 000 (360)
1678 790 000
= 12 Days

3. Leverage Ratio
Debt Ratio Total Debts
Total Assets

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 270 800 000
924 000 000
= 0.2931x 100%
= 29.31%

Time Interest Earned EBIT

Interest

242 366 000

2670 000
= 90.8 Times
4. Profitability Ratio
Gross Profit Margin Gross Profit
Net Sales

687 502 000

1678 790 000
= 0.4095 x 100%
= 41%

Net Profit Margin EAT

Net Sales

178 174 000

1678 790 000
= 0.1061 x 100%
=10.61%
5. Market Ratio
Earning Per Share Profit after tax
Number of Shares

178 174 000

27.08
= RM 6579 542. 10

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Dividend Per Share Dividend Paid
Number of Share

75 660 000
27.08
= RM 2793 943. 87

15 | P a g e
 2019
1. Liquidity Ratio:
Current Ratio Current Assets
Current Liabilities

808 673 000

206 275 000
= 3.92 Times

Quick Ratio Current Assets – Inventory

Current Liabilities

808 673 000 – 277 236 000

206 275 000
= 2.58 Times

2. Activity Ratio
Inventory Turnover Cost of goods sold
Inventory
1085 182 000
277 236 000
= 3.91 / 4 Times

Average Collection Period Account Receivable (360)

Net Sales
57 810 000 (360)
1783 022 000
= 11.67 / 12 Days

3. Leverage Ratio
Debt Ratio Total Debts
Total Assets

215 237 000

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 955 581 000
= 0.2252 x 100%
= 22.52 %

Time Interest Earned EBIT

Interest

221 101 000

1836 000
= 120.43 Times
4. Profitability Ratio
Gross Profit Margin Gross Profit
Net Sales

697 840 000

1783 022 000
= 0.3914 x 100%
= 39.14 %

Net Profit Margin EAT

Net Sales

160 166 000

1783 022 000
= 0.0898 x 100%
= 8.98 % / 9 %
5. Market Ratio
Earning Per Share Profit after tax
Number of Shares

160 166 000

24.34
= RM 6580 361. 55

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Dividend Per Share Dividend Paid
Number of Share

75 660 000
24.34
= RM 3108 463. 44

18 | P a g e
 CURRENT RATIO
4.5
3.92
4
3.5
2.93
3
2.5 2.33
TIMES

2
1.5
1
0.5
0
YEARS

2017 2018 2019

Based on the ratio stated on the graph above, it shows that current ratio of Padini Holdings
Berhad is increases from 2.33 times for the year 2017 to 2.93 times for the year 2018.
Meanwhile, for the year 2018 to 2019 also showed the ratio increased from 2.93 times to 3.93
times. According to Bowlin (2018), the current ratio is usually characterized as an index of
liquidity. Since the numerator of the ratio is composed of cash and other assets that will be
turned into cash within a relatively short period, it is supposed to indicate in a rough way the
ability of a firm to pays it current liabilities when if they fall due. Presumably an abnormally
high ratio could be taken to indicate the possibility of excess liquidity.

According to Kenton W. (2020), The current ratio is sometimes referred to as the “working
capital” ratio and helps investors understand more about a company’s ability to cover its short-
term debt with its current assets. Weaknesses of the current ratio include the difficulty of
comparing the measure across industry groups, overgeneralization of the specific asset and
liability balances, and the lack of trending information. A current ratio that is in line with the
industry average or slightly higher is generally considered acceptable. A current ratio that is
lower than the industry average may indicate a higher risk of distress or default. Similarly, if a
company has a very high current ratio compared to their peer group, it indicates that
management may not be using their assets efficiently. As a conclusion, current ratio on 2019
is the best ratio compared to the other years. Meanwhile ratio on 2017 is the worse current
ratio of Padini Holdings Berhad due to the lowest current ratio compared to the other years.

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 QUICK RATIO
3
2.58
2.5

1.94
2
1.71
TIMES

1.5

0.5

0
YEARS

2017 2018 2019

Based on the ratio stated on the graph above, it shows that the quick ratio repeatedly
increasing from 2017 to 2019. Quick ratio increased from 2017 to 2018 from 1.71 times to 1.94
times and from 2018 to 2019 it is also increased from 1.94 times to 2.58 times.,

According “Quick Ratio: Meaning, Interpretation and Significance” (n.d), quick Ratio known as
a Liquid Ratio, is a more rigorous test of liquidity than the current ratio. The term ‘liquidity’
refers to the ability of a firm to pay its short-term obligations as and when they become due.
The two determinants of current ratio, as a measure of liquidity, are current assets and current
liabilities. Current assets include inventories and prepaid expenses which are not easily
convertible into cash within a short period. Quick ratio may be defined as the relationship
between quick or liquid assets and current or liquid liabilities. An asset is said to be liquid if it
can be converted into cash within a short period without loss of value.

According to Wilkinson J (2013), quick ratios are often explained as measures of a company’s
ability to pay their current debt liabilities without relying on the sale of inventory. Compared
with the current ratio, the quick ratio is more conservative because it does not include
inventories which can sometimes be difficult to liquidate. As a conclusion, ratio on 2019 is the
best quick ratio for Padini Holdings Berhad as it was the highest ratio compared to the others
ratio. Meanwhile ratio in 2017 is the worst ratio of Padini Holdings Berhad due to the lowest
ratio compared to the other years.

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 INVENTORY TURNOVER
6

4.93
5

3.86 3.91
4
TIMES

0
YEARS

2017 2018 2019

Based on the ratio stated on the graph above, it shows that the inventory turnover ratio of
Padini Holdings Berhad is fluctuate as it decreased from 2017 to 2018. Inventory turnover ratio
decrease from 4.93 times to 3.86 times and from 2018 to 2019 it is slightly increased from
3.86 times to 3.91 times.

According to Madhusudhana R. C. (2009), inventory management is vital in supply chain

performance of a firm. The inventory turnover ratio measures the number of times a company
sells its inventory during the year. A high inventory turnover ratio indicated how best the firm
is operating economically in selling its products. Inventory turnover is a measure of
management's ability to use resources effectively and efficiently. Precise control and
safeguarding of inventory is an essential task for a successful and well organized company.
Business requires timely and accurate information on inventory location, movement and
valuation.

According to Deng S (2016), One of the criteria that the managers and industry analysts by
which they judge the performance of retailer is, Inventory turnover. Which is defined as the
ratio between value of goods sold to average inventory. As a conclusion, ratio on 2017 is the
best ratio for inventory turnover of Padini Holding Berhad as it was the highest ratio compared
to the others. For the ratio on 2019 it seems a better ratio compared to the last year 2018.
Meanwhile, ratio on 2018 is the worst ratio of Padini Holdings due to the lowest ratio compared
to the other years.

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 AVERAGE COLLECTION PERIODS
16 15

14
12 12
12

10
DAYS

0
YEARS

2017 2018 2019

Based on the ratio stated on the graph above, it shows the average collection periods of Padini
Holdings Berhad decreases from 2017 to 2018. Average collection periods decreased 15 days
to 12 days and from 2018 to 2019 it is just the same day from 12 days to 12 days. There are
no changes between 2018 to 2019. According to Carlson Rosemary (2019), The average
collection period ratio is referred to as the "ratio of days to sales outstanding." It is the average
number of days it takes a company to collect its accounts receivable. In other words, this
financial ratio is the average number of days required to convert receivables into cash. The
mathematical formula to determine average collection ratio is simple but requires collecting
some financial information first.

According to Kenton W (2019), The average collection period represents the average number
of days between the date a credit sale is made and the date the purchaser pays for that sale.
A company's average collection period is indicative of the effectiveness of its accounts
receivable management practices. Businesses must be able to manage their average
collection period in order to ensure they operate smoothly. A lower average collection period
is generally more favorable than a higher average collection period.

A low average collection period indicates the organization collects payments faster. There is
a downside to this, though, as it may indicate its credit terms are too strict. Customers may
seek suppliers or service providers with more lenient payment terms. As a conclusion, ratio
on 2018 and 2019 is the best ratio for average collection periods of Padini Holdings Berhad
as it was the least amount of days compared to other ratio. Meanwhile, ratio in 2017 is the
worst ratio of Padini Holdings Berhad due to the highest days compared to the other years.

22 | P a g e
 DEBT RATIO
40.00% 37.35%

35.00%
29.31%
30.00%
PERCENTAGES (%)

25.00% 22.52%

20.00%

15.00%

10.00%

5.00%

0.00%
YEARS

2017 2018 2019

Based on the ratio stated on the graph above, it shows that the debt ratio repeatedly
decreasing from 2017 to 2019. Debt ratio show decreases from 2017 to 2018 from 37.35% to
29.31% and from 2018 to 2019 it is also decreased from 29.31% to 22.52%. According to “My
Accounting Course”, (n.d), Debt ratio is a solvency ratio that measures a firm’s total liabilities
as a percentage of its total assets. In a sense, the debt ratio shows a company’s ability to pay
off its liabilities with its assets. In other words, this shows how many assets the company must
sell in order to pay off all of its liabilities. This ratio measures the financial leverage of a
company. Companies with higher levels of liabilities compared with assets are considered
highly leveraged and more risky for lenders. This helps investors and creditors analysis the
overall debt burden on the company as well as the firm’s ability to pay off the debt in future,
uncertain economic times.

The debt ratio is shown in decimal format because it calculates total liabilities as a percentage
of total assets. As with many solvency ratios, a lower ratios is more favorable than a higher
ratio. A lower debt ratio usually implies a more stable business with the potential of longevity
because a company with lower ratio also has lower overall debt. When companies borrow
more money, their ratio increases creditors will no longer loan them money. Companies with
higher debt ratios are better off looking to equity financing to grow their operations. As the
conclusion, the percentage of ratio on 2019 is the best for debt ratio of Padini Holdings Berhad
as it is the lowest percentage on ratio compared to the others ratio. Meanwhile, ratio on 2017
is the worst ratio due to highest percentage on ratio compared to the other years.

23 | P a g e
 TIMES INTEREST EARNED
140
120.43
120

100 90.77

80
TIMES

60
46.72
40

20

0
YEARS

2017 2018 2019

Based on the ratio stated on the graph above, it shows that the time interest earned repeatedly
increasingly from 2017 to 2019. The ratio of times interest earned increased from 2017 to
2018 from 46.72 times to 90.77 times and from 2018 to 2019 it is also increased from 90.77
times to 120.43 times. According to Chen, J. (2019), The times interest earned ratio is a
measure of a company's ability to meet its debt obligations based on its current income. The
formula for a company's time interest earned number is earnings before interest and taxes
divided by the total interest payable on bonds and other debt. The result is a number that
shows how many times a company could cover its interest charges with its pretax earnings. A
company's times interest earned indicates its ability to pay its debts.

According to Horton M (2019), A higher times interest earned ratio is favorable because it
means that the company presents less of a risk to investors and creditors in terms of solvency.
Although a higher times interest earned ratio is favorable, it does not necessarily mean that a
company is managing its debt repayments or its financial leverage in the most efficient way.
Instead, a times interest earned ratio that is far above the industry average points to
misappropriation of earnings. This means the business is not utilizing excess income for
reinvestment in the company through expansion or new projects, but rather paying down debt
obligations too quickly. A company with a high times interest earned ratio may lose favor with
long-term investors. As a conclusion, ratio on 2019 is the best for times interest earned of
Padini Holdings Berhad as it was the highest ratio compared to the others ratio. Meanwhile,
ratio on 2017 is the worst ratio of Padini Holdings Berhad due to the lowest ratio compared to
the other years.

24 | P a g e
 NET PROFIT MARGIN
11.00%
10.61%
10.50%
10.02%
PERCENTAGES (%)

10.00%

9.50%
9%
9.00%

8.50%

8.00%
YEARS

2017 2018 2019

Based on the ratio stated on the graph above, it shows that the net profit margin of Padini
Holdings Berhad is fluctuate as it increased from 10.02% for the year 2017 to 10.61% for the
year 2018. Meanwhile, for the year 2018 to 2019 the ratio decreases from 10.61% to 9%.
According to Murphy C. B. (2020), The net profit margin is equal to how much net income or
profit is generated as a percentage of revenue. Net profit margin is the ratio of net profits to
revenues for a company or business segment. It is typically expressed as a percentage but
can also be represented in decimal form. The net profit margin also illustrates how much of
each dollar in revenue collected by a company translates into profit. Net income is also called
the bottom line for a company or the net profit. As for the net profit margin is called net margin.
The term net profits is equivalent to net income on the income statement, and one can use
the terms interchangeably.

According to “Accounting Simplified”, (n.d), Net Profit Margin ratio is a key performance
indicator of the profitability of an enterprise. It is one of the two elements that determine the
return on assets, the other element being the sales turnover ratio. Measuring the trend of net
profit margin over several periods in comparison to industry benchmarks is crucial for
identifying performance gaps that could be overcome to improve the profitability of business
in the future. As a conclusion, ratio on 2018 is the best for net profit margin of Padini Holdings
Berhad as it was the highest percentage of ratio compared to the others ratio. Meanwhile, ratio
on 2019 is the worst ratio for net profit margin of Padini Holdings Berhad due to the lowest
percentages of ratio compared to the other years.

25 | P a g e
 GROSS PROFIT MARGIN
41.50%
41%
41.00%

40.50%
PERCENTAGES (%)

40.00%
39.40%
39.50%
39%
39.00%

38.50%

38.00%
YEARS

2017 2018 2019

Based on the ratio stated on the graph above, it shows that gross profit margin of Padini
Holdings Berhad is fluctuate as it increased from 39.40% for the year 2017 to 41% for the year
2018. Meanwhile, for the year 2018 to 2019 the ratio decreases from 41% to 39%. According
to Dr. Tulsian M, (2014), The gross profit ratio is also known as gross profit margin and this
ratio expresses the relationship of gross profit to net sales such as cash and credit in terms of
percentage. This ratio is calculated to find the profitability of business. A high gross profit ratio
is a symbol of good management. The main objective of computing this ratio is to determine
the efficiency with which production or purchase operations and selling operations are carried
on.

According to Wilkinson J, (2013), The gross profit margin ratio analysis is an indicator of a
company’s financial health. It tells investors how much gross profit every dollar of revenue a
company is earning. Compared with industry average, a lower margin could indicate a
company is under pricing. A higher gross profit margin indicates that a company can make a
reasonable profit on sales, as long as it keeps overhead costs in control. Investors tend to pay
more for a company with higher gross profit. As a conclusion, ratio on 2018 is the best for
gross profit margin of Padini Holdings Berhad as it was the highest percentages of ratio
compared to the others ratio. Meanwhile, ratio on 2019 is the worst percentage of ratio of
Padini Holdings Berhad due to the lowest ratio compared to the other years.

26 | P a g e
 EARNINGS PER SHARE
6,580,600.00
6,580,361.55
6,580,400.00

6,580,200.00

6,580,000.00
6,579,765.89
RM

6,579,800.00

6,579,600.00 6,579,542.10

6,579,400.00

6,579,200.00

6,579,000.00
YEARS

2017 2018 2019

Based on the ratio stated on the graph above, it shows that earnings per share of Padini
Holdings Berhad is fluctuate from year 2017 to 2019. For the year 2017 to 2018 the ratio
decreases from RM6579,765.89 to RM6579,542.10. Meanwhile, for the year 2018 to 2019 the
ratio repeatedly increased from RM6579,542.10 to RM6580,361.55. According to Rashidul, I.
M. (2014), The term earnings per share (EPS) represents the portion of a company's earnings,
net of taxes and preferred stock dividends, that is allocated to each share of common stock.
The figure can be calculated simply by dividing net income earned in a given reporting period
such as usually quarterly or annually by the total number of shares outstanding during the
same term. Earnings per share are generally considered to be the single most important
variable in determining a share's price. It is also a major component used to calculate the
price-to-earnings valuation ratio. Earning per share is a carefully scrutinized metric that is often
used as a barometer to gauge a company's profitability per unit of shareholder ownership.

According to “The Economic Times”, (June, 2020), Earnings per share is an important financial
measure, which indicates the profitability of a company. It is a tool that market participants use
frequently to gauge the profitability of a company before buying its shares. The higher the
earnings per share of a company, the better is its profitability. As a conclusion, ratio on 2019
is the best for earnings per share of Padini Holdings Berhad as it was the highest ratio value
for earnings per share compared to the others ratio. Meanwhile, ratio on 2018 is the worst
earnings per share of Padini Holdings Berhad due to the lowest ratio compared to the other
years.

27 | P a g e
 DIVIDEND PER SHARE
3,200,000.00 3,163,043.48
3,108,463.44
3,100,000.00

3,000,000.00
RM

2,900,000.00

2,793,943.87
2,800,000.00

2,700,000.00

2,600,000.00
YEARS

2017 2018 2019

Based on the ratio stated on the graph above, it shows that dividend per share of Padini
Holdings Berhad is fluctuate from 2017 to 2019. For the year 2017 to 2018 the ratio decreases
from RM3163,043.48 to RM2793,943.87. Meanwhile, for the year 2018 to 2019 the ratio
repeatedly increased from RM2793,943.87 to RM3108,463.44. According to Chen J. (2019),
Dividend per share (DPS) is the sum of declared dividends issued by a company for every
ordinary share outstanding. The figure is calculated by dividing the total dividends paid out by
a business, including interim dividends, over a period of time by the number of outstanding
ordinary shares issued. A company's DPS is often derived using the dividend paid in the most
recent quarter, which is also used to calculate the dividend yield.

Dividend per share also is an important metric to investors because the amount a firm pays
out in dividends directly translates to income for the shareholder, and the DPS is the most
straightforward figure an investor can use to calculate his or her dividend payments from
owning shares of a stock over time. Meanwhile, a growing DPS over time can also be a sign
that a company's management believes that its earnings growth can be sustained. As a
conclusion, ratio on 2017 is the best ratio for dividend per share of Padini Holdings Berhad as
it was the highest ratio value of dividend per share compared to the others ratio. Meanwhile,
ratio on 2018 was the worst ratio of Padini Holdings Berhad due to the lowest ratio compared
to the other years.

28 | P a g e
Conclusion

a) Liquidity Ratio

According to Durrah, O. (2014), Liquidity management is an important tool for the

management of organizations; it reflects the organization’s ability to repay short-term
liabilities, which include operating expenses and financial expenses resulting within the
organization in the short term. Based on the result of ratio analysis on 2007, 2018 and
2019 for Padini Holdings Berhad, liquidity ratio of Padini Holdings Berhad shows that the
current ratio for the year 2019 is much better than 2017 and 2018.

For quick ratio, for the year 2019 also is better than 2017 and 2018. It shows in 2019,
Padini Holdings Berhad has enough current assets to cover its current liabilities without
having to sells their inventory. Based on the result ratio analysis of liquidity ratio for Padini
Holdings Berhad, it explain that Padini Holdings Berhad have high potential to pay their
liabilities on time without any delay. This is because their company have higher amount of
asset compared to liability and Padini Holdings Berhad manage their assets very well.

Last but not least, investor should have no doubt when they want to invest in Padini
Holdings Berhad and they can invest in this corporation with confidently this is because as
stated earlier Padini Holdings Berhad manage their assets and liability very well.

29 | P a g e
b) Activity Ratio

According to the Drake, P. P. (2005), stated activity ratios are measures of how well assets
used. The activity ratio can be used to evaluate the benefits produced by specific assets
such as inventory or account receivable or they can be use to evaluate the benefit
produced by all company’s assets collectively. These measures help us to gauge how
effectively the company is at putting its investment to work. A company will invest in assets
such inventory or plant and equipment and then use these assets to generate revenue.
The greater the turnover, the more effectively the company is at producing a benefit from
its investment in assets.

Based on the result of ratio analysis on 2007, 2018 and 2019 for Padini Holdings Berhad,
the activity ratio of Padini Holdings Berhad shows that inventory turnover in the year 2017
is much better than 2018 and 2019 which is the company effectively using its inventory to
generate sales. For ratio of average collection period, for the year 2018 and 2019 it shows
better than 2017. It shows that in 2018 and 2019 of Padini Holdings Berhad is good in
managing its credit sales and have more cash in hands.

Furthermore, based on the ratio analysis of activity ratio for Padini Holdings Berhad it
explain that Padini Holdings Berhad able to determine the efficiency which the company
is able to use its different operating assets that are present in its balance sheet and convert
the same into the sales or the cash.

30 | P a g e
c) Leverage Ratio
According to Hayes, A. (2020), a leverage ratio is any one of several financial
measurements that look at how much capital comes in the form of debt such as loans or
assesses the ability of a company to meet its financial obligations. The leverage ratio
category is important because companies rely on a mixture of equity and debt to finance
their operations, and knowing the amount of debt held by a company is useful in evaluating
whether it can pay off its debts as they come due.

Based on the result of ratio analysis on 2007, 2018 and 2019 for Padini Holdings Berhad,
the leverage ratio of Padini Holdings Berhad shows that debt ratio in the year 2019 is much
better than 2017 and 2018 which is the company is good in managing its debt and have
low financial risk. For ratio of times interest earned, for the year 2019 also shows better
than 2017 and 2018. It shows that in 2019 of Padini Holdings Berhad is is good in meeting
their interest payment obligation. As a conclusion, based on the ratio analysis for the year
2019 of Padini Holdings Berhad it explain that Padini Holdings Berhad is able to determine
the relative level of debt load that a business has incurred.

31 | P a g e
d) Profitability Ratio

According to James, M. (2020), For most profitability ratios, having a higher value relative
to a competitor's ratio or relative to the same ratio from a previous period indicates that
the company is doing well. Ratios are most informative and useful when used to compare
a subject company to other, similar companies, the company's own history, or average
ratios for the company's industry as a whole.

Based on the result of ratio analysis on 2007, 2018 and 2019 for Padini Holdings Berhad,
the profitability ratio of Padini Holdings Berhad shows that net profit margin in the year
2018 is much better than 2017 and 2019 which is the company has a better growth
prospect and able to generate net earnings to shareholders. For ratio of gross profit
margin, for the year 2018 also it shows better than 2017 and 2019. It shows the ratio in
2018 of Padini Holdings Berhad is able to control cost of good sold (COGS) relative to its
sales revenue.

As a conclusion, based on the ratio analysis for the profitability ratio of Padini Holdings
Berhad in year 2018, the company is able to measure and evaluate the ability of a
company to generate income relative to revenue, balance sheet assets, operating costs,
and shareholders’ equity during a specific period of time. In that year Padini Holdings
Berhad also show how well a company utilizes its assets to produce profit and value to
shareholders.

32 | P a g e
e) Market Ratio
According to James, M. (2020), stated that market ratio is used to find a company's value
by comparing its book value to its market value. A company's book value is calculated by
looking at the company's historical cost, or accounting value. Based on the result of ratio
analysis on 2007, 2018 and 2019 for Padini Holdings Berhad, the market ratio of Padini
Holdings Berhad shows that earning per share in the year 2019 is much better than 2017
and 2018 which in 2019 the company is profitable enough to pay out more money to its
shareholders.
For ratio of dividend per share, for the year 2017 it shows better than 2018 and 2019. It
shows the ratio of dividend per share in 2017 of Padini Holdings Berhad is in the great way
for a company to signal strong performance and great portion of company’s earnings to its
shareholders.
As a conclusion, A firm's market value is determined by its share price in the stock market
and the number of shares it has outstanding, which is its market capitalization.

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