FACULTY OF ECONOMICS AND MUAMALAT

BACHELOR OF ACCOUNTING (HONS)

SEMESTER 2 2022/2023

MFA2023
PRINCIPLE OF FINANCIAL MANAGEMENT

GROUP ASSIGNMENT

“AJINOMOTO (MALAYSIA) BERHAD”

LECTURER: PN. NORASIKIN BINTI SALIKIN

LECTURE GROUP: KMB 2

PREPARED BY:
NAME MATRIX NUMBER
ZARITH SOFEA BINTI AZMAN 1220626
NURUL AIN BINTI MOHD RAZALLI 1220660
NUR HANNAH HANISAH BINTI KORI 1220666
NURUL AISYAH BINTI MOHD NAJIB 1220667
FARAH NAJIBAH BINTI SHARIPUDDIN 1220670
NUR ADLIN FARHANAH BINTI MAT AROF 1220688

SUBMISSION DATE: 16TH JUNE 2023

1
 APPENDIX 2
RUBRIC FOR ASSESSMENT OF GROUP ASSIGNMENT3: PART A (CLO3) NUMERICAL
SKILLS (PLO7)4

Name of the company: AJINOMOTO (MALAYSIA) BERHAD Lecture Group: KMB 2

Level of Assessment Score s 5 (Capstone) A- 4 (Milestones) B- 2 (Milestones) 1 (Benchmark) D -
Proficient/Excellent Very Good C- Average/Fail Poor
Calculation Calculations attempted are Calculations attempted are Calculations attempted are either Calculations are attempted but are
/10 essentially all successful and essentially all successful and unsuccessful or represent only a both unsuccessful and are not
Ability to calculate: sufficiently comprehensive sufficiently comprehensive portion of the calculations required comprehensive (only some
All 4 groups of ratios (Complete with extra calculation). (Complete with all calculation). (not all calculation were done) calculations were done)
Common size financial statements and Calculations are also presented
percentage change of financial statement elegantly (clearly, concisely, etc.)
Valuation of the company using 3 methods

Representation: /5 Skilfully converts relevant Competently converts relevant Completes conversion of Completes conversion of
information into an insightful information into an appropriate information but resulting information but resulting
Ability to convert relevant information into
mathematical portrayal in a way and desired mathematical mathematical portrayal is only mathematical portrayal is
various mathematical forms (e.g., equations,
that contributes to a further or portrayal. partially appropriate or accurate. inappropriate or inaccurate
graphs, diagrams, tables, words)
deeper understanding.

Interpretation: /10 Provides accurate explanations of Provides accurate explanations of Provides somewhat accurate Attempts to explain information
information presented in information presented in explanations of information presented in mathematical forms
Ability to explain information presented in mathematical forms and makes mathematical forms. For instance, presented in mathematical forms, but draws incorrect conclusions
mathematical forms (e.g., equations, graphs, appropriate inference. For accurately explains the trend data but occasionally makes minor about what the information means.
diagrams, tables, words) example, explains data shown in shown in a graph. errors related to computations or For example, explain data shown in
a graph and makes predictions units. For instance, accurately a graph, but will misinterpret the
for what the data suggest about explains data in a graph, but trend, perhaps by confusing
future events. miscalculates slope of the trend positive and negative trends.
line.
Application / Analysis /10 Uses the quantitative analysis of Uses the quantitative analysis of Uses the quantitative analysis of Uses the quantitative analysis of
data as the basis for deep and data as the basis for competent data as the basis for workmanlike data as the basis for tentative, basic
Ability to make judgments and draw appropriate
thoughtful judgments, drawing judgments, drawing reasonable (without inspiration or nuance, judgments, although is hesitant or
conclusions based on the quantitative analysis
insightful, and appropriately qualified ordinary) judgments, drawing uncertain about drawing
of data, while recognizing the limits of this
conclusions from this work plausible conclusions from this conclusions from this work.
analysis
work.

Assumptions: /5 Explicitly describes assumptions Clearly describes assumptions Explicitly describes assumptions Attempts to describe assumption
and provides compelling rationale and provides compelling rationale
Ability to make and evaluate important for why each assumption is for why assumptions are
assumptions in estimation, modelling, and data appropriate. appropriate.
analysis
TOTAL 40

NOTE: TOTAL SCORE: _ _ (SUM OF ITEMS 1-5: TOTAL SCORE OVER 40); SCORE OBTAINED = _____ (TOTAL OVER 10%)
3
PLO7C4 Cognitive
4
Adapted from: https://www.aacu.org/initiatives/value-initiative/value-rubrics/value-rubrics-quantitative-literacy

2
TABLE OF CONTENT

CONTENT PAGE
Introduction 4
FINANCIAL RATIO ANALYSIS:
Liquidity Ratios 5
Debt & Gearing Ratios 15
Asset Management Ratios 19
Profitability Ratios 22
Common Size Statement of Profit of Loss 33
Percentage Change of Statement of Profit or Loss 35
Common Size of Financial Position 39
Percentage Change of Financial Position 41
Conclusion Of Analysis 42
VALUATION OF THE COMPANY:
Analysis The Value of The Company 42
Asset – Based Valuation Model 43
Income – Based Valuation Model
Cash Flow – Based Valuation Model
Conclusion Of Analysis 45
CONCLUSION 46
REFERENCES 47
APPENDIX 48

3
INTRODUCTION

Ajinomoto (Malaysia) Berhad began running in 1961 as a Monosodium Glutamate (MSG)

producer. It was among the first Japanese businesses to open in Malaysia. Since then, Ajinomoto
(Malaysia) Berhad has developed into a vibrant manufacturer of foods and seasonings that has been
selling various reliable brands for decades. Every household's pantry must have umami, an
Ajinomoto seasoning, in its mainstays.

The discoverer of the Umami flavour is Dr. Kikunae Ikeda and Saburosuke Suzuki II are the
founders of the Ajinomoto group. The idea for this came from Dr. Ikeda, who had cooked tofu and
saw that it had a flavour that was completely distinct from sweet, sour, salty, and bitter. He thought
that there must be another fundamental flavour that gives food its flavour. Dr. Ikeda reached his goal
of figuring out what triggered the unique flavour combination. It is a specific class of amino acid
known as glutamate acid. He gave the flavour the name Umami and created a method for producing
it using glutamate as its primary ingredient. During his time in Germany as a student in 1899, Dr.
Ikeda was impressed by the Germans' physical appearance and general well-being and became
determined to change the Japanese diet. Another person who shared this passion was Saburosuke
Suzuki II, who set up a business effort to market AJINOMOTO as the first umami flavouring in the
world in 1909. The company motto of Ajinomoto was "Eat Well, Live Well" because his
investigations and research were perfect and had strong scientific support.

Tan Sri Dato' (Dr.) Teo Chiang Liang serves as chairperson and independent non-executive
director in Malaysia. The company Ajinomoto (Malaysia) Berhad's vision is to become a "Global
Customer-Centric Halal Food Company" to contribute to resolving People’s Food Health Issues
through Our Specialties and Innovative Solutions. The company's mission is to contribute to the
world's food and wellness and to a better life for future. The policy of Ajinomoto (Malaysia) Berhad
is to ensure that all goods meet the highest standards of quality, practise excellent value across the
supply chain, and keep ambitious standards of performance by adhering to national and international
legal requirements.

4
ANALYSIS

A. FINANCIAL RATIO ANALYSIS

1. Analysis Of Four (4) Groups of Ratios

i. Liquidity Ratios
A liquidity ratio is a type of financial ratio used to determine the company’s ability to pay
its short-term debt. Its helps to determine whether the company can use its current assets
to cover its current liability. Its address the basic question “How liquid is the company?”.
The firm’s liquidity could be analysed from two perspectives which is measuring overall
liquidity of the firm by comparing firm’s current assets to current liabilities and
measuring the individual assets categories to how long it takes the firm to convert its
account receivable and inventories to cash.

There are six types of liquidity ratios, those are:

 Measuring overall liquidity

1) Current Ratio
2) Acid-Test Ratio
 Measuring the individual assets categories
3) Average Collection Period
4) Account Receivable Turnover Ratio
5) Inventory Turnover Ratio
6) Day’s Sale in Inventory

1) Current Ratio
Current ratio measures the ability of the company to pay its liability in short-term.
This ratio describes the relationship between a company’s current assets and current

5
 liabilities. This ratio is used to determine whether the firm should invest in or lend
money to a business.

Current Ratio = Current Assets

Current Liabilities

2018 RM400,659,886
RM37,451,218
= 10.70 times

2019 RM455,722,690
RM56,116,876
= 8.12 times
2020 RM391,393,229
RM71,254,089
= 5.49 times

2021 RM331,503,722
RM101,547,417
= 3.26 times

2022 RM263,610,957
RM118,245,352
= 2.23 times

Current Ratio
12

10 Analysis: Based on the graph above, Ajinomoto (Malaysia) Berhad shows the
8 decrease in its current ratio from 2018 until 2022. In 2018, the company record its

6 highest current ratio, which is 10.7, indicates that the company can pay its current

4 6

0
2018 2019 2020 2021 2022

Current Ratio Column1 Column2

 liabilities 10.7 times with its current assets. This high ratio means the company is
more capable to pay its liabilities as compared to the other four years. The dramatic
decrease in the ratio starts from 2020 to 2022 where the company’s current liabilities
continue to increase while its current assets decreasing. This situation happened
because of the pandemic Covid-19 that cause the company current obligations
increase for the past three years. This shows a bad sign for the company because the
decline of current ratio means that the company will have a difficult time to pay
liabilities with its current assets.

2) Acid-Test Ratio
Acid-test ratio or quick ratio measuring a company’s performance by comparing its
current assets to its current liabilities excluding inventory from the current assets as
inventory may not be very liquid. This ratio examines limited current assets to its
current liabilities.

Acid-Test or (Quick) Ratio = Current Assets - Inventory

Current Liabilities

2018 RM400,659,886 – RM45,743,251

RM37,451,218
= 9.48 times

2019 RM455,722,690 – RM44,632,081

RM56,116,876
= 7.33 times

2020 RM391,393,229 – RM53,729,281

RM71,254,089
= 4.74 times

2021 RM331,503,722 – RM56,689,168

RM101,547,417
7
 = 2.71 times

2022 RM263,610,957 – RM83,700,934

RM118,245,352
= 1.52 times

Acid Test Ratio

10
9
8
7
6
5
4
3
2
1
0
2018 2019 2020 2021 2022

Acid Test Ratio

Analysis: Based on the graph above, quick ratio has the same trend as current ratio. It is
decreasing over the year from 2018 until 2022. The highest ratio was in 2018, 9.48 and it
decreased to 7.33 in 2019 due to the increasing in current liabilities. Quick ratio also faces a
dramatic decrease in 2020 to 2022 because of the decreasing in current assets and increasing
in inventory and liabilities. The potential reason lying behind this situation is the company
might build too much inventory but cannot sell it well due to the pandemic Covid-19, while
the current obligations keep increasing throughout the three years. This shows that Ajinomoto
(Malaysia) Berhad might be struggled to pay its current liabilities as the quick ratio declines.

8
3) Average Collection Period
The average collection period is the average number of days for the company to
collect and convert its accounting receivables into cash. The average collection period
needs to be measured to make sure company has enough cash to pay its currents
liabilities.

Average Collection Period = Accounts Receivable

Annual Credit Sales / 365 days

2018 RM44,247,961
RM436,286,320/365
= 37 days

2019 RM48,981,876
RM447,730,739/365
= 40 days

2020 RM51,259,967
RM461,689,082/365
= 41 days

2021 RM46,433,692
RM443,129,251/365
= 38 days

2022 RM45,133,729
RM484,677,540/365
=34 days

9
 Average Collection Period
45
40
35
30
25
20
15
10
5
0
2018 2019 2020 2021 2022

Average Collection Period Column1

Column2

Analysis: According to this data, the average collection period for Ajinomoto has
increased from 2018 to 2020, from 37 days in 2018, 40 days in 2019, and 41 days in
2020. The increment might happen because of the company had paid less attention to
collections that resulting the account receivable increased. However, the average
collection period decreases to 38 days in 2021 and 34 days in 2022. This shows that
company has efficiently collect its receivables. This is because the annual credit sales
during both years are decreasing that makes it easier for the company to collect its
receivables.

4) Account Receivable Turnover Ratio

Account receivable turnover ratio is used to quantify how well the company manage
the credit it extends to its customers by evaluating how long it takes to collect the
outstanding debt throughout the accounting period. This ratio measures how many
times receivables “rolled over” the year.

Accounts Receivable Turnover = Annual Credit Sales

Accounts Receivables

2018 RM436,286,320

10
 RM44,247,961
= 9.86 times

2019 RM447,730,739
RM48,981,876
= 9.14 times

2020 RM461,689,082
RM51,259,967
= 9.01 times

2021 RM443,129,251
RM46,433,992
= 9.54 times

2022 RM484,677,540
RM45,133,729
= 10.74 times

Account Receivables Turnover Ratio

11

10.5

10

9.5

8.5

8
2018 2019 2020 2021 2022

AR Turnover Column1 Column2

11
 Analysis: From the graph above, it shows that the receivables turnover ratio for
Ajinomoto (Malaysia) Berhad has decreased from 2018 to 2020 before its increased in 2021
and 2022. The decreasing for the first three years due to the increasing in its annual credit
sales and account receivables. This shows that the company is less efficient in collecting the
receivables during these years. The lowest Ajinomoto (Malaysia) Berhad record its
receivables turnover ratio throughout the five years was in 2020 which is it only collected its
receivables 9.01 times over the year. The ratio starts to rise in 2021 and 2022 where during
2021, the annual credit sales and account receivables decrease that help the company to
collect receivables often. In 2022, the company stated the highest ratio, indicates that the
company in a right path to efficiently collect its receivables.

5) Inventory Turnover Ratio

The inventory turnover ratio is to measure how efficiently inventory is managed. This
ratio shows how many times inventory is turned or sold during the period. This ratio
can be used to determine if there are excessive inventory levels compared to sales.

Inventory Turnover = Cost of Goods Sold

Inventories

2018 RM436,286,320
RM45,743,251
= 9.54 times

2019 RM447,730,739
RM44,632,081
= 10.03 times

2020 RM461,689,082
RM53,729,281
12
 = 8.59 times

2021 RM443,129,251
RM56,698,168
= 7.82 times

2022 RM484,677,540
RM83,700,934
= 5.79 times

Inventory Turnover Ratio

12

10

0
2018 2019 2020 2021 2022

Inventory Turnover Column1 Column2

Analysis: For the past five years, Ajinomoto (Malaysia) Berhad record its highest
inventory turnover ratio in 2019 which 10.03 times while the lowest in 2022 which is
5.76 times. A low inventory turnover ratio in 2022 might be assigned of weak sales or
excessive inventory. In this year, the inventory and cost of goods sold is the highest as
compared to the other five years. This shows the inventory moving slower and were sold
5.76 times during the year. Meanwhile, the total inventory in 2019 is the lowest compared
to other five years. This indicates that the company has strong sales during the year and
faster to selling goods.

6) Day’s Sales in Inventory

13
Day’s sales in inventory measures the average time required for a company to convert
its inventory into sales. A small number in day’s sale in inventory indicates that the
company is more efficient at selling its inventory, while large number indicates that
the company has invested too much in inventory.

Day’s Sales in Inventory = 365 days

Inventory Turnover

2018 365 days

9.54
= 38 days

2019 365 days

10.03
= 36 days

2020 365 days

8.59
= 42 days

2021 365 days

7.82
= 47 days

2022 365 days

5.76
= 63 days

14
 Day's Sales in Inventory
70

60

50

40

30

20

10

0
2018 2019 2020 2021 2022

Day's Sales in Inventory Column1 Column2

Analysis: Based on the graph, the days in sales inventory decrease from 2018 to 2019,
and increase in 2020 until 2022. From the data, it shows that Ajinomoto (Malaysia)
Berhad takes 38 days on average to sell its inventory. This shows that the company has
efficiently and frequently sell its inventory. However, the increment from 2020 to 2022
might be resulted from the pandemic that affected the sales of the inventory. In 2022, the
company took 63 days to sell its inventory which is the longest day’s sales in inventory
for the five years, indicates that the company did not efficiently manage its inventory. As
the economy starts to recover from the effect of the pandemic, it might take a long time
for the company to sell its inventory, which could affect the sales revenue of the company
and its net income.

ii. Debt And Gearing Ratios

The gearing ratio calculates the proportion of borrowed cash to equity in a corporation.
Because high debt can lead to financial issues, the ratio represents the financial risk that a
corporation faces. A high gearing ratio indicates a high debt-to-equity ratio, whilst a low
gearing ratio indicates a low debt-to-equity ratio. This ratio is identical to the debt-to-
equity ratio, except that the gearing ratio formula has several modifications that can
produce somewhat different outcomes.

15
 • To address this issue, we use two types of ratios:

1) Debt ratio
2) Times interest earned ratio (Interest Cover)

1) Debt ratio
The debt ratio is the debt-to-asset ratio of a corporation calculated by dividing the sum of
all liabilities by the sum of all assets. The debt ratio measures how much of a company's
assets are financed by debt, or its financial leverage. If the ratio is more than one, it
indicates that a corporation has more debts than assets and may be at risk of default.

Debt Ratio
= Total Liabilities
Total Assets

Year Debt Ratio

2018 RM49,462,684.00
RM486,591,789.00
= 0.10

2019 RM67,926,465.00
RM533,261,262.00
= 0.13

2020 RM84,771,888.00
RM580,449,992.00
= 0.15

2021 RM215,216,446.00
16
 RM727,528,691.00
= 0.30

2022 RM225,029,107.00
RM731,015,585.00
= 0.31

Debt Ratio Chart

0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
2018 2019 2020 2021 2022

DEBT RATIO

Analysis: In this problem analysis, we can see that the company's debt ratio has
increased from 2018 to 2022 since their asset has grown at a quicker rate than the previous
year. Furthermore, the company's responsibility is increasing. A corporation is in good shape
if its debt ratio decreases day by day. But if its debt ratio increases day by day then the
corporation is in bad shape. The ratio is at its maximum in 2022, with debt accounting for
0.31 of investment funds and the rest 0.69 constituting the company's capital. In this case, we
contend that the company is underperforming and relies heavily on loan capital.

2) Times Interest Earned Ratio (Interest Cover)

17
The times interest earned (TIE) ratio assesses a company's capacity to meet its debt
commitments based on current earnings. The TIE number of a corporation is calculated
by dividing earnings before interest and taxes (EBIT) by the total interest payable on
bonds and other debt. The outcome is a number that indicates how many times a
company's interest charges may be covered by its pre-tax earnings. The interest coverage
ratio is another name for TIE.

Times Interest Earned = Net Operating Income or PBIT

Interest Expenses

Year Times Interest Earned Ratio (Interest Cover)

2018 RM67,068,164.00
0
=0

2019 RM72,659,111.00
0
=0

2020 RM77,747,052.00
0
=0

2021 RM61,255,839.00
0
=0

2022 RM24,286,259.00
0
=0

18
 Analysis: No company needs to cover its debts several times over to survive.
However, the TIE ratio is an indication of a company's relative freedom from the
constraints of debt. Generating enough cash flow to continue to invest in the business
is better than merely having enough money to stave off bankruptcy. A company's
capitalization is the amount of money it has raised by issuing stock or debt, and those
choices impact its TIE ratio. Businesses consider the cost of capital for stock and
debt and use that cost to make decisions. An interest expense is the cost incurred by
an entity for borrowed funds. Interest expense is a non-operating expense shown on
the income statement. It represents interest payable on any borrowings-bonds,
loans, convertible debt, or lines of credit. It is essentially calculated as the interest
rate times the outstanding principal amount of the debt. Interest expense on the
income statement represents interest accrued during the period covered by the
financial statements and not the amount of interest paid over that period. While
interest expense is tax-deductible for companies, in an individual's case, it depends
on their jurisdiction and on the loan's purpose. Based on the financial statement of
Ajinomoto (Malaysia) Berhad and the table above, we assume that Ajinomoto
(Malaysia) Berhad doesn’t have interest expense because there is not written.

iii. Asset Management (Efficiency) Ratios

Asset management ratios are a set of indicators that demonstrate how a corporation has
used or managed its assets to generate income. These ratios enable the company's
stakeholders to assess the efficiency and efficacy of the company's asset management. As
a result, they are often known as turnover or efficiency ratios. As the name implies, these
ratios often consider only two factors: a company's assets and revenues. There are varying
ratios for different assets since firms have different types and classes of assets. Inventory
turnover, accounts payable turnover, days sales outstanding, days inventory outstanding,

19
 fixed asset turnover, receivable turnover ratios, and cash conversion cycle are some of the
most often utilised asset management ratios.
 Commonly referred to as turnover ratios as they reflect the number of times a
particular asset account balance turns over during the year.
1) Total asset turnover
2) Fixed asset turnover

1) Total Asset Turnover Ratio

The asset turnover ratio, also known as the total asset turnover ratio, assesses how
effectively a corporation utilises its assets to generate sales. The asset turnover ratio
formula is equal to net sales divided by a company's total or average assets. When
compared to competitors with lower ratios, a company with a high asset turnover ratio
performs more effectively.

Total Assets Turnover = Sales

Total Assets

Year Total Assets Turnover

2018 RM436,286,320.00
RM486,591,789.00
= 0.90 times

2019 RM447,730,739.00
RM533,261,262.00
= 0.84 times

2020 RM461,689,082.00
RM580,449,992.00
= 0.80 times

2021 RM443,119,251.00
20
 RM727,528,691.00
= 0.61 times

2022 RM484,677,540.00
RM731,015,585.00
= 0.66 times

Total Asset Turnover Ratio Chart

1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2018 2019 2020 2021 2022

TATO

Analysis: According to this data, the company's total asset turnover began to reduce gradually
in 2019, 2020, and 2021, from 0.90 times in 2018 to 0.84 times in 2019, 0.80 times in 2020,
and 0.61 times in 2021. Fortunately, the corporation can manage with it because it began
increasing 0.66 times in 2018. It is preferable if the organisation can continue to increase this
total asset turnover ratio because a greater total fixed asset turnover ratio is preferable. It will
demonstrate that the organisation can utilise its overall assets and is adept at asset
management.

2) Fixed Asset Turnover Ratio

21
The fixed asset turnover ratio (FAT) is a financial indicator that measures how effectively
a firm generates sales in comparison to the value of its fixed assets. You can compute a
total value by adding the values of a company's fixed asset base. Fixed assets are tangible
assets that a business owns and utilizes to create revenue. Fixed assets, also known as
physical assets, differ from current assets in that they are expected to live longer than one
year. Machinery, vehicles, land, buildings, and computer equipment are examples of fixed
assets.

Fixed Assets Sales

Turnover
= Net Property, Plant & Equipment Assets

Year Fixed Asset Turnover Ratio

2018 RM436,286,320.00
RM84,375,051.00
= 5.17 times

2019 RM447,730,739.00
RM75,629,330.00
= 5.92 times

2020 RM461,689,082.00
RM161,732,067.00
= 2.85 times

2021 RM443,119,251.00
RM361,525,438.00
= 1.23 times

2022 RM484,677,540.00
RM432,672,282.00
= 1.12 times
22
 Fixed Asset Turnover Ratio Chart
7
6
5
4
3
2
1
0
2018 2019 2020 2021 2022

FATO

Analysis: The fixed asset turnover ratio in 2018 was as high as 5.17 times, according to
this ratio. In 2019, however, it increased 5.92 times. However, beginning in 2020, it continues
to fall as 2.85 times in 2020, 1.23 times in 2021, and 1.12 times in 2022. It demonstrates that
this corporation is unable to utilize its fixed assets and is inept at asset management. This is
due to the fact that a higher fixed asset turnover ratio is preferable.

iv. Profitability Ratios

Profitability ratios are metrics that provide insight into how efficiently a business can
generate profits. They examine revenue in relation to operating costs, balance sheet
assets, or equity to assess the business’s ability to create profits. These financial metrics
are comparable to efficiency ratios, which examines how well a business can use its assets
to create income. The difference between the two ratios is that efficiency ratios examine
the business's ability to generate revenue, whereas profitability ratios examine the
business’s ability to generate profits.

1) Return on Capital Employed (ROCE)

Profit Before Interest and Tax

23
Capital Employed
A long-term profitability ratio called return on capital employed, or ROCE, measures how
efficiently a business spends its capital. The statistic informs you of the profit made for
each dollar (or other used unit of money).

Return on Capital Employed =

Year Return On Capital Employed

2018 RM67,068,164
RM486,591,789 – RM37,451,218
=0.15

2019 RM72,659,111
RM533,261,262 – RM56,116,876
=0.15

2020 RM77,747,052
RM580,449,992 – RM71,254,089
=0.15

2021 RM61,255,839
RM727,528,691 – RM101,547,417
=0.10

24
 2022 RM24,286,259
RM731,015,585 – RM118,245,352
=0.04

Return on Capital Employed

0.16
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0 ROCE
2018 2019 2020 2021 2022

Analysis: Based on the graph, the return on capital employed in 2018 until 2020 shows a
flat value of 0.15 while in 2021, it starts to decrease to 0.10 and then in 2022 also shows a
decrease to 0.04. The higher the value of the percentage return on the capital employee means
the better the profit that can be received. However, the percentage decrease that occurred
from 2020 to 2021 shows that a company does not use capital efficiently and cannot generate
a high return on its investment.

2) Return On Equity (ROE)

25
 The Return on Equity ratio effectively calculates the rate of profit that holders of the
common stock of a business make on their investments. The company's ability to generate
returns on the investments it obtained from its shareholders is measured by its return on
equity.

Profit After Tax and Preference Dividends

Ordinary share capital + Reserves

Year Return On Equity

2018 R56,262,095
RM60,798,534 + RM722,134
=0.04

2019 RM56,580,603
RM60,798,534 + RM825,727
=0.92

2020 RM59,853,667
RM60,798,534 + RM1,760,776
=0.96

2021 RM46,502,317
RM61,255,839 + RM1,655,275
=0.74

2022 RM40,009,636
RM65,102,234 + RM1,721,828
=0.60

26
 Return On Equity
1.2

0.8

0.6

0.4

0.2

0
2018 2019 2020 2021 2022

ROE Column1 Column2

Analysis: Based on the graph above, the return on equity in 2018 was 0.91, in 2019 it
increased to 0.92 and continued to increase until 2020 which is 0.96. This increase reflects
the effectiveness of Ajinomoto's company in generating profits from existing assets. While in
2021, the return on equity decreased to 0.74 and further decreased in 2022 to 0.60. This
decrease in return on equity shows that the company is less efficient in creating profits and
increasing shareholder value. A high rate of depreciation leads to lower net income, and this
causes a significant decrease in Return on Equity.

3) Gross Profit Margin

The ratio known as the gross profit margin, which is shown as a percentage of sales, is a
method to assess a company's profitability after deducting the direct cost of items sold
from the revenue. Apart from the cost of the goods sold, it does not include any
other costs.

Gross Profit
Sales

27
 Gross Profit Margin =

Year Gross Profit Margin

2018 RM436,286,320
RM436,286,320
=1

2019 RM447,730,739
RM447,730,739
=1

2020 RM461,689,082
RM461,689,082
=1

2021 RM443,119,251
RM443,119,251
=1

2022 RM448,677,540
RM448,677,540
=1

28
 Gross Profit Margin
1.2

0.8

0.6

0.4

0.2

0
2018 2019 2020 2021 2022

GPM Series 2 Series 3

Analysis: Based on the graph above, the gross profit margin from 2018 to 2020 is 1. It
becomes 1 because the net revenue is subtracted from the cost of goods sold and divided by
the net revenue then multiplied by 100. This is because, the lower the cost and the higher the
price, the higher the profit margin. This shows the company is efficient in using raw materials
and direct labor and shows the company is operating efficiently and financially stable.

4) Operating Profit Margin (OPM)

Operating Profit
Sales

29
The earnings that a company makes from its everyday operations is recognized as the
operating profit margin. It exposes the business's main operations' financial viability
before any additional financial or tax-related repercussions. As a result, it is one the better
indicators of how successfully a management group is managing a company.

Operating Profit Margin =

Year Operating Profit Margin

2018 RM67,068,164
RM436,286,320
= 0.15

2019 RM72,659,111
RM447,730,739
= 0.16

2020 RM77,747,052
RM461,689,082
= 0.17

2021 RM61,255,839
RM443,119,251
= 0.14

30
 2022 RM24,286,259
RM484,677,540
= 0.05

Operating Profit Margin

0.18
Analysis: Based on the graph above, shows an increase in operating profit margin
0.16
from 2018 to 2020, which is a continuous increase of 0.1, wherein in 2018 it was 0.15, in
0.14
2019 it was 0.16 and in 2020 it was 0.17. In 2021 began to show a decrease from the previous
0.12
year
0.1
which was from 0.17 to 0.14 and it continued to 2022 which only recorded 0.05. An
increase
0.08 in the value of the operating profit margin shows that the company's ability to
generate
0.06 profit or sales is increasing. The decrease from 0.17 to 0.14 is still considered an
average
0.04 performance while a decrease to 0.05 in 2022 may be due to the operating cost or not
0.02operating cost being too high, and it shows that the profit is too low.
the
0
2018 2019 2020 2021 2022

5) Net Profit Margin OPM Column1 Column2

When operating and non-operating expenses are subtracted from the company's earnings
(also known as net profit) in a particular quarter or year, the remaining percentage of
earnings is known as the net profit margin. In most cases, the net profit margin ratio is
represented as a percentage. However, the decimal point may also be applied to express it.

Net Profit Margin = Net Profit

Sales

31
 Year Net Profit Margin
2018 RM56,262,095
RM436,286,320
=0.13

2019
RM56,580,603
R47,730,739
=0.13

2020 RM59,853,667
RM461,689,089
=0.13

2021 RM46,502,317
RM443,119,251
=0.10

2022 RM16,996,225
RM484,677,540
=0.04

32
 Net Profit Margin
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
2018 2019 2020 2021 2022

NPM Column2 Column1

Analysis: Based on the graph above, in 2018 Ajinomoto (Malaysia) Berhad had a net
profit margin of 0.13 whereas 2019 and 2020 also recorded the same value of 0.13. In the
next year,2021, had a net profit margin of 0.10. This indicates a decline, and it gives a bad
impression to investors. This decrease factor may be due to the Covid 19 pandemic which
interferes with economic activity being slower than before. Net profit margin also decreased
due to operating costs increasing at a faster rate than revenue. In 2022 recorded 0.04 and this
shows that the business is trying to manage expenses well and is not able to achieve good
sales.

33
 2. Common Size Statement of Profit or Loss

AJINOMOTO (MALAYSIA) BERHAD

STATEMENT OF PROFIT OR LOSS

Accounts Common Size Percentage Change

2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 2019 2020 2021 2022
RM RM RM RM RM % % % % % % % % %
Revenue 436,286,320 447,730,739 461,689,082 443,129,251 484,677,540 100% 100.00% 100% 100% 100% 0 0 0 0
Other Items of Income 10,566,747 11,861,763 9,919,758 4,513,466 3,499,963 2.42% 2.65% 2.15% 1.02% 0.72% 0.23% -0.50% -1.13% -0.30%

Expenses
Changes in inventories of finished goods and work
-5,271,070 2,003 6,239,755 2,708,411 5,762,460 -1.21% 0.0004% 1.35% 0.61% 1.19% 1.21% 1.35% -0.74% 0.58%
in progress
Raw materials and packaging materials consumed 208,764,055 210,027,041 202,793,283 195,508,714 250,896,112 47.85% 46.91% 43.92% 44.12% 51.77% -0.94% -2.99% 0.20% 7.65%
Finished goods purchased 37,210,475 40,673,321 45,288,839 38,920,150 37,977,166 8.53% 9.08% 9.81% 8.78% 7.84% 0.56% 0.73% -1.03% -0.95%
Employee benefits expense 51,958,074 53,325,247 60,129,824 60,357,575 64,928,800 11.909% 11.910% 13.02% 13.62% 13.40% 0.00095% 1.11% 0.60% -0.22%
Depreciation of property, plant and equipment 13,089,424 16,114,700 16,787,566 16,592,499 18,363,804 3.00% 3.60% 3.64% 3.74% 3.79% 0.60% 0.04% 0.11% 0.04%
Amortisation of intangible assets 0 0 485,727 824,194 2,150,369 0.00% 0.00% 0.11% 0.19% 0.44% 0.00% 0.11% 0.08% 0.26%
Depreciation of right-of-use assets 0 0 1,151,705 1,287,001 1,329,651 0.00% 0.00% 0.25% 0.29% 0.27% 0.00% 0.25% 0.04% -0.02%
Other operation expense 63,491,805 66,795,085 73,464,599 75,595,156 92,967,743 14.55% 14.92% 15.91% 17.06% 19.18% 0.37% 0.99% 1.15% 2.12%
Profit before tax 67,068,164 72,659,111 77,747,052 61,255,839 24,286,259 15.37% 16.23% 16.84% 13.82% 5.01% 0.86% 0.61% -3.02% -8.81%
Income tax expense 10,806,069 16,078,508 17,893,385 14,753,522 7,290,034 2.48% 3.59% 3.88% 3.33% 1.50% 1.11% 0.28% -0.55% -1.83%
Profit net of tax 56,262,095 56,580,603 59,853,667 46,502,317 16,996,225 12.90% 12.64% 12.96% 10.49% 3.51% -0.26% 0.33% -2.47% -6.99%

34
Analysis of Common Size Statement of Profit or Loss

The analysis shows that Ajinomoto (Malaysia) Berhad's revenue ascended from 2018 to
2020, decreased in 2021, and then increased again in 2022. The decline in 2021 is a result of the
country's struggle with COVID-19 and the ongoing instability of the national economy, which led to
sales drops at many businesses that year. However, because the country is already in post-covid,
with the economic recovery that the government is working on, the revenue begins to rise again in
2022. Next, there was no consistent growth in other income items from 2018 to 2019 due to the high
returns from distributions from investment securities, but from 2020 to 2022, there was a decrease of
2.15% in 2020, 1.02% in 2021, and 0.72% in 2022. This decrease is not ideal. Ajinomoto's net profit
will fall because of the reduction in revenue.

Next, for the expenditure, changes in the inventory of finished goods and work in process,
there is an increase starting from 2018 to 2019, and continue increasing in 2020 by 1.35% and starts
to decrease in 2021 to 0.61% and increases again in 2022 to 1.19%. The decrease that occurred in
2019 is due to Ajinomoto (Malaysia) Berhad planning to open a new factory and corporate office at
Techpark@Enstek, Seremban causing the production of finished goods to be slightly affected while
increasing in 2020. This reduction is undesirable since it will have an impact on the production of
inventory. Consumption of raw materials and packaging materials increased between 2018 and 2019,
dropped in 2020, and then increased once again between 2021 and 2022. This growth is beneficial
since it indicates that the company is using and replacing its raw materials more frequently, which
also means that the price of the packaging it uses is rising. If it falls, it shows a reduction in the
inventory turnover rate. Then, the percentage rate of finished goods purchased ascended constantly
from 2018 to 2020, at 8.53% in 2018, 9% in 2019, and 9.81% in 2022, before it began to decrease
from 2021 to 2022, at 8.78% and 7.84%. This growth is beneficial because it shows the company's
sales rate is rising. In addition, employee benefit expenses. This growth is undesirable because it will
raise costs for spending, which the company may reduce by acquiring additional assets like
machines, while also reducing the hiring rate. From 2018 to 2022, the rate of depreciation of
property, plant, and equipment increased constantly at a rate of 3%, with increases of 3.60 in 2019,
3.64 in 2020, 3.74 in 2021, and 3.79 in 2022. It is common for a company to have a rise in
depreciation because it represents a decline in the value of a fixed asset used to generate income for
the firm. For intangible asset amortization, there were no record percentages in 2018 or 2019 but it
35
started to rise from 2020 to 2022 to 0.11%, 0.19%, and 0.44%. This growth is good for the company
since the business has acquired more intangible assets, such as patents, goodwill, and trademarks.

The percentage of other operating expenses that increased each year was 14.55% in 2018,
15% in 2019, 15.91% in 2020, 17.06% in 2021, and 19.18% in 2022. Profit before tax got up from
2018 to 2020 when revenue and expenses before taxes have been considered, but it started to decline
in 2021 and 2022. Next, the cost of income tax increased to 2.48%, 3.59%, and 3.88% from 2018 to
2020 then dropped by 3.33% and 1.50% from 2021 to 2022. Finally, Ajinomoto (Malaysia) Berhad's
profit after tax increased in 2018 and 2019 to 12.90% and 13% and then started to decline from 2020
to 2022 by 12.96% in 2020, 10.49% in 2021, and 3.51% in 2022. These rises and falls show common
shifts for each company. However, the decrease is disadvantageous because it will result in seeing a
decrease in the company's performance in accounting records.

36
Analysis of Percentage Change Income Statement

For the percentage change of analysis of the income statement, there were no changes in
revenue since we assumed revenue is 100% each year. Next, for other items of income, it is
increasing by 0.23% from 2018 to 2019, because in 2019, the company has unrealized foreign
exchange gain. However, it started to decrease from 2020 to 2022. This situation happened because
the company has gained less in interest income, distribution from investment securities, and gain on
disposal of property, plant, and equipment. As stated above in the common size income statement
analysis, this decrease is not good because it will affect the company’s net profit.

Next, for the expenses, the percentage change of changes in the inventory of finished goods
and work in the process increased by 1.21% in 2019 and 1.35%, slightly higher in 2020. However, it
was decreasing by 0.74% in 2021 before increasing again in 2022. The decrease could affect
inventory production, but the company managed to handle that in 2022. For raw materials and
packaging materials consumed, it was decreasing by 0.94% in 2019, and the highest decrease in 2020
which is 2.99%. This circumstance might happen due to the Movement Control Order (MCO) in
2020 where the company could not consume many of its raw materials and produce more goods.
However, the company manage to increase it in 2021 by 0.20%, and the highest increase in 2022 by
7.65% because the economy starts to recover, and it is a good sign for the company. Then, the
finished goods purchased increased from 2019 to 2020 by 0.56% to 0.73% respectively before
decreasing from 2021 to 2022. The decrease happened when the customer purchased fewer finished
goods in the previous two years as compared to 2019 to 2020. Employee benefits expenses
consistently increased from 2018 to 2021 before decreasing in 2022. The increase in this expense is
good for the employee but not good for the firm as it could decrease its net profit. Depreciation of
property, plant, and equipment has been experienced increasing for five years where the percentage
change in 2020 and 2022 are the same which is 0.04%. This situation is also similar to the
amortization of intangible assets which faced an increase for the last five years. The depreciation of
right-of-use-assets also increased from 2018 to 2021 before decreasing in 2022.

Other operating expenses have faced an increase for the last five years where it records its
highest changes in 2020 which is 0.99%. The reason behind this situation is the pandemic Covid-19
and the company still needs to pay its operating expenses even though do not have good sales during
that year. Profit before tax increased from 2018 to 2020 before decreasing in 2021 and 2022 by

37
3.02% and 8.81% respectively. These huge decreasing rates show a bad sign for the company, which
just started to recover from the impact of the pandemic because gain low profit before tax. As the
profit before tax in decreasing for the last two years, this also affects the income tax expense for
those years by decreasing from 0.55% to 1.83%. Lastly, the profit after tax in 2019 decreased by
0.26% from 2018, before increasing in 2020 by 0.33%, and decrease again in 2021 to 2022 by 2.47%
and 6.99% respectively. In conclusion, the year 2022 recorded the highest change in profit after tax
which is decreasing of 6.99%. Based on the common size income statement, during that year,
Ajinomoto (Malaysia) Berhad only gain 3.51% of net income from sales, the lowest as compared to
the other four years. This indicates that the company has shown a slightly bad performance during
that year.

38
 3. Common Size Statement of Financial Position

AJINOMOTO (MALAYSIA) BERHAD

STATEMENT OF FINANCIAL POSITION

Account Common size Percentage Change

2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 2019 2020 2021 2022
Non-current assets RM RM RM RM RM % % % % % % % % %
Property, plant and equipment 84,375,051 75,629,330 161,732,067 361,525,438 432,672,282 17.34% 14.18% 27.86% 49.69% 59.19% -3.16% 13.68% 21.83% 9.50%
Intangible assets 0 0 4,082,103 10,188,132 14,017,961 0.00% 0.00% 0.70% 1.40% 1.92% 0.00% 0.70% 0.70% 0.52%
Right-of-use assets 0 0 18,909,076 18,253,875 18,081,024 0.00% 0.00% 3.26% 2.51% 2.47% 0.00% 3.26% -0.75% -0.04%
Other receivables 1,330,852 1,384,116 1,518,104 1,616,854 1,828,635 0.27% 0.26% 0.26% 0.22% 0.25% -0.01% 0.00% -0.04% 0.03%
Other investments 226,000 226,000 226,000 226,000 226,000 0.05% 0.04% 0.04% 0.03% 0.03% 0.00% 0.00% -0.01% 0.00%
Deferred tax assets 0 299,126 2,589,413 4,214,670 578,726 0.00% 0.06% 0.45% 0.58% 0.08% 0.06% 0.39% 0.13% -0.50%
85,931,903 77,538,572 189,056,763 396,024,969 467,404,628 17.66% 14.54% 32.57% 54.43% 63.94% -3.12% 18.03% 21.86% 9.50%
Current assets
Inventories 45,743,251 44,632,081 53,729,281 56,698,168 83,700,934 9.40% 8.37% 9.26% 7.79% 11.45% -1.03% 0.89% -1.46% 3.66%
Trade and other receivables 58,088,293 105,911,499 102,705,699 56,276,691 51,492,879 11.94% 19.86% 17.69% 7.74% 7.04% 7.92% -2.17% -9.96% -0.69%
Derivatives assets 120,243 0 0 100,395 0 0.02% 0.00% 0.00% 0.01% 0.00% -0.02% 0.00% 0.01% -0.01%
Current Tax Assets 0 0 0 0 4,304,721 0.00% 0.00% 0.00% 0.00% 0.59% 0.00% 0.00% 0.00% 0.59%
Investment securities 169,960,712 198,780,122 122,049,249 99,589,931 0 34.93% 37.28% 21.03% 13.69% 0.00% 2.35% -16.25% -7.34% -13.69%
Liquid Investments 0 0 0 0 48,914,051 0.00% 0.00% 0.00% 0.00% 6.69% 0.00% 0.00% 0.00% 6.69%
Cash and cash equivalents 126,747,387 106,398,988 112,909,000 118,838,537 75,198,372 26.05% 19.95% 19.45% 16.33% 10.29% -6.10% -0.50% -3.12% -6.05%
400,659,886 455,722,690 391,393,229 331,503,722 263,610,957 82.34% 85.46% 67.43% 45.57% 36.06% 3.12% -18.03% -21.86% -45.57%
Total assets 486,591,789 533,261,262 580,449,992 727,528,691 731,015,585 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 0.00% 0.00% 0.00%

Equity and liabilities

Current Liabilities
Retirement benefit obligations 552,411 548,874 1,214,351 1,273,378 1,349,452 0.11% 0.10% 0.21% 0.18% 0.18% -0.01% 0.11% -0.03% 0.01%
Trade and other payables 36,402,523 52,788,321 63,926,831 96,337,772 107,295,600 7.48% 9.90% 11.01% 13.24% 14.68% 2.42% 1.11% 2.23% 1.44%
Derivatives liabilities 26,492 67,300 442,432 442,602 313,367 0.01% 0.01% 0.08% 0.06% 0.04% 0.01% 0.06% -0.02% -0.02%
Lease liabilities 0 0 716,926 616,876 696,946 0.00% 0.00% 0.12% 0.08% 0.10% 0.00% 0.12% -0.04% 0.01%
Loan and borrowing 0 0 0 254,969 8,589,987 0.00% 0.00% 0.00% 0.04% 1.18% 0.00% 0.00% 0.04% 1.14%
Tax payable 469,792 2,712,381 4,953,549 2,621,820 0 0.10% 0.51% 0.85% 0.36% 0.00% 0.41% 0.34% -0.49% -0.36%
37,451,218 56,116,876 71,254,089 101,547,417 118,245,352 7.70% 10.52% 12.28% 13.96% 16.18% 2.83% 1.75% 1.68% 2.22%

39
Non-current Liabilities
Retirement benefit obligations 11,034,214 11,809,589 13,089,377 13,872,856 15,038,659 2.27% 2.21% 2.26% 1.91% 2.06% -0.05% 0.04% -0.35% 0.15%
Loan and borrowing 0 0 0 99,526,827 91,332,596 0.00% 0.00% 0.00% 13.68% 12.49% 0.00% 0.00% 13.68% -0.01%
Lease liabilities 0 0 428,422 269,346 412,500 0.00% 0.00% 0.07% 0.04% 0.06% 0.00% 0.07% -0.04% 0.02%
Deferred tax liabilities 977,252 0 0 0 0 0.20% 0.00% 0.00% 0.00% 0.00% -0.20% 0.00% 0.00% 0.00%
12,011,466 11,809,589 13,517,799 113,669,029 106,783,755 2.47% 2.21% 2.33% 15.62% 14.61% -0.25% 0.11% 13.30% -1.02%
Total liabilities 49,462,684 67,926,465 84,771,888 215,216,446 225,029,107 10.17% 12.74% 14.60% 29.58% 30.78% 2.57% 1.87% 14.98% 1.20%
Net assets 437,129,105 465,334,797 495,678,104 512,312,245 505,986,478 89.83% 87.26% 85.40% 70.42% 69.22% -2.57% -1.87% -14.98% -1.20%
-0.51% 0.23% 26.59% -0.86%
Equity attributable to equity holders
of the company
Share capital 65,102,234 65,102,234 65,102,234 65,102,234 65,102,234 13.38% 12.21% 11.22% 8.95% 8.91% -1.17% -0.99% -2.27% -0.04%
Retained Earnings 372,749,005 401,058,290 432,336,646 448,865,286 442,606,072 76.60% 75.21% 74.48% 61.70% 60.55% -1.40% -0.73% -12.79% -1.15%
Other reserves 722,134 825,727 1,760,776 1,655,275 1,721,828 0.15% 0.15% 0.30% 0.23% 0.24% 0.01% 0.15% -0.08% 0.01%
Total equity 437,129,105 465,334,797 495,678,104 512,312,245 505,986,478 89.83% 87.26% 85.40% 70.42% 69.22% -2.57% -1.87% -14.98% -1.20%
Total equity and liabilities 486,591,789 533,261,262 580,449,992 727,528,691 731,015,585 100.00% 100.00% 100.00% 100.00% 100.00% 0.00% 0.00% 0.00% 0.00%

40
Analysis of Common Size Financial Position

Financial statement analysis for non-current assets is generally strong because it continually
rises from 2018 to 2022. The property, plant, and equipment account show a significant increase. It
started to rise in 2018 by 17.34%, then increased by 14.18% in 2019, 27.86% in 2020, 49.69% in
2021, and 59.19% in 2022. Next, even though the company purchased new assets in 2020, intangible
assets and right-of-use assets also demonstrated positive changes. While right-of-use assets indicate a
slight decrease from 2020, which is 2.51% in 2021 and 2.47% in 2022, intangible assets recorded as
much as 0.70% in 2020, 1.40% in 2021, and 1.92% in 2022, demonstrating that the corporation
successfully made changes from year to year. The general percentage of assets is unaffected by this
reduction, as it is not too significant. For other receivables, there was a minor decline beginning in
2018 by 0.27%, continuing through 0.26% in 2019 and 2020, 0.22% in 2021, and beginning to rise
again by 0.25% in 2022. This decline started in 2019 as the country began coping with the Covid-19
epidemic, lasted until 2021 when the economy was still unstable and began to rise in 2022 when the
country had already entered the post-Covid 19 era. The company did not invest excessively in the
year affected by the economic crisis, thus the reduction in other investments was constant every year
and was 0.05% in 2018, 0.04% in 2019, and 0.03% in 2021 and 2022. Deferred tax assets also
showed an increase from 2019 to 2021 of 0.06%, a reduction of 0.08% in 2022, and rises of 0.45%,
0.58, and 0.58% between 2020 and 2021. This rise indicates that the business does not pay the asset
tax that was computed based on the entire assets of the business.

Next, the company's current assets show a less than satisfactory performance due to a large
decrease. With a rise of 9.40% in 2018 and 11.45% in 2022, the positive increase in inventories for
2018. This shows the business's inventory turnover rate improves year over year. The percentage
decline from 11.94% in 2018 to 7.04% in 2022 shows the company is successful in collecting debts,
and trade and other receivables also had a good effect. Derivative assets show a drop from 2018 of
0.02%, a drop in 2020 of 0.01%, and a continuing 0.00% in 2019, 2020, and 2022. Similarly, to that,
because the company's assets were only recently taxed in 2022, current tax assets only rise by 0.59%.
Since the company's securities shares have been fully sold to the public and liquid investment only
recorded as much as 6.69% in 2022, the company's ability in investment is becoming increasingly
active as there is a good decrease in investment securities from 2018 to 2022 or 34.93% to 0.00%.
Cash and cash equivalents had a decline from 2018, going from 26.05% to 10.29% in 2022. This
41
shows that the company's ability to control cash is less effective, which accounts for the decrease's
periodic occurrence throughout the year.

Overall, current liabilities also performed less than satisfactorily due to an increase in the
percentage rate from 2018 to 2022. This shows the business's ability to pay off debts is weak.
Retirement benefit requirements showed a decrease from 2018 to 2019 of 0.11% and 0.10%, an
increase in 2020 of 0.21%, and a constant decrease of 0.18% in 2021 and 2022. The company does
not consistently pay all the employee's retirement benefits, so this increase is not optimal.
Additionally, there was a rise in trade and other payables from 2018 to 2022 of 14.68%, which
demonstrates inefficiency in the company's debt repayment. Derivative liabilities had an increase in
2018 of 0.01% that remained only until 2020 at 0.08%, and a fall in 2021 of 0.06% that persisted
only until 2022 at 0.04%. The decline that took place in 2021 is advantageous because it proves the
corporation suffered fewer losses from the retained derivatives' revaluation. For lease
liabilities decreased from 2020 to 2022 by 0.12% to 0.10 per cent, while those for loans and
borrowing increased from 2021 to 2022 by 0.04% to 1.18%. The amount of tax due increased from
2018 to 2020 by 0.10% to 0.85%, decreased in 2021 by 0.36% and reached 0.00% in 2022. Because
the tax was previously paid in 2022, this demonstrates the organization's effectiveness in managing
taxes.

In addition, non-current liabilities performed reasonably well since there was a decline in
2022 from the growth that happened between 2018 and 2021. Retirement benefit obligations showed
increases and decrease every year, starting in 2018 at 2.27% and ending in 2022 at 2.06%. This
indicates the business is working to compensate its employees. In terms of loans and borrowing,
there was an increase in 2021 of 13.68% and a drop of 12.49% in 2022. Deferred tax payables
dropped from 0.20% in 2018 to 0.00% in 2019 to 2022, while lease liabilities had decreases starting
in 2020 of 0.07%, 0.04%, and 0.06%, before increasing by 0.06%. The reduction is beneficial
because the company has successfully paid off the long-term tax.

Lastly, overall, the equity attributable to equity holders of the company is less satisfactory
because the percentage from 2018 to 2022 is decreasing. Starting in 2018, the overall share capital
percentage drops from 13.38% to 8.91% by 2022. Despite the amount being the same each year, the
percentage of share capital lowers since the number of assets changes from year to year. Retained
earnings had a drop from 2018, going from 76.60% to 60.55% in 2022. This decline shows how

42
poorly the company's finances are doing and suggests that losses, particularly a reduction of net
income, may have occurred the previous year. Other reserves recorded a constant proportion in 2018
and 2019 of 0.15%, grew to 0.30% in 2020, dropped to 0.23% in 2021, and then increased once
again to 0.24% in 2022. The increase in 2020 and 2022 is beneficial because other reserves can be
used to help the company establish a cushion to cover a loss in case an occurs. A capital loss is a loss
that happens when an asset's value declines, and it is sold for less than it cost to buy it. The decline
that takes place in 2021 is disadvantageous since it will put the business in danger if any losses arise
because other reserves can't cover the losses.

Analysis of Percentage Change Financial Position

Since we assumed total asset was 100% annually for the percentage change analysis of the
statement of the balance sheet, there were no changes in total asset or total equity. Firstly, we will
look at non-current asset. It is keep increasing from 2019 until 2021 because the company has earned
from the other investments and other receivables, and gains from the disposal of property, plant, and
equipment, intangible asset, and deferred tax assets. However, it decreased very suddenly in 2022
from 21.86% to 9.50% because the company needs money to continue the business and sell that
noncurrent asset. Next, for current asset, it is increasing by 6.24% from 2018 to 2019 because it’s
encouraging for the business that the economy is beginning to improve. Unfortunately, it slightly
decreases from 2020 to 2022. This situation happened when the buyer bought less finished goods,
the price dropped, the revenue and profit will drop.

The next category Is for current liabilities. It shows negative records respectively from 2019
to 2021 because this situation may arise following the Movement Control Order (MCO) in 2020,
which will prevent the corporation from using a lot of raw materials and producing more goods.
Then it increases in 2022 which is 1.68% to 2.22% because the economy still needs to pay operating
expenses to recover losses due to the Covid-19 pandemic causing the company to take out loans. For
non-current liability consistently increased from 2018 until 2021 before decreasing in 2022. The
increase in this category because the company need the money to run and continue the business.
Lastly is the equity. It had in the stable situation except in year 2021. In that year happened conflicts
occur between investors and disrupt the value of the company’s shares and retained earnings.

43
 B. VALUATION OF THE COMPANY

Companies must be valued for a variety of reasons, including their purchase and sale, getting
listed, calculating inheritance tax and capital gains tax, and more. Since listed firms have a quoted
share price, valuation issues are typically limited to unlisted enterprises. However, even publicly
traded corporations can pose valuation difficulties, such as when attempting to forecast how a
takeover will affect the share price.

The rights that the new owners have when a company is purchased depend on the share they own:

Majority shareholders: have access to their portion of profits and because they have the option of a
winding up, their share of the company's net assets.

Minority shareholders: are entitled to the dividends that the majority decides to pay and a portion of
the company's net assets if the majority decides to dissolve the business.

Therefore, a 20% stake of a corporation should represent less than 20% of its total worth since
minority shareholders have limited influence and no control. In contrast, a share worth 80% of the
company's total value should be worth more than 80% of that share. Holders of a majority should be
ready to pay more for control.

There are three broad approaches to share valuation:

1. Asset – based valuation model.

2. Income – based valuation model.

3. Cash flow – based valuation model

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Analysis The Value of the Company

i. Asset – Based Valuation Model

YEAR 2018 2019 2020 2021 2022

TOTAL ASSET 486,591,789 533,261,262 580,449,992 727,528,691 731,015,585

INTANGIBLE ASSETS - - 4,082,103 10,188,132 14,017,961

TOTAL LIABILITIES 49,462,684 67,926,465 84,771,888 215,216,446 225,029,107

NET ASSET VALUE OF 437,129,10 465,334,79 491,596,00 502,124,11 491,968,51
EQUITY 5 7 1 3 7
NUMBER OF SHARE 60,798,534 60,798,534 60,798,534 60,798,534 60,798,534
VALUE PER SHARE 7.19 7.65 8.09 8.26 8.09

The value of the company's net assets is used in this estimation. There are three typical methods for
assessing its net assets, though: net realisable values, book values, and replacement values. But this
company use the net book value which is it takes from the historical cost basis. In the year of 2018, the net
asset value of equity is RM437,129,105 increased to RM465,334,797 in year 2019 and continues to decrease
in year 2020, which the net asset value is RM491,596,001. In the next year 2021, the net asset value was still
increased, which the value is RM502,124,113 but decreased to RM491,968,517 in year 2022. As we can see,
in 2022, this company had the highest total assets of RM731,015,585 and the total liability of
RM225,029,107. But the net value asset on 2021 is more valuable than the other four year and it is the best
value that can be offered to a buyer.

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 ii. Cash Flow - Based Valuation Model

YEAR 2018 2019 2020 2021 2022

DIVIDEND 94,237,727 28,271,318 28,575,311 29,973,677 23,255,439
SHARE CAPITAL 65,102,234 65,102,234 65,102,234 65,102,234 65,102,234
DIVIDEND PER SHARE 1.45 0.43 0.44 0.46 0.36
GROWTH RATE DIVIDEND 0.57 0.57 0.57 0.57 0.57
RISK FREE RATE (Rf) 3.992 3.992 3.992 3.992 3.992

RETURN MARKET (Rm) -6.49 0.26 5.56 -1.02 -1.18

BETA ( ϐ ) 0.37 0.37 0.37 0.37 0.37

In cash flow-based valuation model, this company use the dividend valuation model method. As we
can see, in 2018, the dividend of this company is RM94237727, and the dividend per share is 1.45. Then, in
the next year 2019, the dividend is RM28271318 and the dividend per share is 0.43 which shown that it was
decreased on this year. But, the value was increased on the next year 2020, where the dividend is
RM28575311 and the dividend per share is 0.44 and still increased for the next year 2021 which is the
dividend is RM29973677 and the dividend is 0.46. For the year 2022, it was decreased again which the
dividend is RM23255439 and the dividend per share is 0.36.

VALUE OF SHARE - 2018

CALCULATION VALUE
r 3.99 + (-6.49 - 3.99)0.37 0.1137
g 94237727 = 87500000 (1+r)¹ 0.4650
VOS (RM) 1.45 (1+0.57) / (1-0.57) 5.2942

From this method, we found that in year 2018, this company’s value of share (VOS) is 5.2942.
VALUE OF SHARE - 2019
CALCULATION VALUE
r 3.99 + (0.26 - 3.99)0.37 2.6112
g 28271318 = 87500000 (1+r)² 0.4700
VOS (RM) 0.43 (1+0.57) / (1-0.57) 1.5700

Then, in the year 2019, the VOS was decreased to 1.57.

VALUE OF SHARE - 2020
CALCULATION VALUE
r 3.99 + (5.56 - 3.99)0.37 4.5722
g 28575311 = 87500000 (1+r)³ 0.4930
VOS (RM) 0.44 (1+0.57) / (1-0.57) 1.6065

After that, it was a little bit increased in year 2020, which is the VOS is 1.6065.

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 VALUE OF SHARE - 2021
CALCULATION VALUE
r 3.99 + (-1.02 - 3.99)0.37 2.1376
g 29973677 = 87500000 (1+r)⁴ 0.3825
VOS (RM) 0.46 (1+0.57) / (1-0.57) 1.6795

And still increased on 2021 which the VOS is 1.6795.

VALUE OF SHARE - 2022
CALCULATION VALUE
r 3.99 + (-1.18 - 3.99)0.37 2.0784
g 23255439 = 87500000 (1+r)⁵ 0.0850
VOS (RM) 0.36 (1+0.57) / (1-0.57) 1.3144

Lastly, in the year 2022, the VOS for this company decreased to 1.3144.

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 3) Conclusion Of Analysis

In general, Ajinomoto performance has decreased from year 2019 until 2022. This is because of the
Covid19 outbreak, which has adversely affected in Malaysia. Financial performance analysis and
interpretation are important tools for evaluating a company's performance. It can show a company's
strengths and weaknesses. It assists clients in determining which firms provide the least risks and in which
firms they should invest to receive the most benefits. We divided the trend of analysis into four categories
for analyse the financial performance of this performance. The most important part of this analysis is about
trend analysis for ratios. This analysis has divided four categories for performance evaluation such as
liquidity ratios, debt, and gearing. ratios, asset management ratios and profitability ratios.

Obviously, the company was unable to manage its assets and liabilities effectively and efficiently. The
company ratios also indicate a high risk for us lending money to the company because the company already
has a high debt to handle and is worried that adding another debt will make them worse. The other part
discussed in this analysis is trend analysis for common size financial statements, percentage change financial
statements and the value of the company. Each of this part have a different data but focus on the same
objective which is to identify a general trend within a user group and to forecast how a trend will develop
over time.

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CONCLUSION

The study highlights that financial management plays an important role in corporate decision-
making. This suggests that making sound financial decisions and staying true to those decisions is key to
achieving organizational goals. Long-term investment valuation: The company's Return on Assets (ROA)
and Return on Equity (ROE) metrics are important in evaluating long-term investment decisions. The
highest ROE recorded in 2019 was 0.92%, indicating that for every RM1 of assets the company generated a
net profit of RM0.92. As a result, investors may be inclined to invest in 2019 due to its higher ROE
compared to other analysis years (2018-2022). During his five years in the current period, the company's
gross margin was stable. This stability suggests that the company made good use of raw materials and direct
labor, demonstrating operational efficiency and financial stability.

The study acknowledges that the company faces several challenges that affect its financial metrics.
These challenges are likely responsible for the observed variability in the analyzed ratios. Ajinomoto
Malaysia's revenue trended upward from 2018 to 2020, decreased in 2021, and increased again in 2022.
Expenses, on the other hand, initially decreased from 2018 to 2019, then increased in 2020 and decreased in
2020. It will increase in 2021 and increase again in 2022. Spending cuts in 2021 are seen as unfavorable and
may have contributed to worsening corporate performance. In summary, the study concludes that financial
management is integral to corporate decision-making. Evaluating financial metrics such as ROA and ROE
can help you make long-term investment decisions. Gross margin stability indicates operational efficiency
and financial stability. However, the company faced challenges that impacted its financial performance,
including fluctuations in revenue and spending patterns.

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margin.shtml
Bowman, J. (2023, March 13). Understanding Operating Margin. The Motley Fool.
https://www.fool.com/investing/how-to-invest/stocks/operating-margin/
Dilallo, M. (2022, October 31). Net Profit Margin: Definition and How to Calculate. The
Motley Fool. https://www.fool.com/investing/how-to-invest/stocks/net-margin/
Lee, D. (2022, December 3). How to Calculate Return On Capital Employed (With
Examples). Indeed.
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company's profitability. INSIDER. https://www.businessinsider.com/personal-
finance/return-on-equity
Mukhopadhyay, S. n.d. Gross Profit Margin. Wall Street Mojo.
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Patrick Petti. (2022, April 22). What is Average Collection Period? (Formula &
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Sean Ross. (2022, March 22). What Is a Good Debt Ratio (and What’s a Bad One)?
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earned/

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APPENDIX

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2022

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Liquidity ratio

(a) Current Ratio = Current Asset ÷ Current Liabilities

(b) Quick Ratio = (Current Asset - Inventory) ÷ Current Liabilities

(c) Cash Ratio = Cash ÷ Current Liabilities

(d) Net Working Capital to Total Assets = Net Working Capital ÷ Total Asset

(e) Interval Measure = Current Asset ÷ Average daily operating

Debt and Gearing ratio

(a) Debt Ratio = Total Liabilities ÷ Total Asset

(b) Time Interest Earned = Net Operating Income ÷ Interest Expense

(c) Debt/Equity = Total Debt ÷ Total Equity

(d) Equity Multiplier = 1 + Debt ÷ Equity

(e) Long Term Debt Ratio = Long term Debt ÷ (Long term debt + Total Equity)

Assets and Management ratio

(a) Total Assets Turnover = Sales ÷ Total Assets

(b) Fixed Assets Turnover = Sales ÷ Fixed Assets

(c) Net Working Capital = Sales ÷ Net Working Capital

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(d) Inventory Turnover = Net Sales ÷ Inventory

(e) Days Sales in Inventory = 365 days ÷ Inventory Turnover

(f) Receivables Turnover = Sales ÷ Account Receivables

(g) Days Sales Outstanding = (Account Receivable ÷ Revenue) × 365 days

(h) Payables Turnover = Purchases ÷ Account Payable

Profitability and Return Ratios

(a) Net Profit Margin = Net Income ÷ Total Sales

(b) Gross Profit Margin = (Revenue – Cost of Goods Sold) ÷ Revenue

(c) Return on Assets = Net Income ÷ Average Total Assets

(d) Return on Equity = Net Income ÷ Average Total Equity

(e) Operating Profit Margin = Earnings before Interest and Taxes ÷ Revenue

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