How a business charts its growth in the current market - Free Essay Example

Sample details Pages: 9 Words: 2556 Downloads: 1 Date added: 2017/06/26 Category Business Essay Type Cause and effect essay Did you like this example? Landmarks Group is charting its growth path into the new millennium. The Group is confident that the plans and changes put into place over the past three years will enable us to achieve our vision of being a leading player in the lifestyle sector in the South East Asian region. The Group has reviewed the master plan for the water resort city development in Treasure Bay Bintan. The improving property investment scenario, especially in Singapore, has encouraged the Group to work towards the launching of Phase 1, which includes a marina, yacht club, themed resorts, private residences and commercial areas, before the end of 2010. Don’t waste time! Our writers will create an original "How a business charts its growth in the current market" essay for you Create order The Andaman is now operated by Starwood and rebranded as a premier Luxury Collection Resort which will raise the profile of the hotel amongst the discerning guests. Starwood, a leading international hospitality company and operator, is expected to complement and further enhance the unique and innate qualities of our resort and bring it to the next level of growth. The Group recorded a Profit after Tax of RM9.5 million for the financial year ended 31 December 2009. This was mainly due to our share in the revaluation gain recorded by our associated company, MSL Properties Sdn.Bhd, amounting to RM9.8 million. Their main operating subsidiary, The Andaman, recorded an operating profit of RM17 million for the year ended 31 December 2009, which is an increase of 5.4% compared to the preceding year. Their cash reserves of RM230 million, comprising RM220 million in cash and RM10 million in short term investment, remained intact during the year. Coupled with the improving credit environment and risk appetite of the financial institutions, the Directors have decided to declare a dividend for 2009 to our shareholders of 1% less tax. We thank our shareholders for their patience and continued support during difficult times. Besides that, Shangri-La for the year ended 31 December 2009, the Group recorded a 12% decrease in revenue to RM 367.371 million compared with RM 415.447 million in 2008, mostly due to the material declines in revenue contributions from Shangri-La Hotel Kuala Lumpur and Golden Sands Resort. Group profit before tax for the year was RM51.505 million, 28% below that of RM71.474 million achieved in 2008. The Groups profit attributable to shareholders consequently dropped to RM35.353 million in 2009 from RM 49.267 million the previous year. Earnings per share were 8.03 sen for 2009 as compared to 11.20 sen in 2008. The Group continues to maintain a healthy balance sheet and financial position. As at the end of 2009, shareholders equity of the Group stood at RM748.275 million, up from RM739.322 million at the 2008 year-end. In tandem, Group net asset value per share increased to RM1.70 from RM1.68 at the end of December 2008. The Groups consolidated net debt at the yearend amounted to RM 168.970 million compared with a net debt level of RM154.319 million at 31 December 2008, reflecting the increased borrowings taken on during the year mainly to finance the renovation programmers at Shangri-La Hotel Kuala Lumpur and Golden Sands Resort. Group net gearing at 31 December 2009 was 23% versus 21% as at the previous year end, and remains well within the debt capacity of the Group. Shangri-La Hotel Kuala Lumpur had a challenging year, with business levels in both rooms and food and beverage operations impacted significantly by renovation disruptions and poor market conditions. The major work to upgrade all the guestrooms at the hotel that began in April 2008 was fully completed at the end of November 2009. Landmark Shangri-La 279774000-26135000 =253639000 69220000-202709000 =-133489000 Net working capital= Current assets Current liabilities 2 company comparative down, Landmarks comparison have the ability to return his debt, Shangri-La instead not ability has debts. Shangri-La owes debts than he is of asset, Landmarks is 253639000 and Shangri-La is -133489000. Landmark Shangri-La 279774000 26135000 =10.7 69220000 202709000 =0.3 Current ratio= Current assets Current liabilities Current assets normally include cost, marketable securities, accounts receivable and inventories, current liabilities consist of accounts payable, short-term notes payable, current maturities of long-term debt, accrued taxes and other accrued expense. Shangri-la current ratio is 0.3, this company is getting into financial difficulty, it begins paying its bills more slowly, borrowing from its bank and so on. If current liabilities are rising faster than current assets, the darrent ratio will fall and this could spell trouble. Because the current ratio provides the best single indicator of the extent to which the claims of short-term creditors are covered by assets that are expected to be converted to cash fairly quickly, it is the most commonly used measure of short-term solvency. Landmark current ratio is 10.7, there can liquidity debt easily. Since current assets are scheduled to be converted to cash in the near future, it is highly probable that they could be liquidated at close to their stated value. Landmark Shangri-La 279774000- (873000) 26135000= 10.6 69220000-(9230000+19206000) 202709000= 0.2 Acid-test (Quick) Ratio Current assets (inventory + prepaid expenses) Current liabilities Acid-test (Quick) Ratio of Shangri-La is 0.2, it is low in comparison with other firms with Landmark in its industry. Besides that, Landmark their accounts receivable can be collected, the company can pay off its current liabilities without having to liquidate its inventory. Landmark Shangri-La 46776000 (5764000+7921000) 2 =6.8 times 367371000 (29420000+31094000) 2 =12.1 times Account receivable turnover Net credit sales Average accounts receivable This Account receivable turnover is the ratio of the number of times that accounts receivable amount is collected throughout the year. A high accounts receivable turnover ratio indicates a tight credit policy. A low or declining accounts receivable turnover ratio indicates a collection problem, part of which may be due to bad debts. The accounts receivable turnover ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio. 2 company comparative down, Landmark comparison have the ability to return his debt, Shangri-La instead not ability has debts. Landmark need to use 6.8 time to pay his debts, but Shangri-La is 12.1 time to also, so Landmark comparison have the ability to also debt Landmark Shangri-La 5764000 46776000/365 = 44.9 day 29420000 367371000/365 = 29.2 day Account receivable turnover Account receivable Daily credit sales A high turnover indicates higher cash basis sales or efficient collections. A low turnover indicates collection problems and possible bad debts. Most companies do not charge interest on accounts receivable unless the account becomes past due. An extension of credit is then essentially an interest free loan to customers and not collecting payments on time creates inefficiency and opportunity costs for the company. For example, the company could use the cash to invest the money and earn interest, pay down debt from which the company is incurring interest expenses, or finance growth opportunities instead of having money tied up in accounts receivable. It is also a business risk that a certain percentage of customers will not pay balances due at all, so measures of uncollectible accounts should be made when it can be reasonably estimated. Estimates are usually based on historical uncollectable. Landmark Shangri-La 17984000 (873000+1450000) 2 =15.4 times 51505000 (9230000+11592000) 2 =4.9 times Inventory turnover ratio Cost of goods sold Average inventory Each item of Landmark inventory is sold out and restocked, or turn over 15.4 times per year. Landmark excess inventory is of cause, unproductive and it represents an investment with a low or zero of return. Shangri-La low inventory turnover ratio also makes us questions the current ratio. With such a low turnover, we must wonder whether the firm is actually holding obsolete good not worth their stated value. Landmark Shangri-La 46776000 2102172000 =0.02 times 367371000 1065890000 =0.3 times Total asset turnover Net sales Total fixed asset The total asset turnover represents the amount of revenue generated by a company as a result of its assets on hand. This equation is a basic formula for measuring how efficiently a company is operating. The sale represents all the revenue generated by the company and is disclosed on a companys income statement. The total asset represents the assets listed on the companys balance sheet. The higher ratio of sales to net total assets is the better. Landmark only 0.02 times, so they have a good use of their asset, Shangri-La is 0.3 times therefore said they did not take advantage of. Once the asset, the more their profits would also more. Landmark Shangri-La 46776000 2381946000 = 0.01 times 367371000 1135110000 =0.3 times Total asset turnover Net sales Total asset Landmark only 0.01 times, so they have a good use of their asset, Shangri-La is 0.3 times therefore said they did not take advantage of. Landmark is not generating a sufficient volume of business given its total asset investment. Sales should be increased, some assets should be disposed of, or a combination of these steps should be taken. Landmark Shangri-La 675642000 2381946000 =0.28% 317203000 1135110000 =0.28% Debt ratio Total liabilities Total asset Total debt includes both current liabilities and long-term debt. Creditors prefer low debt rations because the lower the ratio, the greater the cushion against creditors losses in the event of liquidation. Landmark and Shangri-La debt ratio is 28 percent, which means that its creditors have supplied less than half the total financing. Landmark and Shangri-La debt ratio is 28 percent, so creditors may be reluctant to lend the firm more money and management would probably be subjecting the firm to the risk of bankruptcy if it sought to increase the debt ratio. Landmark Shangri-La 675642000 9791000 =69 317203000 35353000 =8.9 Debt / equity ratio Total liabilities Stockholders equity Debt or equity ratio is measure of a companys financial leverage calculated by dividingits total liabilitiesbystockholders equity. It indicates what proportion of equity and debt the company is using to finance its assets. A high debt or equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. If a lot ofdebt isused to finance increasedoperations high debt to equity, the company could potentially generate more earningsthan it would have without thisoutside financing.If this were to increase earnings by a greater amount than the debt cost interest, then the shareholders benefit asmoreearnings are being spread among the same amount of shareholders. Landmark Shangri-La 7586000 4012000 =1.8 times 51505000 5005000 =10.2 times Times interest earned ratio Earnings before interest and tax Interest expense The times interest earned ratio measures the extent to which operating income can decline before the firm is unable to meet its annual interest costs. Failure to meet this obligation can bring legal action by the firms creditors, possibly resulting in bankruptcy. Shangri-La interest is covered 10.2times, if the times is higher their will stable and can pay their interest. Gross profit margin Landmark Shangri-La 28792000 46776000 =0.6 56748000 367371000 =0.15 Gross profit Net sales A financial metric used to assessa firms financial health by revealing theproportion of money left over from revenues after accounting for the cost of goods sold.Gross profit margin serves as thesource for paying additional expenses and future savings. Gross margin, gross profit margin or gross profit rate is the difference between the sales and the production costs excluding overhead, payroll, taxation, and interest payments. Gross margin can be defined as the amount of contribution to the business enterprise, after paying for direct-fixed and direct-variable unit costs, required to cover overheads fixed commitments and provide a buffer for unknown items. It expresses the relationship between gross profit and sales revenue. It is a measure of how well each dollar of a companys revenue is utilized to cover the costs of goods sold Net profit margin Landmark Shangri-La 9515000 46776000 =0.2 44227000 367371000 =0.1 Net profit Net sales Profit margins vary by industry, but all else being equal, the higher a companys profit margin compared to its competitors, the better. Net profit divided by net revenues, often expressed as a percentage. This number is an indication of how effective a company is at cost control. The higher the net profit margin is, the more effective the company is at converting revenue into actual profit. The net profit margin is a good way of comparing companies in the same industry, since such companies are generally subject to similar business conditions. However, the net profit margins are also a good way to compare companies in different industries in order to gauge which industries are relatively more profitable also called net margin. Return on total assets Net income Average total assets Landmark Shangri-La 4729000 (2381946000+2386381000) 2 =-0.19% 190000 (1135110000+1074039000) 2 =-0.017% Return on total assets ratio that measuresa companys earnings before interest and taxes (EBIT) againstits total net assets. The ratio is considered an indicator of how effectively a company is using its assets to generate earnings before contractual obligations must be paid. The greater a companys earnings in proportion to its assets and the greater the coefficient from this calculation, the more effectively that company is said to be using itsassets. The resulting number will reveal the companys EBIT. The EBIT number should then be divided by the companys total net assets total assets lessdepreciation and any allowances for bad debtsto reveal the earnings that company has generated for each dollar of assets on its books. Return on common equity (ROCE/ROE) Earnings available to common stockholders Average stockholders equity Landmark Shangri-La 9515000 (9791000+62865000) 2 =0.2% 44227000 (35353000+49267000) 2 =1% Stockholders invest to get a return on their money and this ratio tells how well they are doing in an accounting sense. Earnings per share (Net income Preferred dividends) Total common shares outstanding Landmark Shangri-La 4729000-0 1706304000 = -0.27 190000-0 748275000 = -0.02 The portion of a companys profit allocated to each outstanding share of common stock.Earnings per shareserve as an indicator ofa companys profitability. It is more accurate to use aweighted average number of shares outstanding over the reporting term, because thenumber of shares outstanding can change over time. Landmark Shangri-La 9867000 -0.27 = -36 428000 -0.02 = -21 Price / Earnings ratio Market price per share Earnings per share Price / Earnings ratio are higher for firms with strong growth prospects. Shangri-La this suggests that the company is regarded as being somewhat riskier than most, as having poorer growth prospects or both. Book value per share (Total stockholders equity preferred dividends) Shares outstanding Landmark Shangri-La (9791000+0) 1706304000 = -0.5 (35353000+0) 748275000 = 0.04 In most situations, the book value per share can be a pretty meaningless value. Technically, it is considered to be the accounting value of each share, which can be drastically different than what the market value per share is for a common stock.There is also very little that market value and book value have in common. Market value or price per share is a reflection of supply and demand for a stock.Usually this is based on some expectation of future performance. Landmark Shangri-La 480682000 9867000 = 48 440000000 428000 = 1028 Dividend yield Dividend per share Market price per share A financial ratio thatshows how much a company pays out in dividends each year relative to its share price.In the absence of any capital gains, the dividend yield is the return on investment for astock. Investors who require a minimum stream of cash flow from their investment portfolio can secure this cash flow by investing in stocks paying relatively high, stable dividend yields. Landmark Shangri-La 480682000 -0.27 = -17 440000000 -0.02 = -22 Dividend payout Dividend per share Earnings per share Dividend payouts are one of the two usual options open to an investor when it comes to dividends generated on investment holdings. The dividend payout is the generated cash that a corporation issued to a shareholder as a dividend on the total number of shares. Depending on the structure of the stock issue, the dividend payout may involve all the net profit generated during the fiscal year, or be a portion of the net profit.