Question 1 (part 1)

I) Current ratio
Current ratio is the ratio of current assets of a business to its current liabilities. It is the
most widely used test of liquidity of a business and measures the ability of a business to
repay its debts over the period of next 12 months.

Current Ratio= Current Assets/ Current liabilities

Year2011

2158830/800090 =2.70x

Year2012

1444410/1036464=1.39x

In year 2011, Bumi Armada Berhad has a RM2.70 in current asset for every RM1 in
current liabilities. A current ratio of 2.70 would mean that current assets are sufficient to
cover for 2.70 times the amount of a companys short term liabilities. A high ratio
indicates "safe" liquidity, but also it can be a signal that the company has problems
getting paid on its receivable.
In Year 2012, Bumi Armada Berhad has RM1.39 in current asset for every RM1 in
current liabilities. A current ratio of 1.39 would mean that current assets are sufficient to
cover for 1.39 times the amount of a company's short term liabilities.
Between this two year, the current ratio for 2011 is 2.70x, while the current ratio for 2012
is 1.39x. Current ratio is decrease from year 2011 to 2012 which is from 2.70x decrease
to 1.39x. The differences between this two years is 1.31x. The reason for this situation is
the deposits, cash, bank balances is decreased from 1,247,416 (2011) to 500,500 (2012).

II) Total asset turnover

The total asset turnover ratio measures the ability of a company to use its assets to
efficiently generate sales. This ratio considers all assets, current and fixed. Those assets
include fixed assets, like plant and equipment, as well as inventory, accounts receivable,
as well as any other current assets.

Total assets turnover= Sales/Total asset

Year 2011

1,543,896/6,936,242= 0.22x

Year2012

1,659,184/6,929,759= 0.24x

In year 2011, Bumi Armada Berhad has generated RM0.22 in sales for every RM1 in
total sales. In the year 2012, Bumi Armada Berhad has generated RM0.24 in sales for
every RM1 in total sales. If a company can generate more sales with fewer assets it has a
higher turnover ratio which tells it is a good company because it is using its assets
efficiently. A lower turnover ratio tells that the company is not using its assets optimally.
This means that Bumi Armada Berhad can generate more sales with fewer assets in year
2012 than year 2011.

III) Quick Ratio (acid test ratio)

Quick ratio is a tool that use to measures the amount of the most liquid current assets
there are to cover current liabilities. The sequences of the current assets is cash, cash in
bank, account receivable, inventories. This ratio is more conservative than the current
ratio because it excludes the inventories which are least liquid in the current assets and
more difficult to turn it into cash.

Quick ratio=Total Current Assets-Inventories/Total Current Liabilities

Year 2011

2158830-1550/800090 = 2.7x

Year 2012

1444410-10750/1036464= 1.38x

In year 2011, Bumi Armada Berhad has a quick ratio which is RM 2.70 in liquid current
assets for every RM1 in current liabilities. This means that Bumi Armada Berhads most
liquid assets have exceed its current liabilities. The company has its current liabilities
covered 2.70 times over.
In year 2012, Bumi Armada Berhad has a quick ratio which is RM 1.38 in liquid current
assets for every RM1 in current liabilities. The company has its current liabilities covered
1.38 times over.
The quick ratio for this company has decreased from 2.70x (2011) to 1.38x (2012). The
reason is the company has increased their reserves by decreasing their cash which is
under current assets. So the total liquid current assets for this company have decreased.

IV) Net Income Margin

Net Profit Margin is used to measures how much out of every RM1 of sales a company
actually keeps in earnings. A higher profit margin indicates a more profitable company
that has better control over its cost compared to its competitors.

Net Profit Margin=Net income/Sales

Year 2011

365,331/1,543,896= 23.66 %

Year2012

388,018/1,659,184= 23.39%

In year 2011, Bumi Armada Berhad generated RM0.24 of net profit for every RM1 in
sales. In year 2012, the company has generated RM0.23 of net profit for every RM1 in
sales. The company has better control over its costs to its competitors in year 2011 than
year 2012. The net income for this company is increased from RM365,331 to
RM388,018. This is because the revenue and the operating income of the company had
increased.
The Net Profit Margin of the company had decreased from 23.66% (year 2011) to
23.39% (year 2012). The total sales of the company had increased from RM1,543,896 to
RM1,659,184 while the sales of the company had also increased from RM365,331 to
RM388,018. However, the increment in sales is bigger than the net income. This means
that the company had not better control over its costs compared to year 2011.

V) Return on Investment
Return on Investment is an indicator of how profitable a company is relative to its total
assets. It gives an idea as to how efficient management is at using its assets to generate
earnings.

Year 2011

365,331/6,936,242=5.3%

Year 2012

388,018/6,929,759=5.6%

In year 2011, Bumi Armada Berhad generated RM 0.05 in profits for every Ringgit in
total assets while in year 2012, it had generated RM 0.06 in profits for every Ringgit in
total assets. Total assets in year 2011 is more than year 2012, which is RM 6,936,242
greater than RM 6,929,759 while the net income in year 2011 is lower than year 2012.
This means that the company has uses its assets efficiently to generate earnings in year
2012 compare to year 2011.
The number of return on investment in year 2012 is better than the number of return on
investment in year 2011 because the company is using less investment to earn more
money.

Question 1 (part 2)
Suggestion given to the company:

i) Bumi Armada Berhad can keep more money on hand because the quick ratio in year
2012 of the company is lower than year 2011. If the company had not enough money to
cover the emergency case such as economics crisis, fund crisis, and so on, the company
will faced bankruptcy.

ii) Bumi Armada Berhad can improve its net profit margin by focusing their price,
product, customer and costs. The company must differentiate their business from their
competitors when making a business because how they pitch their product or service to
their customers and how their customer communicate the value that they deliver are often
more influential than price in closing a sale. Cost control should be an ongoing part of
their business, and not just something do once a year or when they are in trouble.

Question 2
I) the future value annuity of savings since the first salary.

1993-1994:

(
400

2 12

1+

0.02
12
0.02
12

=RM 9786.27

1995-1998:

(
520

4 12

1+

0.02
12
0.02
12

=RM25963.06

1999-2008:

(
880

10 12

1+

0.02
12
0.02
12

=RM116793.30

Total :

RM9786.27+ RM25963.06+RM116793.30 =RM152542.63

II) Future value until resignation day

1993-1994
0.02
FV= 9786.27 1+ 12

12 14

=RM12945.49

1995-1998
0.02
FV = 25963.06 1+ 12

12 10

=RM31706.07

1999-2008
FV=RM116793.30

Total: RM12945.49 + RM31706.07 +RM116793.30 =RM 161444.86

Total amount in his saving account: RM 161444.86

Question 3
(a) The fixed asset turnover for the company decrease.
Reason: Because the company purchase machinery, the fixed assets increase while the
sales is no changes, so the fixed asset turnover decrease.

(b)The current ratio for the company had increased.

Reason: This is because a company sells additional common stock and uses the proceed
to pay back its bank loan and increase its balances. .Bank loan is current liability and
cash is current asset. Since the current liabilities had decreased while the current assets
had increase, the current ratio had increased.
(c) The return on investment ratio of the company had decreased
Reason: When a company increase its cash balance and buy machinery, the total asset
for the company is increased while the net income of the company had no change.

(d)The gross profit margin for a company is no change.

Reason: The changes in fixed assets, current liabilities and current assets are no related to
the Gross profit and sales.

(e)The debt ratio for the company had decrease.

Reason: Since the company is pay back its bank loan, bank loan is consider as a debt,
so the total debt decrease. The total assets of the company increased by purchasing
machinery and increasing cash balances. When the total debt decrease and the total
asset increase, debt ratio will decrease.