BFW2140 Corporate Finance : Statements of Bonia Corporation

You are required to choose a company (any company of your choice as long as data is/are available) and perform a thorough financial statement analysis using at least four (4) audited financial year data.

The analysis should cover the close competitors and industry-related issue and standards.

The assignments mist describe the financial condition of the business, the efficiency of its activities, its profitability, and the perception of investors as expressed by their behavior in current condition and any expected future trends.

Identify and analyze trends in financial statements
Carry out ratio analysis to analyse the performance of the company e.g. asse management, debt management, profitability, liquidity & valuation.
Evaluate off-balance sheet and other relevant information for more meaningful financial analysis
Provide a conclusion and recommendations wherever applicable

Answer:

Introduction:

The current assignment aims to evaluate the trends in the financial statements of Bonia Corporation Berhad, which has been selected as the organisation. The organisation is one of the leading retailers in Malaysia and Amtek Holdings Berhad has been chosen as its competitor. Thus, the financial performance of the organisation has been evaluated by considering the data of the past four years with that of the competitor. In addition, the off-balance sheet and other pertinent information related to Bonia Corporation Berhad have bee

n briefly illustrated.

Trend analysis in financial statements of Bonia Corporation Berhad:

In order to conduct the trend analysis of the financial statements of Bonia Corporation Borhad, the percentage change in each year has been conducted (Refer to Appendices, Appendix 1, Appendix 2 and Appendix 3).

Trend in income statement:

From the evaluation of the income statement, it has been observed that the revenue margin of the organisation has declined sharply, while the cost of sales has increased largely in 2016. As a result, the net income of Bonia Corporation Berhad has declined largely in 2016.

Trend in balance sheet statement:

According to the balance sheet statement of the organisation, the overall asset base of the organisation has not increased in comparison to the overall liability base of the organisation (Bonia.com 2017). This depicts that the organisation has not been able to generate sufficient returns from assets and as a result, the debt burden of the organisation has increased further in the Malaysian market (Ramezanalivaloujerdi, Rasiah and Narayanasamy 2015).

Trend in cash flow statement:

According to the cash flow statement, the net cash generated from operating activities has increased largely. The net cash from financing and investment activities have increased as well; however, the realisation from operating activities has been higher in 2016. As a result, it has increased the cash balance of Bonia Corporation Borhad in 2016.

Performance of the organisation through various ratios:

Particulars		Bonia Corporation Berhad				Amtek Holdings Berhad
Particulars	Details	2013	2014	2015	2016	2013	2014	2015	2016
Revenue	A	632	692	695	665	47	39	40	32
Cost of revenue	B	247	269	285	299	26	19	22	18
Gross profit	C	386	422	411	366	21	20	18	14
Net Profit	D	41	55	45	25	-1	0	-4	-3
Inventory	E	110	145	154	149	20	22	25	15
Non-current liabilities	F	78	131	131	154	0	4	3	3
Equity	G	302	346	388	406	25	25	24	21
Current assets	H	292	327	370	371	46	45	44	36
Current liabilities	I	113	135	146	149	26	26	24	21
Market value per share	J	5	5	3	1.5	3	1	1	0.5
Earnings per share	K	0.05	0.07	0.06	0.03	-0.01	0	-0.07	-0.05
Inventory turnover	365/(B/E)	162.55	196.75	197.23	181.89	280.77	422.63	414.77	304.17
Debt-to-equity	F/G	0.26	0.38	0.34	0.38	0.00	0.16	0.13	0.14
Gross margin	C/A	61.08%	60.98%	59.14%	55.04%	44.68%	51.28%	45.00%	43.75%
Net margin	D/A	6.49%	7.95%	6.47%	3.76%	-2.13%	0.00%	-10.00%	-9.38%
Current ratio	H/I	2.58	2.42	2.53	2.49	1.77	1.73	1.83	1.71
Quick ratio	(H-E)/I	1.61	1.35	1.48	1.49	1.00	0.88	0.79	1.00
Price/earnings ratio	J/K	100	71.4286	50	50	-300	0	-14.286	-10

According to the above table, the inventory turnover of Bonia has been much lower in contrast to Amtek, it could be stated that the former has higher market demand. Both the organisations are keeping their debt burden under control, as majority of the funds are generated through equity (Frino, Hill and Chen 2015). In terms of profitability, Bonia has the upper hand over Amtek, as the former has higher amount of sales due to better quality products and services. However, it has been maintaining high level of inventory compared to market demand. Hence, the liquidity position of Bonia is not effective. Finally, Bonia is a better alternative for the investors due to its probability of higher return in future.

Off-balance sheet and other relevant information:

Decline in the growth rate of Malaysian economy resulting in weak external environment
Continual decline in net exports has lowered down the value of stocks of Bonia in the Malaysian market (Haron 2014)
Closure of Bonia outlets that have not performed efficiently and weakened consumer sentiments

Conclusion

From the above discussion, it has been evaluated that despite Bonia has been maintaining competitive edge over Amtek in the Malaysian fashion industry, the former is struggling to maintain adequate financial position in the market. The reasons identified behind such trend include the slow progress of the Malaysian economy and faking customer demand. Therefore, Bonia is suggested to come up with new and innovative products for increasing its overall sales. In addition, reducing the amount of inventory level and recovering amount from the debtors within shorter timeframe would help the organisation to maintain its liquidity position adequately in the market.

References:

Bonia.com. (2017). BONIA Official Website | Shop Online BONIA. [online] Available at: https://www.bonia.com/ [Accessed 7 Apr. 2017].

Frino, A., Hill, A. and Chen, Z., 2015. Introduction to corporate finance. Pearson Higher Education AU.

Haron, R., 2014. Capital structure inconclusiveness: evidence from Malaysia, Thailand and Singapore. International Journal of Managerial Finance, 10(1), pp.23-38.

Ramezanalivaloujerdi, R., Rasiah, D. and Narayanasamy, K., 2015. Corporate Capital Structure and Performance of Listed Construction Companies in Malaysia from 2005-2009. International Business Management, 9(3), pp.191-199.