OBJECTIVE
The objective of this paper is to understand and apply the analytical skills in evaluating firms’ asset management and performance. The selected firm from Bursa Malaysia is Tenaga Nasional Berhad (TNB). The asset management and financial performance of TNB is analyzed from the point of view of management, based on the financial statements for years 2005 to 2009.
TENAGA NASIONAL BERHAD
Tenaga Nasional Berhad or known as TNB is the largest and a leading electricity utility company in Asia which is located in Malaysia. With assets amounted to nearly RM87 billion, TNB is listed as one of the Main Board of Bursa Malaysia. Having that huge amount of stability the company has a total of more than 33,500 employees throughout Malaysia who …show more content…
It is solely because the revenue during that year in increasing in line with its total assets. The same can be said to the year of 2008 and 2009 where the ratios are constantly increasing due to TNB revenues rose up.
Over the five year period, the asset turnover ratio showed a gradual increase. This indicates that TNB has increased its efficiency in optimizing its asset while the revenue has increase at a higher rate than the asset. TNB has lower profit margin and company with high profit margin tend to have high asset turnover.
Inventory Turnover Ratio
Inventory Turnover ratio is a measurement of the numbers on the frequency of times inventory is sold or used in a given time period such as one year or more. It is one of the best indicator of inventory quality (whether the inventory is obsolete or not), efficient buying practices, and inventory management. This ratio is important because gross profit is earned each time inventory is turned over or sold. Inventory turnover measures how many time inventories being turnover into sales.
Calculation formula:
Inventory Turnover Ratio = Sales / …show more content…
Generally, the better performance of inventory management is depended on a higher value of inventory turnover, to be exact, the higher the ratio is the better the performance of company is and lower value means an inefficiency in controlling the inventory levels. A lower inventory turnover ratio may be an indication of over-stocking which likely posed risk of obsolescence and increased inventory holding costs. However, a very high value of this ratio may be accompanied by loss of sales due to inventory shortage.
Inventory turnover is different for different industries. Businesses which trade perishable goods have very higher turnover compared to those dealing in durables. Hence a comparison would only be fair if made between businesses of same industry.
According to the ratio of TNB inventory turnover, the approximate average of turnover days is 12 days. These days means that it takes about 12 days for TNB to replace and sell over its products. Since TNB core businesses does not involves sales of the product, TNB are doing good in managing its inventory level. This means TNB is efficient in generating sales. The main reason is because TNB is selling non-diversified product so they are specialized and focus in their products. The other reason is that TNB is a sole company that provides this kind of services and products in Malaysia. The monopoly in market
The objective of this paper is to understand and apply the analytical skills in evaluating firms’ asset management and performance. The selected firm from Bursa Malaysia is Tenaga Nasional Berhad (TNB). The asset management and financial performance of TNB is analyzed from the point of view of management, based on the financial statements for years 2005 to 2009.
TENAGA NASIONAL BERHAD
Tenaga Nasional Berhad or known as TNB is the largest and a leading electricity utility company in Asia which is located in Malaysia. With assets amounted to nearly RM87 billion, TNB is listed as one of the Main Board of Bursa Malaysia. Having that huge amount of stability the company has a total of more than 33,500 employees throughout Malaysia who …show more content…
It is solely because the revenue during that year in increasing in line with its total assets. The same can be said to the year of 2008 and 2009 where the ratios are constantly increasing due to TNB revenues rose up.
Over the five year period, the asset turnover ratio showed a gradual increase. This indicates that TNB has increased its efficiency in optimizing its asset while the revenue has increase at a higher rate than the asset. TNB has lower profit margin and company with high profit margin tend to have high asset turnover.
Inventory Turnover Ratio
Inventory Turnover ratio is a measurement of the numbers on the frequency of times inventory is sold or used in a given time period such as one year or more. It is one of the best indicator of inventory quality (whether the inventory is obsolete or not), efficient buying practices, and inventory management. This ratio is important because gross profit is earned each time inventory is turned over or sold. Inventory turnover measures how many time inventories being turnover into sales.
Calculation formula:
Inventory Turnover Ratio = Sales / …show more content…
Generally, the better performance of inventory management is depended on a higher value of inventory turnover, to be exact, the higher the ratio is the better the performance of company is and lower value means an inefficiency in controlling the inventory levels. A lower inventory turnover ratio may be an indication of over-stocking which likely posed risk of obsolescence and increased inventory holding costs. However, a very high value of this ratio may be accompanied by loss of sales due to inventory shortage.
Inventory turnover is different for different industries. Businesses which trade perishable goods have very higher turnover compared to those dealing in durables. Hence a comparison would only be fair if made between businesses of same industry.
According to the ratio of TNB inventory turnover, the approximate average of turnover days is 12 days. These days means that it takes about 12 days for TNB to replace and sell over its products. Since TNB core businesses does not involves sales of the product, TNB are doing good in managing its inventory level. This means TNB is efficient in generating sales. The main reason is because TNB is selling non-diversified product so they are specialized and focus in their products. The other reason is that TNB is a sole company that provides this kind of services and products in Malaysia. The monopoly in market