ENCORP Berhad: Case Study: Efficiency Analysis In The Company

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2.3 Efficiency Efficiency ratio is commonly used to evaluate how well the company manages their asset and liabilities internally. This ratio goes hand in hand with profitability ratios as it helps to improve the company’s profitability in the business. The efficiency ratio of ENCORP Berhad will calculate by using Fixed Assets Turnover and Debtor’s Collection Period (Appendix ). Figure 2.3.1: Efficiency Analysis of ENCORP Berhad

Based on the diagram above, the Fixed Assets gradually increased from year 2009 to year 2013 whereas the Debtor’s Collection Period fluctuated over the five year period. This indicates a good sign of business for ENCORP Berhad since it duplicates more efficient asset utilization to generate more revenue, and at the same time, ENCORP Berhad also increased the speed at which bills are collected. Furthermore, the
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The Debt-to-Equity Ratio of ENCORP Berhad for year 2009 was 4.01%. The company experienced an increase of Debt-to-Equity Ratio to the highest, which reached to 4.08% in year 2010 as compared to others four years. This implied that ENCORP Berhad was facing higher risk in year 2010. However, the Debt-to-Equity Ratio gradually dropped to 3.65% in the following year. This means that there is less creditor financing suah as bank loan is used than investor financing which involved of shareholders in year 2011. In year 2012, the Debt-to-Equity Ratio increased to 4%, but in year 2013 the Debt-to-Equity Ratio was slightly reduced to 3.96% (Appendix ). This could indicate that investors don't want to fund the business operations because the company isn't performing well. Deficiency of performance might also be the intention why the ENCORP Berhad is seeking out additional debt

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