# Financial Ratio Analysis Of Dutch Lady

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5. Financial ratio analysis – Interpretation (External analysis)
Current Ratio
The current ratio of Dutch Lady in year 2013 is 1.91 times. It means that it has RM1.91 in current asset for every RM1 in current liability. It also means that Dutch Lady has its current liability covered 1.91 times over.
The current ratio of Nestle in year 2013 is 0.90 times. It means that it has RM0.90 in current asset for every RM1 in current liability. It also means that Nestle has its current liability covered 0.90 times over.
In theory, the higher the current ratio is the better for the company. Therefore, Dutch Lady Milk is better than Nestle. Although the current assets of Dutch Lady (RM337,728,000) is less than Nestle (RM929,987,000) , but the current
Dutch Lady has higher ROE because it only require less shareholders’ equity (RM187,998,000) to generate the net income (RM138,264,000). Net income (RM569,413,000) of Nestle in year is higher than Dutch Lady. However, it need a large number of shareholders’ equity (RM816,444,000) to generate profit.
Account Receivable Days
Account Receivable Days for Dutch Lady is 13.18 days. It means that the group requires 13.18 days to turn its receivables into cash. Account Receivable Days for Nestle is 38.28 days. It means that the group requires 38.28 days to collect its accounts receivable.
The lesser the Account Receivable Days will be better because it means that the company required a shorter period to collect back its receivables balance outstanding. Dutch Lady has a lower Account Receivable Days than Nestle. This is because Dutch Lady has lesser accounts receivables (RM35,482,000) compared with Nestle (RM502,207,000).
Debt to Equity Ratio
Debt to Equity Ratio of Dutch Lady is 121.52%. It means that the group uses RM1.22 of liabilities for every RM1 of equity financing. Debt to Equity Ratio of Nestle is 155.83%. It means that the group uses RM1.56 of liabilities for every RM1 of equity