_________________________________________________________________________

CODE & COURSE:

PAF3033 – FINANCIAL ACCOUNTING 1
SEMESTER 2 (SESSION 2018/2019)

GROUP ASSIGNMENT:
Dutch Lady Milk Industries Berhad
_________________________________________________________________________
GROUP MEMBERS:

Name: Matric number:

Nur Atiqah binti Pandikal D20161074164

Anis Najwa binti Zakaria D20161074176

Muhammad Iffat Zaqwan bin Omar D20171078309

Nur Asyikin binti Mansor D20171078366

Marzan bin Amat D20171078383

Nur Hariza binti Abdul Latif D20181082724

Group: A Lecturer Name: Dr. Norizan bin Saad

Submitted date:
19 May 2019
 Contents

No. Details Page

1. Introduction

2. About Companies

3. Liquidity Ratio

4. Leverage Ratio

5. Profitability Ratios

6. References

7. Attachment
Introduction
Nowadays, generations in Malaysia have grown up with Dutch Lady. For years, Dutch Lady

Milk Industries Berhad (Dutch Lady Malaysia) have made their business to supply quality dairy

nutrition products to the nation.

They is the first companies that established themselves as a manufacturer of sweetened

condensed milk in the 1960s in their factory in Petaling Jaya. More than 50 years have passed

and they are still operating from the same production plant in Petaling Jaya, only they have

expanded their range of quality and delicious dairy products.

Dutch Lady product’s, which include Dutch Lady Pure farm UHT milk, Friso Gold and

formulated milk powder for children Dutch Lady Nutriplan with 5X DHA, are distributed to

Peninsular and East Malaysia. With a workforce of about 600-strong employees, Dutch Lady

Malaysia makes their mission to help Malaysians move forward in life with trusted dairy

nutrition.

Other than that, Dutch Lady Malaysia also deeply committed to upholding these

standards of Halal and to preserving customer confidence in every item that leaves the Dutch

Lady Malaysia plant. As a Halal dairy products manufacturer, their production facilities are

subject to regular routine, comprehensive site visits by JAKIM enforcement officers. Every

local Dutch Lady product bears the official JAKIM Halal logo. Imported Dutch Lady Products

are certified Halal by the respective country of origin's Halal Certification Bodies recognised

by JAKIM.

Owned by Dutch parent company Royal Friesland Campina, they are constantly

looking to innovate to further strengthen their position as a leading dairy company.

1. Liquidity Ratios

a.) Current Ratio

𝐜𝐮𝐫𝐫𝐞𝐧𝐭 𝐚𝐬𝐬𝐞𝐭𝐬
Formula: 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 = 𝐜𝐮𝐫𝐫𝐞𝐧𝐭 𝐥𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬

Dutch Lady Milk

2016 419 377 000
= 𝑅𝑀1.2
348 390 000
2017 286 781 000
= 𝑅𝑀1.02
281 640 000
2018 279 549 000
= 𝑅𝑀0.95
292 804 000

CURRENT RATIO
Dutch Lady Milk Linear (Dutch Lady Milk)

1.4
1.2
1.2
1.02
1 0.95

0.8

0.6

0.4

0.2

0
2016 2017 2018

The table shows that Dutch Lady Milk Industries current ratio in 2016, 2017, and
2018. To differentiate between years, the graph shows that in 2016, Dutch Lady
Milk Industry’s current ratio is greater than other years with RM1.20. Followed by
year 2017 with RM1.02. The last year (2018), with RM0.95. In conclusion, this is
the desirable situation to be in except in 2018 because the amount is lower than
RM1. It is shows that companies current assets enough to pay down short term
obligations except for 2018. They have to take an action to make their company to
be stable as the past year percentage. The best current ratio is in 2016.
b.) Quick Ratio
𝐜𝐮𝐫𝐫𝐞𝐧𝐭 𝐚𝐬𝐬𝐞𝐭−𝐢𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐲
Formula: 𝑞𝑢𝑖𝑐𝑘 𝑟𝑎𝑡𝑖𝑜 = 𝐜𝐮𝐫𝐫𝐞𝐧𝐭 𝐥𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬

Dutch Lady Milk

(419 377 000 − 112 993 000)
=
2016 348 390 000
= 𝑅𝑀0.88

(286 781 000 − 115 839 000)

=
2017 281 640 000
= 𝑅𝑀0.61
(279 549 000 − 131 050 000)
=
2018 292 804 000
= 𝑅𝑀0.51

QUICK RATIO
Dutch Lady milk Linear (Dutch Lady milk)

1
0.88
0.9
0.8
0.7
0.61
0.6
0.51
0.5
0.4
0.3
0.2
0.1
0
2016 2017 2018

The table shows Dutch Lady Milk Industries quick ratio in 2016, 2017, and 2018.
It is shows that companies quick ratio is lower than 1 and decrease year by year. In
2016, the ratio is 0.88 and decrease in 2017 with 0.61. Also decrease in 2018 with
ratio 0.51 In 2016 to 2017 is show a decrease of 0.27, meanwhile in 2017 to 2018,
a decrease of 0.1. It is indicates that every year, the companies cannot meet its
current obligations without rely on inventories with the available quick funds on
hand. For conclusion, the best quick ratio for Dutch Lady Milk Industries is in 2016.
c.) Net Working Capital

Formula: 𝑛𝑒𝑡 𝑤𝑜𝑟𝑘𝑖𝑛𝑔 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 = 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 − 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Dutch Lady Milk (RM)

2016 419 377 000 − 348 390 000 = 70 987 000

2017 286 781 000 − 281 640 000 = 5 141 000

2018 279 549 000 − 292 804 000 = (13 255 000)

NET WORKING CAPITAL(RM)

Dutch Lady Milk Linear (Dutch Lady Milk)

80000000 70987000

60000000

40000000

20000000
5141000
0
2016 2017 2018
-20000000 -13255000

-40000000

The table shows, in 2016, Net working capital of Dutch Lady Milk company is
$70987 very decreased to $5141 in 2017. Then in 2018, net working capital of
Dutch Lady Milk more decreased to -13255. Net working capital is important to
because it is a measure of a company's ability to pay off short-term expenses or
debts. On the other hand, too much working capital means that some assets are not
being invested for the long-term. Based on the graph, working capital of Dutch Lady
Milk is decreased from 2016 to 2018. That’s mean the company's liabilities are
high. However, since there are several exceptions to this rule, negative working
capital need not always be a bad thing.
2. Leverage Ratios

d.) Debt Ratio

𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑏𝑡
Formula: 𝑑𝑒𝑏𝑡 𝑟𝑎𝑡𝑖𝑜 = 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

Dutch Lady Milk

2016 355 348 000
= 0.68%
520 841 000
2017 288 248 000
= 0.73%
392 258 000
2018 299 343 000
= 0.74%
404 802 000

DEBT RATIO
Dutch Lady Milk Linear (Dutch Lady Milk)

0.76
0.74
0.74 0.73

0.72

0.7
0.68
0.68

0.66

0.64
2016 2017 2018

In 2016, the debt ratio of Dutch Lady Milk company is 0.68 and it increased to 0.73
in 2017. Then in 2018, the debt ratio of Dutch Lady Milk more increase to 0.74.
Debt ratio measures the proportion of firm’s total debt to its total assets. It indicates
the amount of debt in the financial structure, higher percentage is associated with
higher risk. Based on the graph, the debt ratio of Dutch Lady Milk is increased from
2016 to 2018. This shown that the company have amount of debt to finance assets
that more increased from 2016 to 2018. This is because higher ratio reflect the
higher amount of debt to finance assets
e.) Debt to Equity Ratio
𝑡𝑜𝑡𝑎𝑙 𝑑𝑒𝑏𝑡
Formula: 𝑑𝑒𝑏𝑡 𝑡𝑜 𝑒𝑞𝑢𝑖𝑡𝑦 = 𝑒𝑞𝑢𝑖𝑡𝑦

Dutch Lady Milk

2016 355 348 000
= 2.147%
165 493 000
2017 288 248 000
= 2.77%
104 010 000
2018 299 343 000
= 2.838%
105 459 000

DEBT TO EQUITY RATIO

Dutch Lady Milk Linear (Dutch Lady Milk)

3.5

3 2.771 2.838

2.5
2.147
2

1.5

0.5

0
2016 2017 2018

The table shows, in 2016, debt of equity ratio of Dutch Lady Milk is 2.147 and it
increased to 2.771 in 2017. Then in 2018, debt of equity ratio of Dutch Lady Milk
more decrease to 2.838. The company may not be able to generate enough cash to
satisfy its debt obligations. Based on the graph, debt of equity ratio of Dutch Lady
Milk is increased from 2016 to 2018.
f.) Times Interest Earned
𝑬𝑩𝑰𝑻
Formula: 𝑡𝑖𝑚𝑒𝑠 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑎𝑟𝑛𝑒𝑑 = 𝒊𝒏𝒕𝒆𝒓𝒆𝒔𝒕

Dutch Lady Milk

2016 196 594 000
= 63.01 𝑡𝑖𝑚𝑒𝑠
3 120 000
2017 157 405 000
= 52.56 𝑡𝑖𝑚𝑒𝑠
2 995 000
2018 173 865 000
= 50.67 𝑡𝑖𝑚𝑒𝑠
3 431 000

TIMES INTEREST EARNED

Dutch Lady Milk Linear (Dutch Lady Milk)

70
63.01
60
52.56 50.67
50

40

30

20

10

0
2016 2017 2018

The table shows, in 2016, the times interest earned of Dutch Lady Milk is 63.01 and
it decreased to 52.56 in 2017. Then in 2018, the times interest earned of Dutch Lady
Milk more decrease to 50.67. Times interest earned is measures the ability of the
firm to pay the interest charges applied on the debts used. Based on the graph, the
times interest earned of Dutch Lady Milk is decreased from 2016 to 2018. This
shown that the company have lower margin of safety. This is because lower ratio
indicates that firm have higher risk of default.
3. Profitability Ratios

g.) Gross Profit Margin

𝒈𝒓𝒐𝒔𝒔 𝒑𝒓𝒐𝒇𝒊𝒕
Formula: 𝑔𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡 𝑚𝑎𝑟𝑔𝑖𝑛 = 𝒔𝒂𝒍𝒆𝒔

Year Dutch Lady Milk

2016 443 873 000
× 100 = 42.37%
1 047 725 000
2017 (401 164 000)
× 100 = 37.68%
1 064 536 000
2018 416 251 000
× 100 = 12.35%
1 048 568 000

GROSS PROFIT MARGIN

Dutch Lady Milk Linear (Dutch Lady Milk)

43 42.37
42

41

40 39.7

39

38 37.68

37

36

35

34
2016 2017 2018

Gross profit margin is a metric used to assess a company's financial health and
business model by revealing the amount of money left over from sales after
deducting the cost of goods sold. The gross profits of the Dutch Lady Company in
2017, has fallen from 42.37% in 2016 to 37.68% and its rise in 2018 with value.
39.70%Gross profit margin towering at 2016 years is 42.37 from another years.
This indicates gross profit margin there is no stability .This happen when amount
gross profit in 2016 very high from another years.
h.) Operating Profit Margin

𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡
Formula: 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡 𝑚𝑎𝑟𝑔𝑖𝑛 = 𝑡𝑜𝑡𝑎𝑙 𝑟𝑒𝑣𝑒𝑛𝑢𝑒

Dutch Lady Milk

2016 196 594 000

× 100 = 18.76%
1 047 725 000

2017 157 405 000

× 100 = 14.79%
1 064 536 000

2018 173 865 000

× 100 = 16.58%
1 048 568 000

OPERATING PROFIT MARGIN

operating profit margin Linear (operating profit margin )

0.2 0.1876
0.18 0.1658
0.16 0.147
0.14
0.12
0.1
0.08
0.06
0.04
0.02
0
2016 2017 2018

The operating profit margin for the company Dutch lady Milk Industries shown by
the following figure, where operating profit margin in 2017 decreased from the
previous year, which shows that the occurrence of a decrease in operating profit
earned by the company for the year Dutch lady. In 2018 showed an increase to
0.1658, where the higher value of the operating profit margin ratio suggests that
the company made sufficient profit from its operations to pay variable and fixed
expenses.
i.) Operating Ratio

𝑐𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑 𝑠𝑜𝑙𝑑+𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠

Formula : 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑟𝑎𝑡𝑖𝑜 = × 100
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠

Dutch Lady Milk (RM’000)

2016 603852 + 874.7
× 100 = 57.718
1047725
2017 663372 + 907.13
× 100 = 62.40
1064536
2018 632317 + 851.13
× 100 = 60.38
1048568

OPERATING RATIO
operating ratio Linear (operating ratio)

63 62.4
62
61 60.38
60
59
57.718
58
57
56
55
2016 2017 2018

Based on the diagram above shows the operating ratio of the Dutch lady company
for 3 years accounting in inconsistency which shows a significant increase from
2016 to 2017 of 62.40. The increase in operating ratios shows a negative situation
where there is an increase in operating expenses compared to sales or revenue. If
this condition persists a company should implement cost control for marginal
improvement. But in 2018 the ratio dropped to 60.38, this gave a positive
impression to the Dutch lady SDN.BHD company which is whether the increase in
sales or operating expenses decreased.
j.) Net Profit Margin

𝒆𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝒂𝒇𝒕𝒆𝒓 𝒕𝒂𝒙

Formula: 𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 𝑚𝑎𝑟𝑔𝑖𝑛 = 𝒔𝒂𝒍𝒆𝒔

Dutch Lady Milk

2016 149 074 000

× 100 = 14.23%
1 047 725 000
2017 117 717 000
× 100 = 11.06%
1 064 536 000
2018 129 449 000
× 100 = 12.35%
1 048 568 000

NET PROFIT MARGIN

Dutch Lady Milk

16
14
12
10
8
14.23
6 12.35
11.06
4
2
0
2016 2017 2018

Net profit margin is a financial ratio used to calculate the percentage of profit a
company produces from its total revenue. The net profit margin is equal to net profit
(also known as net income). The net profit margin for Dutch Lady are seen to
decline from 2016 to 2018 as show in graph. In 2016 the value of the profit margin
is 14.23% then decrease to 11.06% in 2017 but increase back in 2018 is 12.35%. In
three years, net profit margin for 2016 is 14.23 high from another years. This happen
when amount net profit high from another year net profit.
k.) Return on Equity

𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 (𝑎𝑛𝑛𝑢𝑎𝑙)

Formula: 𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑒𝑞𝑢𝑖𝑡𝑦 = 𝑇𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦

Dutch Lady Milk

2016 149,074,000
= 0.9%
165493000
2017 117,717,000
= 1.1%
104010000
2018 129,449,000
= 1.2%
105459000

RETURN ON EQUITY
RETURN ON EQUITY Linear (RETURN ON EQUITY)

1.6
1.4
1.2
1.2 1.1
1 0.9
0.8
0.6
0.4
0.2
0
2016 2017 2018

Return on equity measures how efficiently a firm can use the money from
shareholders to generate profits and grow the company. Unlike other return on
investment ratios, ROE is a profitability ratio from the investor’s point of view—
not the company. In other words, this ratio calculates how much money is made
based on the investors’ investmentFor 2016,the shareholders will receive 90% or
RM0.90 for every dollar invested in firms.In 2017,the shareholders will receive RM
1.1 for every dollar received in firms.Lastly,in 2018,the shareholders will receive
RM 1.2 for every dollar invested in firms.
l.) Return on Asset
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
Formula: 𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑎𝑠𝑠𝑒𝑡𝑠 = 𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡 𝑎𝑣𝑒𝑟𝑎𝑔𝑒

Dutch Lady Milk

2016 149,074 000
× 100 = 32%
466 683 000
2017 117,717 000
× 100 = 25.78%
456 549 500
2018 129,449 000
× 100 = 32.48%
398 530 000

RETURN ON ASSET
dutch lady milk Linear (dutch lady milk)

35% 32% 32%

30%
26%
25%

20%

15%

10%

5%

0%
2016 2017 2018

The return on assets ratio measures how effectively a company can earn a return on

its investment in assets. In other words, ROA shows how efficiently a company can

convert the money used to purchase assets into net income or profits.For Dutch

Lady company, the return of assets in 2016 is 32%.In 2017,the return on assets

slightly drop at 26%.In 2018,the increase in return on assets(6%) which is 32%.As

a conclusion,the Dutch Lady company has high return on assets means than the

business was able to utilize its resources well in generating income

Conclusion

References

1. Attachment from: https://www.myaccountingcourse.com/financial-ratios/debt-ratio

2. Attachment from: https://www.myaccountingcourse.com/financial-ratios/times-

interest-earned-ratio

3. Attachment from: www.bursamalaysia.com/market/listed-companies/company-

announcements/6108021