Accounting

Gearing ratio

Gearing= interest bearing debt X100%

Shareholders’ equity + interest bearing debt

2010 = 3757 2009 = 4150

197472+3757 179985+4150

=1.87% =2.25%

This ratio indicates how much a company is utilizing outside (non-owner) funds to finance its assets. These non-owner funds are liabilities to the company. The gearing ratio has decrease slightly from 2.25% to 1.87% if compare to year 2009. This decrease due to the increase in retained profit from RM115985 to RM133472 in year 2010 and the decrease in deferred tax liabilities from RM4150 to RM3757 in year 2010. The decrease in gearing ratio is good sign which indicate lower risk to the shareholders. This is because if the company able to service the interest payable for non-owners funds, the company could not face the risk to be sued for and risk for close down. In addition, the company also able to repay its debt when due and also lesser stress to meet the interest payment. Investor may interest to invest in this company since its gearing ratio is better than previous year and they might get greater profit distribute by way of dividend to the ordinary shareholders. If want to compare gearing ratio among the competitor, which are nestle and Forentta, we found that our company ratio is the lowest, 1.87% compared to Nestle 42.02% and forentta 46.59%.

Debt ratio

Debt ratio= total debt x100%

Total assets

2010 =110018 x100% 2009 =101005 x100%

307490 280990

=35.78% =35.95%

This ratio measures whether the company has sufficient assets to meet all its liability when due. The company has slightly lower debt ratio in year 2010 which is 35.78% compared to previous year debt ratio 35.95%.This slightly decrease due to increase in total current asset from RM193784 to RM234244 and increase in total current liabilities from RM 96855 to...