THE BURSA MALAYSIA

The Bursa Malaysia

The Bursa Malaysia

Bursa Malaysia Sectors

SECTOR Weight (%)

FINANCIAL 33.20

PLANTATION 20.90

TELCOS 9.20

GAMING 9.60

UTILITIES 15.70

CONSUMER 5.00

TRANSPORT 6.60

Financial Statement Analysis

A countless number of financial market participants will use and analyze financial statement information, particularly bankers, other lenders, suppliers, investors, and even some of the firm's customers. Often firms make their financial data available to the public to show workers and investors how well the company is doing. For private firms, statement analysis and industry comparisons are done for internal use. A few simple ratio calculations can shed light on how well a company is doing and how it is making profits. Those same ratio calculations are done by lenders on personal financial data when individuals apply for a mortgage or an auto loan.

Successful financial analysis and planning require an understanding of a company's external and internal environments. External factors that affect a firm's profitability may be issues such as inflation, interest rates, exchange rates, and government policy. The firm's internal environment includes items that can be affected by management, such as organizational structure, employee motivation and productivity, cost control, and the company's plant and operations. Sales are affected one way or the other by the state of the economy, management's ability to handle growth, and the quality and marketing of the company's product. Pricing decisions are also influenced by the state of the economy, actions by competitors, and the firm's production costs. The joint impact of the external and internal environment on a firm should be reflected in its financial statements. These statements are a good way to assess the success or failure of the company's strategies and operations.

Ratio Analysis

Ratio analysis is a financial technique that involves dividing various financial statement numbers into one another. Ratios are computed by dividing one amount on the financial statements into another. They are percentages that are easily obtained by entering the numbers from financial data into a calculator. The ratios can then be examined to determine trends and reasons for changes in the financial statement from month to month. Ratios are valuable tools, as they standardize balance sheet and income statement numbers. Comparing a firm's ratios to average industry ratios requires a degree of caution.

That's because some sources of industry data report the average for each ratio;

others report the median; others report the interquartile range for each ratio, which is the range for the middle 50% of ratio values reported by firms in the industry.

Typers of Financial Ratio

Many types of ratios can be calculated from financial statement data or stock market information. However, it is common practice to group ratios into five basic categories:

Liquidity ratios

Asset-management ratios

Financial-leverage ratios

Profitability ratios

Market-value ratios

Capital Structure

Capital structure decisions are crucial for the financial wellbeing of the firm. Financial distress, liquidation and bankruptcy are the ultimate consequences lay ahead if any major misjudgment occurred following any financing decision of the firm's activity. Thus, firm with high leverage need to allocate an efficient mixture of capital that will finally reduce its ...