Bien Hoa sugar

2008 2007 2006 Trend

Short term solvency
1.Current ratio 2.44917 3.513386 4.426622 lower liquidity since 2006
2.Quick ratio 0.958512 2.760191 3.560803 lower liquidity since 2006
3.NWC to TA 0.268515 0.386917 0.432908 lower liquidity since 2006
Efficiency ratios
4.Accounts receivable turnover Increased efficiency from 2006 to 2007
16.5408 19.76149 8.955173 Decreased efficiency since 2007
6.Inventory turnover ratio 4.47492 7.278205 10.34965 Decreased efficiency since 2006
7.Fixed Assets turnover ratio Decreased efficiency from 2006 to 2007
2.8018 2.320071 3.313126 Increased efficiency since 2007
8.Total Assets turnover ratio Decreased efficiency from 2006 to 2007
1.320058 0.958103 1.298997 Increased efficiency since 2007
Long term solvency
9.Debt ratio 0.44659 0.431777 0.399984 Increase in leverage since 2006
10.Times interest Earned ratio -0.58196 4.987584 2.91782 Sharp drop in coverage during 2008
Profitability Ratios
11.Net profit margin Increase in profitability from 2006 to 2007
-0.05477 0.083621 0.061897 Lower profitability since 2007
12.Return on assets (ROA) -0.0723 0.080118 0.080404 Lower ROA since 2007
13.Return on equity (ROE) -0.13065 0.140997 0.134004 Lower ROE since 2007

SAFOCO 2008 2007 2006 Trend

Short term solvency
1.Current ratio lower liquidity from 2006 to 2007
2.267226 1.974102 2.134013 higher liquidity since 2007
2.Quick ratio lower liquidity from 2006 to 2007
higher liquidity since 2007
1.803057 1.133188 1.285426
3.NWC to TA 0.400996 0.395454 0.365113 higher liquidity since 2006
Efficiency ratios
4.Accounts receivable turnover Decreased efficiency from 2006 to 2007
16.89574 15.23571 16.08805 Increased efficiency since 2007
6.Inventory turnover ratio
Cost of goods sold/Inventory Decreased efficiency from 2006 to 2007
42.14007 12.3066 16.40179 Increased efficiency since 2007
7.Fixed Assets turnover ratio 23.53412 22.50169 15.26911 Increased efficiency since 2006
8.Total Assets turnover ratio Decreased efficiency from 2006 to 2007
Increased efficiency since 2007
6.649969 4.468352 4.777764
Long term solvency
9.Debt ratio Increase in leverage from 2006 to 2007
0.321645 0.410594 0.327076 Decrease in leverage since 2007
10.Times interest Earned ratio Increase in coverage from 2006 to 2007
Lower coverage since 2007
32.99509 181.8667 73.90323
Profitability Ratios
11.Net profit margin 0.027197 0.032569 0.033227 Lower profitability since 2006
12.Return on assets (ROA) Decrease in ROA from 2006 to 2007
0.180862 0.145528 0.158752 Higher ROA since 2007
13.Return on equity (ROE) 0.266619 0.246906 0.23592 Higher ROE since 2006

Liquidity ratio

Looking at the current ratio it appears that BHS and SAF are more liquid than the industry.
However, when looking at Quick ratio- a better measure –
+ BHS is not as liquid indicating that inventory levels are probably too high.
+ the quick ratio of SAF is the highest one in comparison with BHS and industry => SAF is really
safe because it still has the ability to repay current liabilities after the least liquid of the current
assets is subtracted.
Efficiency ratio

- BHS is slower than industry and SAF in collecting sales. Inventories are also being sold more
slowly than industry and SAF, again indicating too high inventories.
- SAF is slower than average collecting sales. However, inventories of SAF are being sold faster
than industry. May be the policies of SAF is keeping slow collection period in order to sell faster

* TAT and fixed assets turnover: BHS < industry < SAF
→SAF is very efficient at converting fixed asset and total assets to sales
→BHS is inefficient at converting fixed asset and total assets to sales

Long-term solvency

* Debt-ratio: SAF < INDUSTRY < BHS

 SAF has lower proportion and BHS has higher proportion of their assets which are
financed with debt than the industry.
* Time-interest earned: BHS < industry < SAF
 This indicates that BHS wasn’t profitable [ EBIT = -15920] and also was not effective in
searching cheap funds ( interest expense was too high = 27356 )
 SAF was good at covering its interest obligations.

Profitability ratio

* Profit margin: BHS < industry < SAF

 BHS has extremely high expense ratio relative to sales.
 SAF is very efficient at converting sales volume into bottom line profit.
* BHS has lower the ROA and ROE than those of SAF and industry. So BHS is inefficient as
using its assets and managing its operation; mainly due to productivity problem
SAF has higher ROA & ROE than those of industry. So, it is efficient at using assets & managing
its operation.
Market values ratio

* M/B: Market to book ratio of BHS is less than 1, means that the firm has not been successful
in creating value for its stockholders. The market book ratio of SAF is more than 1  SAF is
successful in creating value for its stockholders.
* P/E:
P/E of BHS is negative because EPS value is below zero, that means, the company is losing
money.
P/E of SAF is lower than industry means that investors are less willing to pay for the share of
SAF. The reason may be the company’s performance was so strong that there was little room for
improvement.

BIEN HOA SUGAR

2006-2007:
As can be seen clearly from the table, ROE increased slightly due to:
- a rise of PM and EM. => BHS at that period controlled the expenses generated in order
to makes sales well. But the increase in EM may probably lead BHS to pay higher
interest that resulted in higher financial risk.
- A reduction in TAT: BHS was profitable (increased in PM) but not too efficient.
2007-2008:
From the table it is clear that BHS had a dramatic reduction in ROE because of:
- a reduction in PM
- increase in EM and TAT
Creditors perceived the company as riskier and charge it higher interest; the company was poorly
managed and had higher costs that decrease its operating profit margin

SAFOCO

As an overall trend, it is clear that ROE of SAF has increased by the time [06-08]
which based on
2006-2007:
- reduction in PM and TAT
- increase in EM
 The equity multiplier was the source of the rise, and the company was already appropriately
leveraged, this was simply making things more risky.
2007-2008:
- reduction in EM and PM
- increase in TAT
 Company’s ROE went up due to an increase in the asset turnover; this was a very positive
sign for the company. Moreover, SAF was under-leveraged as well (reduction in EM) showed
that the company has been managing itself better.