Ekovest and Gamuda's Business Performance (Research Paper Sample)

Name
Date
EKOVEST AND GAMUDA PERFORMANCE ANALYSIS
Student’s Name
Institutional Affiliation
The two main companies I have chosen in the costruction sector of Bursa Malaysia are Ekovest and Garmuda.These companies are among the most experienced firms in the construction industrywith over ten years. The companies have been generating their financial report at the end of every year.The two companies have their financial year ending at 30/06/ of every year.
Using the relevant profitability ratios (supported with detailed workings), analyse and explain the trends in the companies’ ratios over the past five years (2013 - 2017).
EKOVEST BURSA PERFORMANCE ANALYSIS
Profitability Ratios
Net profit Margin

Net Income(EBIT-Tax)/Total sales *100

2019

334,260/1,335,178*100=25.03%

2018

275,038/1036867*100=26.53%

2017

247,362/1088703*100=22.72%

2016

252,391/793582*100=31.80%

2015

111,266/438015*100=25.40%

2014

132,572/229,126*100=59.17%

2013

67,353/140996*100=47.77%

The net profit margin is a measure of the overall profitability of a business. Net profit margin determines the net income earnings of a company in relation to each dollar of sales. A horizontal sectional analysis of the Ekovest firm indicates that there is a decrease in in the net profit margin ratio over the years from 2013 to 2019. According to the rule of thumb net profit margin below 5% indicates a low performance of a firm, while a 10% net profit margin performance indicates an average performance. On the other side a 20% and above net profit margin signifies a high performance. A high ratio is an indication of the degree of efficiency in the management of the firm’s resources. In this perspective Ekovest construction company performance on a horizontal analysis reveals that the firm’s management is efficient in the converting sales into actual profit. In most scenario net profit margin is dependent on the complexity and the size of the company and big firm like Ekovest analysis indicates an overall high performance
Grossprofit Margin

Revenue-COGS/Revenue

2019

(1,335,178-87,889)/1,335,178*100=93.42%

2018

(1,036,867-671,310)/1,036,867*100=33.58%

2017

(1,088,703-703958)/1,088,7038*100=35.34%

2016

(793,582-594,283)/793582*100=25.11%

2015

(438,015-284182)/438015*100=35.12%

2014

(229,126-115675)/229126*100=49.51%

2013

(140996-78317)/140996*100=44.45%

Gross profit margin indicates relationship between the percentages of gross profit in comparison to sales. It provides an analysis calculating the profit that is left after the deduction of cost of sales. A company’s performance measurement of a gross profit margin is determined by thumb rule. The thumb rule principle specifies a net profit margin of 5% is considered low, while a 10% net profit margin is considered average, but a 20% margin is viewed as high performance. A horizontal analysis of the firm reveals Ekovest has a good gross profit margin over the five years above 20%.
The interpretation of gross profit margin indicates that a firm is better at managing its cost of sales. The gross profit margin should be relatively stable over the long run unless a firm alters its business model, unless there are issues that result to negative effects on the gross profit margin. These issues include a sales volume decline, incline of sales price and lowering of quality of products as a result of cost cutting.
Return on Assets

RM in Million

2018

114,388/(2,582,519+9,347,104/2)=1.92%

2017

115,241/(9,347,104+3,991,687)/2*100=1.72%

2016

155,606/(3,991,687+3,670,850)/2=4.06%

2015

20,006/(3,670,850+3,413147)/2=0.56%

2014

13200/(3,413,147+2,025,408)/2=0.49%

2013

50,035/(2,025,408+634,148)/2=3.76%

Ekovest return on assets depicts the company’s low efficiency in utilizing its assets to generate earnings. Generally the company has been posting low ROA performance on an annual basis.