Return on Equity Ratio

𝐍𝐞𝐭 𝐈𝐧𝐜𝐨𝐦𝐞
Formula:
𝐓𝐨𝐭𝐚𝐥 𝐄𝐪𝐮𝐢𝐭𝐲

2013 2014 2015 2016 2017

Return on Equity Ratio 68.43% 63.67% 89.67% 92.39% 87.36%

100.00% 92.39%
89.67% 87.36%
90.00%
80.00%
68.43%
70.00% 63.43%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2013 2014 2015 2016 2017

Return on Equity (ROE) is the ratio that measure how business firms generate income from the
equity financing. In other words, it measures how effective the company use shareholder’s fund
to operate business and generate income. ROE is popular financial ratio for investor as they
need to choose company which can utilize their money to gain profit. Dutch Lady Milk
Industries Berhad’s ROE is 87.36% in 2017. In 2013, the ROE recorded is 68.43% and it keeps
increasing and reaches the peak in 2016 which is 92.39%. From 2013 to 2015, the ROE
increased from 68.43% (2013) to 89.67%(2015). In 2014 the ROE decreased to 63.43%. The
reduction in equity and increasing in profit are the reasons why the ROE is high in 2017.
Earnings Per Share (EPS)
𝐍𝐞𝐭 𝐈𝐧𝐜𝐨𝐦𝐞
Formula:
𝐒𝐡𝐚𝐫𝐞 𝐎𝐮𝐭𝐬𝐭𝐚𝐧𝐝𝐢𝐧𝐠

2013 2014 2015 2016 2017

EPS 2.16% 1.71% 2.20% 2.33% 2.42%

EPS
3
2.33 2.42
2.5 2.16 2.2
2 1.71
1.5
1
0.5
0
2013 2014 2015 2016 2017

Earnings per share (EPS) are the allocation of the net income of the company to its outstanding
shares. Basically, EPS is used to measure the efficiency of a company to generate income from
the investor’s fund. It is similar to ROE but there is difference between ROE and EPS. EPS
can give a clearer picture to investor on actual earnings for one share on hand. In 2013, Dutch
Lady Milk Industries Berhad’s EPS which is 2.16% per share. From the chart, the EPS is keep
increasing from 2015 to 2017 which is from 2.2% per share until 2.42% per share. There is an
improvement compare to 2014 EPS. The reason of the EPS achieve highest in history is due to
the increase in net income and the outstanding shares remains the same from year 2015 to 2017.
In other words, Dutch Lady Milk Industries Berhad able to generate more profit without raising
any funds by issuing shares in this particular period. Thus, the company is very effective in
generating profit from investor’s fund
Dividend Yield

2013 2014 2015 2016 2017

Dividend Yield 5.39% 4.70% 4.53% 4.20% 4.70%

6.00%
5.39%

5.00% 4.70% 4.53% 4.70%

4.02%
4.00%

3.00%

2.00%

1.00%

0.00%
2013 2014 2015 2016 2017

The dividend yield or dividend-price ratio of a share is the dividend per share, divided by the
price per share. It is also a company's total annual dividend payments divided by its market
capitalization, assuming the number of shares is constant. It is the amount that a company pays
to its shareholders annually for their investment. We can see that the dividend yield from 2013
to 2015 has decreased from 5.39% to 4.53%. From 2015 to 2017 the dividend yield increased
to 4.70%. If the investor invests in Dutch Lady in 2017, they will get 4.70% earning for each
amount invested in the company. As an investor, they can consider to invest the past dividend
yield ratio to decide whether to invest in Dutch Lady. The dividend yield shows it growing it
will be good for the investors.
Price Earnings Ratio (P/E Ratio)

𝐏𝐫𝐢𝐜𝐞 𝐩𝐞𝐫 𝐬𝐡𝐚𝐫𝐞

Formula:
𝐄𝐚𝐫𝐧𝐢𝐧𝐠𝐬 𝐩𝐞𝐫 𝐬𝐡𝐚𝐫𝐞𝐬

2013 2014 2015 2016 2017

Dividend Yield 21.81% 24.71% 21.68% 23.85% 33.71%

40

35 33.71

30
24.71 23.85
25 21.81 21.68
20

15

10

0
2013 2014 2015 2016 2017

Price-Earnings ratio (PE ratio) is a valuation tool that tells you how much you are paying for
each $1 in earnings per share a stock generates. PE ratio is the quick way to look at the valuation
of the stock. Dutch Lady PE ratio from 2013 to 2015 has decreased. In 2014 the PE ratio
increased to 24.71%. 2015 it decreased to 21.68%. from 2015 to 2017, the PE ratio has
increased to 33.71%. The higher the PE ratio, the better the company is. However, high PE
ratio may bring the risk of overprice by investor. Therefore, it shows higher PE ratio because
investors think that the company is worth to invest.
 a) Other important ratio
Liquidity Ratios
Liquidity ratios look at various aspects of an entity’s working capital. The working capital is
the difference between an entity’s current assets and current liabilities. Assessing an entity
liquidity is an important factor in financial statement analysis since it measures the entity’s
ability to meet its short- term obligation.

Current Ratio
Formula: Current assets / Current liabilities

2013 2014 2015 2016 2017

Current Ratio 1.52 1.44 1.27 1.20 1.02

1.8

1.6 1.53
1.44

1.4
1.27
1.2
1.2
1.02
1

0.8

0.6

0.4

0.2

0
2013 2014 2015 2016 2017
Current ratio is used to analysis a company’s liquidity. Basically, current ratio is computed to
see the ability of company to handle short term debt by using short term assets (current asset).
In 2013, Dutch Lady Milk Industries Berhad is able to achieve 1.53 for current ratio. In other
words, it means that Dutch Lady Milk Industries Berhad has RM1.53 in current asset for every
RM1.00 in current liabilities. From the chart above, we can see that the current ratio was high
on 2013. However, it is dropped from 2014 to 2017. This is because company has higher
current liabilities in 2017. As the company is quite active in different marketing campaign, it
increases the debt of the company. Besides that, launching of new products like Dutch Lady
Chocolate drink also increase the current liabilities as more money is spent. However, if
compare with the industry indicator, Dutch Lady Milk Industries Berhad is doing a great job
as the ratio of 1.02 is higher than 1.00 which is industry indicator.
Quick Ratio
Formula: Cash assets + Receivables / Current Liabilities

2013 2014 2015 2016 2017

Quick Ratio 0.99 0.88 0.86 0.87 0.59

Quick Ratio
1.2

0.99
1
0.88 0.86 0.87

0.8

0.59
0.6

0.4

0.2

0
2013 2014 2015 2016 2017

Quick ratio is also known as acid-test ratio. From the formula, it is similar with current ratio,
just need to exclude the inventories for current assets. It is because inventories have the least
liquidity. Thus, quick ratio measures a company's ability to meet its short-term obligations with
its most liquid assets. For Dutch Lady Milk Industries Berhad, the quick ratio in 2017 is 0.59.
From the chart above, we can see that the quick ratio was higher in 2013 and it decline and
increased in 2016 and decline in 2017. It starts with 0.99 in 2013 and reaches the peak at 0.89in
2016. However, the ratio is declined to 0.56 in 2017. The reason of the decline is due to
increment in current liabilities as company is expanding their business.