Carlsberg vs GAB Malaysia
Report of Findings from the Analysis
The Financial Ratios for Carlsberg Brewery Malaysia Berhad and Guinness Anchor Berhad:
To have a clearer view, please refer to the appendix 1 or the special handout for the calculations, formula and the graphs of all the ratios for both the company.
Current ratio measures the ability to meet short term cash needs. It shows the company`s ability to pay short-term liabilities when due. The higher the current ratio, the more liquid firm is. The more predictable the cash flows are, the lower the current ratio that is required.
The average current ratio for Carlsberg is 4.39 while the average current ratio for GAB is 2.09. This shows that current ratio for Carlsberg is higher compared to GAB. For Carlsberg, current ratio of 4.39 means every RM1 ringgit of current liabilities is supported by RM4.39 of current assets. In conclusion, Carlsberg have better and stronger ability to pay short-term liabilities when due as compared to GAB.
Quick Ratio Quick ratio measures ability to meet short-term cash needs more rigorously by elimination inventory. This ratio has to eliminate inventory because it is least liquid, because the inventory has many types and some may not be easy to sell. Prepayments cannot be converted into cash, so we have to eliminate it also. The quick ratio shows ability to pay current liabilities out of liquid assets.
The average quick ratio for Carlsberg is 2.31 while the average quick ratio for GAB is 0.95, it shows that quick ratio for Carlsberg is higher compared to GAB. For Carlsberg, RM2.31 of liquid assets will meet RM1 of current liabilities. This means that Carlsberg have better ability to pay short-term cash after eliminating the inventory.
Debtors’ Turnover Debtors’ turnover or accounts receivables turnover is a ratio that shows efficiency in managing debtors. It shows the company’s ability to collect from...