liquidity position, and how the liquidity position has changed over time.

1. Liquidity measures how much cash a company can quickly generate. Thus this provides an insight
how well the business might fare in unexpected circumstances. For example company with a lot of
liquidity will able to generate more cash over time in order to keep operations running trough
turbulent times.

Liquidity and cash flow risk The Group actively manages its debt maturity profile, operating cash flows
and the availability of funding so as to ensure that all operating, investing and financing needs are met.
In executing its liquidity risk management strategy, the Group measures and forecasts its cash
commitments and maintains a level of cash and cash equivalents deemed adequate to finance the
activities of the Group. The Group is actively managing its operating cash flows to ensure all
commitments and funding needs are met. Prudent liquidity risk management implies maintaining
sufficient cash, the availability of funding through an adequate amount of committed credit facilities and
the ability to close out market positions. Due to the dynamic nature of the underlying businesses, the
Group aims at maintaining flexibility in funding by keeping committed credit lines available. The analysis
of financial instruments by remaining contractual maturities has been disclosed in Notes 8, 17 and 21 to
the financial statements

Liquidity calculation being calculate by dividing current assets by current liabilities In the year of 2022,
In the year of 2021 we could see that Gearing Ration in % is at 18 % compare to year 2022 is at 23% for
Mr.DIY Group. Thus we could see an elevated trend by increment of 5% from 2021-2022. For Mr DIY
company there is no different as stated in the report that The gearing ratio and net gearing ratio for the
Company are not presented as the Company does not have borrowings as at the end of each reporting
period.

To assess Mr. D.I.Y.'s financial position for 2021 and 2022 in terms of liquidity and how it has changed
over time, you would typically look at several key financial ratios and indicators. Here's a general
framework for the analysis:

Current Ratio: This ratio measures a company's short-term liquidity. It's calculated by dividing current
assets by current liabilities. A ratio above 1 indicates that the company has enough assets to cover its
short-term obligations.

Compare the current ratio for 2021 and 2022. An increasing ratio suggests an improvement in liquidity.

Quick Ratio (Acid-Test Ratio): This ratio is similar to the current ratio but excludes inventory from
current assets since inventory may not be as easily converted to cash. It's calculated by dividing (current
assets - inventory) by current liabilities.

Compare the quick ratio for 2021 and 2022. An increasing ratio may indicate improved liquidity quality.

Cash Flow Analysis: Review the cash flow statement to understand the company's cash generation and
usage. Pay attention to operating cash flow, investing cash flow, and financing cash flow. A positive
operating cash flow is generally a good sign for liquidity.

Compare the cash flow from operations for 2021 and 2022. An increasing trend suggests improving
liquidity.

Debt Levels: Assess the company's total debt and its ability to meet debt obligations. High debt levels
can strain liquidity.

Compare the total debt levels for 2021 and 2022. A decreasing trend or stable debt levels may indicate
improved liquidity.
Working Capital Changes: Analyze changes in working capital, which is the difference between current
assets and current liabilities. An increase in working capital can signify better liquidity.

Compare the changes in working capital from 2021 to 2022. An increasing working capital may indicate
improved liquidity.

Cash Conversion Cycle: Calculate the cash conversion cycle, which measures how long it takes for a
company to convert its investments in inventory and other resources into cash.

Compare the cash conversion cycle for 2021 and 2022. A shorter cycle may indicate improved liquidity
efficiency.

These analyses will provide you with insights into Mr. D.I.Y.'s liquidity position and how it has changed
over the two years. Be sure to also consider any industry-specific factors that may affect liquidity and
the company's overall financial health.

ii) asset management position, and how its asset management efficiency has changed over time.

To assess Mr. D.I.Y.'s asset management position and how its asset management efficiency has changed over time,
you'll need to analyze its financial statements, specifically the balance sheet and income statement from the fiscal
years 2021 and 2022. Here are some key financial ratios and metrics to consider:

Total Asset Turnover Ratio: This ratio measures how efficiently the company uses its assets to generate
revenue. It's calculated by dividing total revenue by average total assets.
Compare the total asset turnover ratio for 2021 and 2022. An increasing ratio indicates improved asset
management efficiency.

Inventory Turnover Ratio: This ratio measures how quickly the company sells its inventory. It's
calculated by dividing the cost of goods sold (COGS) by average inventory.

Compare the inventory turnover ratio for 2021 and 2022. A higher ratio suggests better inventory
management efficiency.

Accounts Receivable Turnover Ratio: This ratio assesses how quickly the company collects payments
from customers. It's calculated by dividing total revenue by average accounts receivable.

Compare the accounts receivable turnover ratio for 2021 and 2022. A higher ratio indicates improved
receivables management.

Fixed Asset Turnover Ratio: This ratio evaluates how efficiently the company uses its fixed assets to
generate revenue. It's calculated by dividing total revenue by average fixed assets.

Compare the fixed asset turnover ratio for 2021 and 2022. An increasing ratio suggests better utilization
of fixed assets.

Return on Assets (ROA): ROA measures the company's ability to generate profits from its assets. It's
calculated by dividing net income by average total assets.

Compare the ROA for 2021 and 2022. An increasing ROA indicates improved asset management
efficiency.

Asset Growth: Examine the percentage change in total assets from 2021 to 2022. Rapid asset growth
without corresponding revenue growth may indicate inefficiencies in asset management.

Capital Expenditure (CapEx): Review the company's capital expenditure over the two years. High CapEx
relative to revenue or assets may suggest investments in asset expansion or improvements.

Depreciation and Amortization: Evaluate the depreciation and amortization expenses. Lower expenses
relative to the value of assets may suggest efficient asset management.

By analyzing these ratios and metrics, you can gain insights into Mr. D.I.Y.'s asset management position
and whether it has become more efficient or less efficient over the specified time period. Keep in mind
that industry norms and benchmarks can provide context for your analysis and help you assess how the
company's asset management compares to its peers.
iii) debt management position, and how its debt management has changed over time.

To assess Mr. D.I.Y.'s debt management position and how its debt management has changed over time,
you'll need to analyze its financial statements, particularly the balance sheet and income statement, for
the fiscal years 2021 and 2022. Here are key financial ratios and metrics to consider:

Debt-to-Equity Ratio: This ratio compares the company's total debt to its shareholders' equity. It
provides insight into the company's reliance on debt for financing.
Compare the debt-to-equity ratio for 2021 and 2022. An increasing ratio indicates increased leverage
and potential financial risk.

Interest Coverage Ratio: This ratio measures the company's ability to cover its interest expenses with its
operating income. It's calculated by dividing operating income by interest expenses.

Compare the interest coverage ratio for 2021 and 2022. An increasing ratio suggests improved ability to
service debt.

Debt Ratio: The debt ratio evaluates the proportion of total assets financed by debt. It's calculated by
dividing total debt by total assets.

Compare the debt ratio for 2021 and 2022. An increasing ratio may indicate a higher degree of asset
financing through debt.

Debt Maturity Schedule: Review the company's debt maturity schedule to understand when debt
obligations are due. Pay attention to any significant changes in the maturity profile between the two
years.
Debt-to-Capitalization Ratio: This ratio measures the proportion of total capitalization represented by
debt. It's calculated by dividing total debt by the sum of total debt and shareholders' equity.

Compare the debt-to-capitalization ratio for 2021 and 2022. An increasing ratio suggests a larger
proportion of debt in the company's capital structure.

Debt Service Trends: Analyze the company's debt service trends by examining the annual principal and
interest payments on debt. Determine if the company is consistently meeting these obligations.

Credit Rating and Borrowing Costs: Check whether the company's credit rating has changed over time,
as this can affect borrowing costs and access to debt markets.

Debt Issuance and Repayment: Look for any significant debt issuances or repayments between the two
years, as these actions can impact the company's debt load.

By analyzing these debt management indicators, you can assess Mr. D.I.Y.'s debt position and whether it
has become more or less leveraged over time. It's crucial to consider the implications of debt
management changes on the company's financial stability and ability to meet its financial obligations.
Additionally, compare the company's debt metrics to industry benchmarks to gain a broader perspective
on its debt management performance

Iv) Profitability Ratios, And How Its Profitability Position Has Changed Over Time.

To assess Mr. D.I.Y.'s profitability position and how it has changed over time, you can analyze various
profitability ratios using its financial statements for the fiscal years 2021 and 2022. Here are some key
profitability ratios and metrics to consider:

Gross Profit Margin: This ratio measures the percentage of revenue that remains after subtracting the
cost of goods sold (COGS). It's calculated by dividing gross profit by total revenue.
Compare the gross profit margin for 2021 and 2022. An increasing margin suggests improved
profitability in terms of production and sales.

Operating Profit Margin (Operating Margin): This ratio assesses the profitability of the company's core
operations. It's calculated by dividing operating income by total revenue.

Compare the operating profit margin for 2021 and 2022. An increasing margin indicates improved
profitability from day-to-day operations.

Net Profit Margin: The net profit margin measures the company's overall profitability after accounting
for all expenses, including interest and taxes. It's calculated by dividing net income by total revenue.

Compare the net profit margin for 2021 and 2022. An increasing margin suggests improved overall
profitability.

Return on Assets (ROA): ROA measures how efficiently the company generates profits from its assets.
It's calculated by dividing net income by average total assets.

Compare the ROA for 2021 and 2022. An increasing ROA suggests better profitability relative to the
assets employed.
Return on Equity (ROE): ROE measures the company's profitability relative to shareholders' equity. It's
calculated by dividing net income by average shareholders' equity.

Compare the ROE for 2021 and 2022. An increasing ROE indicates improved profitability in relation to
shareholders' equity.

Earnings per Share (EPS): EPS represents the company's profit allocated to each outstanding share of
common stock. It's calculated by dividing net income by the number of outstanding shares.

Compare the EPS for 2021 and 2022. An increasing EPS suggests greater profitability on a per-share
basis.

Profit Growth: Assess the percentage change in net profit from 2021 to 2022 to understand the growth
or decline in profitability over the period.

Operating Expense Ratios: Analyze specific operating expense ratios (e.g., selling and administrative
expenses as a percentage of revenue) to identify areas where cost management has improved or
worsened.
By examining these profitability ratios and metrics, you can gain insights into Mr. D.I.Y.'s financial
performance and how its profitability position has evolved over the two years. Be sure to consider any
significant changes in revenue, expenses, or business strategies that may have contributed to the
observed changes in profitability. Comparing the company's profitability metrics to industry benchmarks
can also provide valuable context for your analysis.

V) Market Value Ratios, And How Its Valuation Has Changed Over Time.

To assess Mr. D.I.Y.'s valuation and how it has changed over time, you can analyze various market value
ratios using its financial statements for the fiscal years 2021 and 2022. These ratios provide insights into
how the market perceives the company's value. Here are some key market value ratios and metrics to
consider:

Price-to-Earnings Ratio (P/E): The P/E ratio compares the company's stock price to its earnings per share
(EPS). It's calculated by dividing the stock's market price by the EPS.

Compare the P/E ratio for 2021 and 2022. A rising P/E ratio may indicate that the market values the
company more highly relative to its earnings.

Price-to-Book Ratio (P/B): The P/B ratio compares the stock's market price to its book value per share
(BVPS). It's calculated by dividing the stock's market price by BVPS.

Compare the P/B ratio for 2021 and 2022. A higher P/B ratio may suggest that the market values the
company more richly relative to its book value.

Price-to-Sales Ratio (P/S): The P/S ratio compares the stock's market price to its revenue per share. It's
calculated by dividing the stock's market price by revenue per share.

Compare the P/S ratio for 2021 and 2022. A rising P/S ratio may indicate that the market values the
company more highly relative to its sales.

Dividend Yield: If the company pays dividends, assess the dividend yield, which compares the annual
dividend per share to the stock's market price.
Compare the dividend yield for 2021 and 2022. A decreasing yield may suggest that the stock's price has
risen relative to its dividends.

Market Capitalization: Examine the company's market capitalization, which is the total market value of
its outstanding shares.

Compare the market capitalization for 2021 and 2022. An increasing market capitalization may indicate
that the market values the company more highly.

Earnings Yield: The earnings yield is the reciprocal of the P/E ratio and represents the percentage of
earnings relative to the stock's market price.

Compare the earnings yield for 2021 and 2022. A rising earnings yield may suggest that the stock is
becoming more attractively priced.

Book Value per Share (BVPS): Analyze the BVPS, which is the book value of the company's equity divided
by the number of outstanding shares.

Compare the BVPS for 2021 and 2022. Changes in BVPS can provide insights into the company's financial
health and its attractiveness to investors.

By examining these market value ratios and metrics, you can assess Mr. D.I.Y.'s valuation and how it has
changed over time. Be sure to consider factors such as changes in stock price, earnings, and dividend
policies that may have influenced these ratios. Additionally, compare the company's market value ratios
to those of its peers and industry benchmarks to gain a broader perspective on its valuation relative to
the market.

b) Mr. D.I.Y.’s shareholders’ major concern is how much earning derived from their equity investment.
In addition, they also demand more in-depth analysis that could identify the strengths and
weaknesses of the company.

i) To satisfy the shareholders, calculate Mr. D.I.Y.’s ROE as well as the industry average ROE, using the
DuPont equation. (5 marks)

To calculate Mr. D.I.Y.'s Return on Equity (ROE) using the DuPont equation, you'll need to
break it down into its components:
ROE = Net Profit Margin × Asset Turnover × Equity Multiplier

NET PROFIT MARGIN =84,323 x 12,382 x 17,453

=18222457147858

Net Profit Margin: This represents the company's ability to generate profit from its revenue. It's
calculated by dividing net income by total revenue.

Asset Turnover: This measures how efficiently the company uses its assets to generate revenue. It's
calculated by dividing total revenue by average total assets.

Equity Multiplier: Also known as financial leverage, this ratio shows how much the company relies on
debt financing. It's calculated by dividing average total assets by average shareholders' equity.

Now, let's calculate Mr. D.I.Y.'s ROE and the industry average ROE based on these components. You'll
need the financial data from Mr. D.I.Y.'s annual report for 2022 and potentially industry data for the
industry average.

ii) To evaluate Mr. D.I.Y.'s financial performance, compare its calculated ROE to the industry average
ROE:

If Mr. D.I.Y.'s ROE is higher than the industry average ROE, it suggests that the company is performing
well in terms of generating earnings from shareholders' equity.

If Mr. D.I.Y.'s ROE is lower than the industry average ROE, it could indicate that the company's financial
performance is not as strong compared to its industry peers. In

ii) Evaluate Mr. D.I.Y.’s financial performance based on the outcome from part b(i). (5 marks) c) One of
Mr. D.I.Y.’s substantial shareholders, Employees Provident Fund (EPF) has voiced their intention to
vote against MR DIY Group (M) Bhd’s proposed renewal of authority for the company to purchase its
own shares in its Annual General Meeting (AGM) on June 8, 2023. Instead, EPF has appealed for a
higher dividend payout.

If Mr. D.I.Y.'s ROE is higher than the industry average ROE, it suggests that the company is performing
well in terms of generating earnings from shareholders' equity.

If Mr. D.I.Y.'s ROE is lower than the industry average ROE, it could indicate that the company's financial
performance is not as strong compared to its industry peers. In
C i) What do you think would be the trade-off between share buyback and cash dividend for Mr. D.I.Y.
based on its current financial position? (5 marks)

i) The trade-off between share buyback and cash dividend for Mr. D.I.Y. depends on its current financial
position and its strategic priorities. Let's evaluate the trade-off based on different financial and strategic
considerations:

Share Buybacks:

Pros:

It can signal that the company believes its shares are undervalued, potentially boosting investor
confidence.

It reduces the number of outstanding shares, which can increase earnings per share (EPS) and return on
equity (ROE), making the company's financial metrics appear stronger.

It provides an exit strategy for shareholders who want to sell their shares.

Cons:

It uses company cash, which could otherwise be used for investments in growth, debt reduction, or
other strategic initiatives.

Cash Dividends:

Pros:

It provides immediate cash returns to shareholders, which can be appealing to income-focused investors
like EPF.

It can attract dividend-focused investors and potentially boost the company's stock price.

Cons:
It reduces the company's cash reserves, potentially limiting its ability to fund growth initiatives, make
strategic acquisitions, or handle unexpected expenses.

A consistent high dividend payout may be unsustainable if the company needs to reinvest heavily in its
business for long-term growth.

The trade-off should consider Mr. D.I.Y.'s current financial position, including its cash reserves, debt
levels, and growth opportunities. If the company has ample cash, a stable financial position, and limited
immediate growth opportunities, increasing dividends may be a reasonable option to satisfy income-
seeking investors like EPF. However, if the company has significant growth prospects and believes its
shares are undervalued, it may choose share buybacks to enhance shareholder value.

ii) Is EPF’s reaction relevant to Mr. D.I.Y.’s long-term growth? (5 marks)

ii) EPF's reaction to vote against share buybacks in favor of higher dividends is relevant to Mr. D.I.Y.'s
long-term growth for several reasons:

Shareholder Relations : Maintaining positive relations with major shareholders like EPF is crucial for
long-term stability and support. A vote against their preferences could strain the relationship and
potentially lead to future issues.

Cash Allocation : The decision to allocate cash to either buybacks or dividends affects the company's
ability to fund growth initiatives. For long-term growth, Mr. D.I.Y. may need to invest in expanding its
operations, entering new markets, or enhancing its product offerings. Favoring dividend payouts might
limit its capacity to make these strategic investments.

Market Perception : Shareholders' reactions can influence the market's perception of the company.
Favoring dividend payouts might attract income-focused investors but could affect the company's stock
price if it's perceived as sacrificing growth.

In conclusion, Mr. D.I.Y. should carefully consider the trade-off between share buybacks and cash
dividends, taking into account its current financial position, growth opportunities, and the importance of
maintaining positive relations with major shareholders. Balancing short-term shareholder interests with
long-term growth objectives is essential for the company's strategic decision-making.

Justify whether the following instruments are examples of money market or capital market securities. a)
Malaysian Treasury Bills (MTB) (5 marks) b) Corporate bonds (5 marks) c) Common stocks (5 marks) d)
Repurchase Agreements (Repo) (5 marks) e) Malaysian Government Securities (MGS) (5 marks)

a) Malaysian Treasury Bills (MTB): Money Market Securities

Malaysian Treasury Bills are short-term debt securities issued by the Malaysian government to raise
funds. They typically have maturities of less than one year, making them short-term investments. They
are traded in the money market, which deals with short-term debt instruments. Therefore, MTBs are
examples of money market securities.

b) Corporate Bonds: Capital Market Securities

Corporate bonds are long-term debt securities issued by corporations to raise capital. They typically
have maturities ranging from several years to several decades. They are traded in the capital market,
which deals with longer-term securities. Therefore, corporate bonds are examples of capital market
securities.

c) Common Stocks: Capital Market Securities

Common stocks represent ownership shares in a corporation. They are traded in the capital market and
do not have a fixed maturity date. Common stocks represent equity ownership in a company, making
them capital market securities.

d) Repurchase Agreements (Repo): Money Market Securities

Repurchase Agreements (Repos) involve the sale of securities with an agreement to repurchase them at
a specified future date. Repos are typically short-term transactions, often with maturities of one day to a
few months. They are widely used in the money market for short-term financing and liquidity
management, classifying them as money market securities.

e) Malaysian Government Securities (MGS): Capital Market Securities

Malaysian Government Securities are debt securities issued by the Malaysian government, typically with
longer maturities, such as 3, 5, 7, 10, 15, or 20 years. They are traded in the capital market and are
considered long-term investments. Therefore, MGS are examples of capital market securities.

In summary, the classification of these instruments as money market or capital market securities is
based on their maturity and the market in which they are traded. Money market securities have short-
term maturities and are traded in the money market, while capital market securities have longer-term
maturities and are traded in the capital market.