Financial Analysis Comparison

Liquidity Ratios
Comparing the liquidity ratios of Panasonic Manufacturing Malaysia Berhad and
Pensonic Holdings Berhad, Panasonic's current ratio consistently exceeds 4.0, indicating it
has over four times the current assets to cover its liabilities, peaking at 4.55 in 2020 and
slightly decreasing to 4.21 in 2022. In contrast, Pensonic’s current ratio, while improving
from 1.21 in 2018 to 1.42 in 2022, remains much lower. This suggests that Panasonic
maintains a significantly stronger buffer of short-term assets, indicating better financial
stability and flexibility than Pensonic (Rashid, 2021). The quick ratios further illustrate this
disparity. Panasonic’s quick ratio remains robust, at 3.62 in 2022, with a peak of 4.23 in 2019
and a slight decline to 3.62 in 2022. Pensonic's quick ratio, although improving from 0.61 in
2018 to 0.74 in 2022, stays below 1.0 throughout, indicating potential challenges in meeting
short-term obligations without selling inventory. The quick ratio has also remained
consistently and significantly above the industry average, illustrating Panasonic’s greater
capacity to easily access liquid resources to meet its short-term liabilities. The cash ratios
paint the picture even better when it comes to the area of liquidity between the two firms.
Panasonic’s cash ratio remains remarkably at 2.91 in 2022, reaching 3.62 in 2020, which
strongly suggests that Panasonic has sufficient cash in comparison to its current liabilities to
meet its short-term obligations or enjoy improved financial flexibility. On the same note,
Pensonic has a significantly lower cash ratio, ranging between 0.16 and 0.29, indicating that
the firm holds less cash. A lower cash ratio also means more significant liquidity risks for
Pensonic or its inability to respond immediately to financial commitments or opportunities
(Rashid, 2021). Therefore, the liquidity ratios show that Panasonic Company has a better
liquidity position.
Profitability
For gross profit margin, Panasonic Manufacturing Malaysia Berhad started at a high
of 20.23% in 2018 and experienced a general decline to 10.91% in 2022, indicating
increasing cost pressures or declining revenue efficiency (Nurlatipah et al., 2022). The gross
profit margin for Panasonic shows a consistent downward trend, with significant drops in
2021 (18.69%) and 2022 (10.91%). Pensonic maintains a more stable gross profit margin,
starting at 18.44% in 2018, peaking at 20.08% in 2022, and experiencing a notable dip to
16.56% in 2021. More specifically, this relative stability in Pensonic’s gross profit margin
may indicate better cost control or better pricing strategies in the years, although they have
experienced a slight fluctuation in 2021(La Rosa, 2020). Analyzing the net profit margins,
Panasonic looks good, with margins of 109.3% in 2018 and 119.5% in 2021, and then slightly
reducing to 59.3% in 2022. The result indicates that Panasonic probably achieved a superb
year in 2021 because of extraordinary sales revenue or cost management. Although in 2022,
the net profit margin decreased, Panasonic has been operating at much higher values than
Pensonic in the analyzed period. Pensonic, on the other hand, starts with a negative net profit
margin of -1.06% in 2018, indicating a loss, and shows significant improvement to 4.56% by
2022. However, the net profit margin fluctuates widely, with very low margins of 0.13% in
2020 and 0.91% in 2021. This fluctuation tends to depict challenges experienced in the
effective management of net income even as the results move in the positive direction
towards profitability by 2022. As a result, Panasonic over the period (2018-2022) displays
due to cost-effectiveness and revenue generation.
Efficiency
Comparing the efficiency ratios of Panasonic and Pensonic, the inventory turnover
rate, which indicates the frequency at which a particular organization buys and sells its
inventories over a period, differs significantly between the two firms. Panasonic managed to
maintain its high inventory turnover ratio of 19.01 in 2018, which shows that Panasonic has
complied with effective inventory management and high sales performance. However, this
ratio comes down steadily to 8.62 by 2022, indicating that either the inventory is not as active
or sales efficiency is slowing down. The ratio in 2019 at 18.55 seemed to decrease slightly,
showing that there are problems operating at the same level of productivity (Rashid, 2021).
Despite this decline, Panasonic’s inventory turnover remains significantly higher than
Pensonic’s, which started at a mere 0.31 in 2018, indicating severe inefficiencies. Pensonic’s
inventory turnover improved over the years, reaching 5.24 in 2020, but then dropped to 2.74
in 2022. This volatility indicates that Pensonic has problems with stock control, which could
be due to unpredictable consumer demand or supply chain issues. Looking into the total asset
turnover ratio, which points to how efficient a business entity is in utilizing the total assets for
the production of sales, one can see a clear indication of differentiation between Panasonic
and Pensonic on the operation strategy indicators as well. Panasonic's total asset turnover
ratio also does not fluctuate a lot; it was 1.12 in 2018, 1.12 in 2019, and it slightly declined to
095 in 2022. This stability indicates that Panasonic has effectively implemented its assets to
produce revenues, even though a decline in 2022 is apparent. On the other hand, the total
asset turnover ratio of Pensonic begins at 115 in the year 2018 and fluctuates uniformly
where it is reaching its highest point at 121 of the year 2021 and going slightly down to 103
in the year 2022 (Nurlatipah et al., 2022). Panasonic Manufacturing Malaysia Berhad seems
to demonstrate a higher and more saturated efficiency ratio, especially for inventory turnover,
but weaker performance in recent periods.
Leverage
Panasonic's debt ratio, which measures the proportion of assets financed by debt,
shows a stable and low trend over these years. Starting at 17.69% in 2018, it slightly declines
to 17.12% in 2019, then further decreases to 16.40% in 2020, maintaining around 16.44% in
2021 and 16.62% in 2022. This consistently low debt ratio indicates Panasonic’s conservative
approach to leveraging, ensuring financial stability and low risk (Nurlatipah et al., 2022). In
contrast, Pensonic's debt ratio starts at a high of 58.43% in 2018, slightly decreases to 58.09%
in 2019, then drops to 54.10% in 2020. Despite a minor reduction, it remains high at 53.84%
in 2021 and slightly increases to 54.91% in 2022. This high debt ratio indicates that Pensonic
has significantly relied on debt, which has an inherent higher financial risk and issues with
managing liabilities. Equally, the debt-equity ratio reveals an even greater divergence
between the two firms. Panasonic’s debt-equity ratio remains low and stable, starting at
21.49% in 2018, decreasing slightly to 20.66% in 2019, and maintaining around 19.62% to
19.94% from 2020 to 2022. This low ratio indicates a strong equity base and minimal
reliance on debt, reflecting prudent financial management and resilience (La Rosa, 2020).
Conversely, Pensonic’s debt-equity ratio is significantly higher, beginning at 140.58% in
2018 and decreasing to 138.61% in 2019. It increases to 117.87% in 2020 and 116.64% in
2021 but increases to 121.77% in 2022. These high ratios show that Pensonic has been
engaging in a higher leverage strategy that restrains the overall financial freedom of the
company and enhances its exposure to operations of volatility. Hence, Panasonic has
consistently maintained low and more stable leverage ratios as evidence of its sound financial
management compared to Pensonic Holdings Berhad, which has high and volatile limits
indicative of a higher risk profile and high dependence on liabilities.
Recommendations:
Concerning the decline in the inventory turnover ratio at Panasonic Manufacturing
Malaysia Berhad, the company should intensify its efforts to raise the degree of inventory
management. Adopting enhanced inventory tracking systems that employ real-time tracking
mechanisms for data can be useful for minimizing unnecessary stock accumulation. Also,
Panasonic could adopt a Just-In-Time (JIT) inventory system, as this would reduce holding
costs as well as increase the stock turnover rate. Improving the supplier relationship to
incorporate a flexible and timely procurement can also improve inventory effectiveness or
optimization (Mahajan et al., 2024). Overall, Panasonic’s total assets turnover has slightly
reduced; therefore, the firm must strive to optimize the utilization of total assets. This can be
done by acquiring capital equipment and other technologies that enhance operational
effectiveness and productivity. Improved maintenance and operational techniques with
existing resources could also improve turnover characteristics and rates (Mahajan et al., 2024,
p. 16). Moreover, growing market share through market expansion strategies and business
diversification may assist in enhancing revenues from existing resources.
Consequently, it is recommended that Pensonic Holdings Berhad pay special attention
to the debt ratio and ensure it undertakes efforts to improve its financial structure. Among
them, one of the primary methods is to consistently and proactively pay off debts with the
help of operating money flows. Pensonic could also consider restructuring some of its high-
cost debt, minimizing interest expenses and enhancing financial discretion. Reducing costs
and increasing operational efficiency can lead to the generation of more resources to repay
the liabilities (Mahajan et al., 2024). Pensonic should focus on increasing cash reserves and
reducing current liabilities to improve liquidity ratios. For instance, this can be done by
seeking to agree on improved credit terms on supplier payments to have elongated payment
timelines and, hence, better cash management. Also, the accounts receivables management
should be enhanced at Pensonic to collect debts from clients (Khaustova et al., 2020, p. 45).
This also promotes a proper management of the cash flows, which the right management of
cash reserves should also accompany to improve liquidity and ensure short-term obligations
are met.
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