Hi, I was inputting the numbers into the template when I realised that the inventory turnover days and cash conversion cycle days increased from year 2017 till year 2020.
I was wondering whether this increase can be due to the acquisition of equity stake in other entities? Or did I input my numbers incorrectly?
You may want to let me know the company name and send me the excel to take a look. From there, I can give you a much accurate input.
I found some errors in collection of financial numbers. Let me point it out below:
1.The cost of good sold should be Raw material purchases and subcontractor charges instead of changes in inventories.
2.Changes in inventories (COI) should be viewed as one-off item. This figure is derived when the company increase or decrease in inventories. It is a type of special accounting only for certain business that rely heavy on inventory. So for instance, if you look at UMS’ 2020 figure, the COI is 2,192 it is the same amount of increase when you look into the balance sheet under inventories. (taking 53,938 minus 51,746). Hence, if it is a positive figure you have to subtract from your net profit and if negative then you have to add back to your net profit.
3.SGA figure should be the sum of Employee benefits expense, Depreciation expense, Other expenses and Other charges. (2020: 48,382)
4.Profit should always take profit attributable to owners of the parent which is 36,471 for 2020.
5.Total Equity should take Total Equity before non-controlling interest (sometime called equity attributed to owners of the parent) which is 251,286 (2020)
6.Capex is just Purchase of property, plant and equipment which is 11,588 (2020)
7.Dividend per share should be 0.05 (2020).
- I noticed some of your 2020 figure are actually 2019 figure which you may have mixed up when collecting it.
- Next time when you collect financial numbers for the excel, do it in million (rounding to one decimal place) so that you don;t collect so many numbers.
Hope this helps :)
- COI, happen when the company increase or reduce their inventory. For instance, the starting year inventory value is $100m and by the end of year, it become $200m. The increase is due to the management purchasing $100m worth of inventory. Hence the difference of $100m is recorded in the P&L as a gain of $100m. In real fact, those $100m is not actual gain from operating but rather increase in their inventory due to purchase. Hence, you have to subtract it from the profit. Theory is the same when the inventory is reduce where you add back the negative to the profit. Do let me know, if you understand what I just explained as it is slightly more technical.
- Profit/Equity attributed to shareholder of the company are basically shareholder money. Non-controlling interest is never the money of shareholder company. For instance, the company own a subsidiary for 90% stake while remaining 10% stake is own by other investors (minority interest). If the subsidiary make $100m in profit, $90m will be given to the shareholder of the company while the remaining $10m is given to the other investors (minority interest). Hence, that is the reason why we took profit attributed to shareholder as non-controlling interest (sometime called minority interest) is never your money.
- So sorry, I missed out on the improvement to investment property. Yes you can consider that as a capex but the figure is quite small and insignificant. As for investment in an associate, that is not a capex but rather just an investment.
- Once you have done with the excel, you can send it to me to double check your figure.
I had looked at your excel and stated those figures that are incorrect in yellow. The excel was sent back to you through email.
Thanks for your help. The ratios look more normalised now :)
For the no. of shares, I had looked through the annual report and noted that UMS Holdings had issued 1 bonus share for every 4 ordinary share held in year 2014 and 2017.
Whenever there is a share split, I have to adjust the number of shares for all the previous years?
- So in year 2014 to year 2016, it would be 429.1*1.25=536.4 ?
- Then for year 2011 to year 2013, I would have to take the base year 2011’s figure 343.8*1.25*1.25=537.2?
I saw that my number for year 2011-2013 is different from yours .. is my understanding flawed somewhere?
In addition, just like to understand for share of profit from associate, if it is a singular event, only then I include it in numbers, otherwise I should just omit if it is recurring?
Your adjustment for the outstanding shares is correct. The difference is just 0.1 which may due to rounding error. Do note that, unless it is a significant difference, if not it is still ok. Keep up the good work :)
2011 & 2012 figure base on your number of shares you need to multiply 1.25 by twice as mentioned by you. The 2013 number of shares just need to multiply by once.
Share of profit from associate is the company investment in a company that they owned less than 50% stake. Due to the fact that they own less than 50%, they only recorded profit. Hence, it is a actual business that the company own which is not a one-off item.
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