Assignment #3-November 23th, 2009

2. Relation between Capital Structure and Firm Value
From the graph, it can be seen that the relationship between capital structure (which is represented by debt to equity ratio) and firm value (represented by closing price of company stock) has the same pattern. When the debt to equity ratio increased then the closing price of the stock also increased and when the debt to equity ratio decreased then the closing price of the stock decreased too. And also D/E Ratio is differed much for each year. The D/E Ratio is differed much means that the changes or differences of D/E Ratio from year to year are big (for example from 80% to 100%). It is one of the Trade-off Theory’s characteristic. While for the Pecking Order Theory, the D/E Ratio should stay stable and only differs a little for each year.

From the graph above also we can know that, debt or leverage increases in the profitability of the firm and make this company has a better capital structure and this company gets its optimal capital structure at the D/E ratio is 180, 17% and the stock price Rp.800, it means that at this level company still get the benefit of debt because after this level if company still do debt, there will be two effects, first, it just caused the firm value of company would decrease because the increasing of the profit benefit from using debt will not proportional with the increases in financial distress and agency problem cost. Second, after the optimal capital structure point, the rising costs of the likelihood of firm financial distress and agency cost cause the market value of the levered firm to decline, that’s why the pricing cost of this company get decrease after optimal capital structure.

3. Working Capital Management of The Company
After make the calculation of working capital in this figure below, showed that there is no negative result. This is meaning that the firm never experienced a deficit in working capital during period 2004-2008. Why did the firm should maintain their working capital in a positive value? The firm should maintain their working capital in a positive value to ensure that the firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses.


In this company, the cash conversion cycle calculation demonstrates that in 2008 is their best performer in managing its cash flow in this supply chain (32 days) while 2004 is the worst CCC performs (191 days). All of these cash to cash cycles demonstrate ineffective cash management because from 2004 until 2008 this came from its lower payable turnover than its receivable and inventory which caused a positive CCC. Like the earlier theory, the lower number of CCC is the more efficient company. Therefore, improvement must also focus on how to manage their inventory more effectively.

4. Conclusion

From the graph, it can be seen that D/E Ratio and closing price has the same pattern. That pattern is when D/E Ratio increased then closing prices also increased and when D/E Ratio decreased then closing price decreased too. It happened because if company used debt then it can be seen as positive signal that the company has ability to pay the interest in the future. While company is issuing stock, it can be seen as negative signal that the firm’s managers feel the company’s stock is overvalued (i.e. earnings are likely to decline in the future) and they wish to take advantage of a market opportunity. Furthermore, the graph used Trade-off Theory for analysis because the debt to equity ratio changed significantly in each period and company used debt for financing its activity.
From the analysis above can be concluded that this company has a good performance of working capital because this company never experienced a negative value of working capital. This company always has enough assets to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses.
While from the cash conversion cycle this company is experienced ineffective condition because the number of the cash conversion cycle is quite high. This high number show that this company will be able to repay the cash but with long time. A good company should be experienced in low cash conversion cycle.

Assignment #2 -- Stock analysis

2. b. Explanation and Analysis of the Graph

The graphic above present the stock data from January 2^nd, 2008 until September 30^th, 2009. From the data, it can be seen that in January 16th, 2008, the volume of transaction is 1531. It is well a bigger number of volumes than the other data. It happened because on January 18^th, 2008, Tradesound Investment Ltd bought 75,288 billion sheets or 25.31% stock of PT Cahaya Kalbar (CEKA) with the value of transaction is about Rp 61.89 billion or Rp 820 per sheet. If a foreign company bought PT Cahaya Kalbar’s stocks, people might think that the company is safe enough and thereby they decided to buy the stock, so that the price of the stock increased.

But, in the middle of September 2008, the stock price level of CEKA was going down. It probably happened because of the global crisis. Like what it is known, global crisis and recession happened between middle of 2007 until 2008 to around the world. But, the effect of global crisis could be felt by Indonesian company in the middle of 2008 until in the middle of 2009. That’s why the stock price of almost all companies in Indonesia stock market including CEKA, was going down in that period. Global crisis can also affect Indonesian stock market because many of investors are foreign investors. If they are bankrupt, then they couldn’t invest their money in Indonesia. Besides that, some Indonesian companies are doing export-import. If the foreigners are bankrupt, how they can buy Indonesian companies product. So, global crisis also has effects to Indonesian stock market including CEKA.

Shares in commodity sectors such as mining and commodity stocks are leading the reinforcement. Each close higher 118.259 points and 93.36 points causing PT Cahaya Kalbar down Rp190 to Rp1.250. Meanwhile, for the end of September 2009 the first session of trading JCI monitored at home was in the red line. Index closed lower or equal to 33.551 points to 1.36 percent 2435.351 positions. Trading volume recorded 1.032 billion valued at Rp1, 139 trillion, with total transactions reaching 26,548 times. A total of 90 stocks tracked strengthened, weakened the stock 55, and 84 shares to stay where it is due to a decrease in what happened in oil, nickel and banking indicators and causes of PT Cahaya Kalbar shares close higher or top gainer up Rp50 to Rp1.490

2. c. The Average, Standard deviation, Highest and Lowest

2. d. Explanation and Analysis of the Average, Standard deviation, Highest and Lowest result

Average

The average calculation results will be used in the calculation of standard deviation and to determine the data’s dispersion.

Standard Deviation

The standard deviation is used in statistics to measure the variability or dispersion of a data set. If the data are very close to the average value, we have a small standard deviation. If the data are dispersed over a wide range of values then we have a large standard deviation.

From the table above, we can see that in the volume element, we find that there is significant difference between the average (47.0405) and the standard deviation (152.4456). From that number, the standard deviation is very high. It is mean that there is a great dispersion in volume or we can say that the volume has high volatility.

In this case, it can be seen that the data collected is highly dispersed. This situation indicates a risky condition to having stock in PT Cahaya Kalbar. The background is come from the result of standard deviation calculation. Because of the standard deviation is high, so this company’s stock exchange price has high possibility to change, which mean that the price is not stable.

Highest and Lowest Analysis

From the table, it can be seen that the highest volume is 1883 and the lowest is 0. The highest volume reached in March 13^th, 2008, it can be analyzed that it happened because in March 2008 the sales of PT Cahaya Kalbar increased dramatically five times of 463.5% and became Rp 595,551 billion and the net profit (after deducted by tax) also increased from Rp 617 millions or Rp 2.1 per stock in the first three-semester of 2007 to Rp 35,972 billion or Rp 121 per stock. People invest money to get return, so they want to invest their money in a company with big profit. That’s why the volume in March is the highest volume. While, for example in January 29^th until February 5^th, 2008, the volume is 0 because there is nothing special happened in those dated and besides that, PT Cahaya Kalbar is still in unstable company category if it is seen from the pattern of the graph.

Next, for the closing stock price level, the highest level is Rp 2000 per stock in June, while the lowest level is Rp 650 per stock in October. The range between the highest and the lowest is very high. It shows that the company has high risk. High risk means that the stock price has unpredictable changes.

3. Conclusion

To analyze the company performance, it is not only based on trend line record but also using standard deviation calculation. From the calculation, the data are dispersed or the data has a high volatility. With high volatility, it means that the stock price has a high possibility to change. From stockholder point of view, the higher changing possibility indicates the higher risk for stockholder to have the stock.

Based on graphical data and calculation, this company has good prospect in future but risky in stock price’s stability

Assignment # 1 -- PT. Cahaya Kalbar Tbk. Financial Condition (Period 2004-2008)

1. Company Profile
PT Cahaya Kalbar Terbuka
Business Description:
PT Cahaya Kalbar Terbuka. The Group's principal activity is producing vegetable and specialty oil used in food industry and general trading including export and import. It produces various ingredients for a range of food products, including chocolate and cocoa confectionary industries, icing coating and confectionary filling. It also produces aloe vera concentrates and powder for functional food, cosmetics and pharmaceutical industry. The Group operates in Indonesia. (Source: www.corporateinformation.com)

2. Analysis of financial condition
2.1. Liquidity analysis

This ratio will show how liquid are assets owned by the company. If we look on year 2004, the company has current ratio of 1, 4708 which is mean this company has Rp. 1, 4708 in current assets for every Rp.1 in current liabilities, or we could say that PT. Cahaya Kalbar has its current liabilities covered 1,4708 times over.
Here, to determine the quick ratio we assume that the half of current ratio is one indicator whether this company has more liquidity asset or not and also for the “save condition” indicator. So if we look at the calculation from 2004 until 2008, we can see that the quick ratio for 2004, 2005 and 2007 are below the half of current ratio. This calculation shows that this company’s inventories are bigger than the other account in current asset or the changes of inventories increased significantly and it makes the liquidity of this company become low.
The cash ratio is an indicator of a company's liquidity that further refines both the current ratio and the quick ratio by measuring the amount of cash; cash equivalents or invested funds there are in current assets to cover current liabilities.

2.2. Efficiency analysis

What we are intended to describe is how efficiently or intensively a firm uses its assets to generate sales. (Ross: 2003). Efficiency measures the degree to which the business is effectively utilizing its resource in generating sales and profit for the business. The longer credit sales are exist, the more dangerous the company’s situation. This calculation will show how long the company will collect their credit sales in average. So that the company can make financial decision due to their credit sales condition.
From our calculation, we find that in year 2004 the average collection period is 45.0381 days. From this figure we know that PT. Cahaya Kalbar will collect their credit sales in 45.0381 days in average. As we know that if the average collection period result is lower, it is mean that the company will collect their credit sales sooner.

2.3. Leverage analysis

Leverage analysis is usually used by a shareholder to analyze whether he should invest money to the company or not. The using of this analysis is by looking the debt, the higher the ratio of the debt, the more risk that the shareholder has. Simply said, if a company has many debts then the risk of bankruptcy is also greater than the less one. However, to calculate this analysis or ratio, three items are needed. Those are assets, debt, and equity. Each of them has different formula to calculate and they also have different meaning to interpret.
For debt ratio and debt to equity ratio, the higher the ratio, the higher the risk is. While for the equity ratio, the higher the ratio, the lower the risk is. The example can be taken from PT Cahaya Kalbar in 2004. It is said that in that year the debt ratio of that company is 13.74%; the equity ratio is 70.45%; and the debt to equity ratio is 40.61%. From the ratio above, it can be concluded that the risk of the company is low because the debt and debt to equity ratio of the company is also low and for the equity ratio can be seen in other way; the risk of the company is low because the equity ratio of the company is high.

2.4. Profitability analysis

For the profit margin we can see the number about -13.38 % in average, this is tell us that the firm spent a little less than Rp 14 for every rupiah in sales. But if we look at the profit margin per year the highest profit margin was happened in year 2006 for 4.97 %, this number shows that the profit margin at 2006 is better than the others. In operating income return on investment we find the average number 18.34 %, this number means that the company get Rp 18 in profit for every rupiah investment in the company. The highest number of operating income return on investment happened in 2008 at 14.50 %.
For the times interest earned ratio we have found the average in 2.9607 times, it’s belong in a good condition because it’s higher than 1. The last in this analysis is earnings per share. In earnings per share we can see that the average number is Rp 14.7920, it means that in every stock that company have and sold to the other company, the company itself (PT Cahaya) will receive Rp 14.7920 as the profit.

2.5. DuPont analysis

The DuPont analysis is a method used to analyze a firm's profitability, ROE and potential growth. Companies that boast a high return on equity with little or no debt are able to grow without large capital expenditures, allowing the owners of the business to withdrawal cash and reinvest it elsewhere or in the other words with higher rate of DuPont ratio the wealth of owner wealth is increasing. The increasing or decreasing of DuPont value itself depend on the how good and effective company use their capital and asset in the business activities.

3. Conclusion
For liquidity ratio analysis, the higher this ratio, the better financial condition. From the calculation we can find that overall the company has an increase along 2004 – 2006 and show a better performance of the financial condition. In fact, in 2007 this company experienced decreasing liquidity ratio, but in 2008 there is a significant increase. In 2008 we can say that the company has the best record of financial condition.
For average collection period, the lower this ratio, it is meant that the company has better financial condition. In this ratio, the company has the best record in 2007. For account receivable turnover, total asset turnover, inventory turnover, and fixed asset turnover, the higher this ratio, the better condition for the company, because of that, the company has the best efficiency in 2008.
In 2007 the company is in the most risky condition because it has the lowest ratio for equity ratio and highest ratio for debt to equity ratio. Whereas in 2008 the company is in the risky condition in debt ratio sector because it gives the highest ratio in this year.
Profitability ratio in this company is very varying in each sector and each year. But from the calculation we can say that in 2007 is the worst condition for the company because the company did not make any profit from its business.
Based on our calculation, we find that there is no significant difference between our calculation with usual formula and DuPont. The advantage of using DuPont is this formula will break ROE into three parts, operating efficiency, asset use efficiency, and financial leverage. So, we can interpret what is influence ROE from those three sectors.


Formulas that we use in this calculation:
>> Liquidity Ratio
Current Ratio
Current Ratio= (current assets)/(current liabilities)
Quick Ratio
Quick Ratio= (current assets-inventories)/(current liabilities)
Cash Ratio
Cash Ratio= (cash+marketable securities)/(current liabilities)

>>Efficiency Ratio
Average Collection Period
Average Collection Period=(accounts receivable)/(daily credit sales)
Account Receivable Turnover
Account Receivable Turnover=(360 days)/(Average Colection Period)
Total Assets Turnover
Total Assets Turnover=sales/(total assets)
Inventory Turnover
Inventory Turnover=CoGS/inventory
Fixed Assets Turnover
Fixed Assets Turnover=sales/(fixed assets)

>>Leverage Ratio
Debt Ratio
Debt Ratio=(total debt)/(total assets)
Equity Ratio
Equity Ratio=(total equity)/(total assets)
Debt to Equity Ratio
Debt to Equity Ratio=(total debt)/(total equity)

>>Profitability Ratio
Operating Profit Margin
Operating Profit Margin=(operating income)/sales
Net Profit Margin
Net Profit Margin=(net income)/sales
Operating Income Return on Investment (OIROI)
OIROI=(operating income)/(total assets)
Return on Equity (ROE)
ROE=(net income)/(common equity)
Return on Assets (ROA)
ROA=(net income)/(total assets)
Times Interest Earned Ratio
Times Interest Earned Ratio=(operating income)/(interest expense)
Earnings Per Share (EPS)
EPS=(net income)/(shares outstanding)

>>DuPont
Return on Equity=(net income/sales)x(sales/total assets)÷(1-(total debt)/(total assets))

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The reason why we choose this name

We choose this name because as an accounting program student, this term of word is very familiar to us. In every activity, we always find this term even in the manufacture, create or sell a product.
So, it is so important in the every accounting process.