Capital Structure in Malaysia

2921 Words6 Pages
bulb-icon

Recommended: Traditional approach of capital structure

Introduction Every company listed on the Bursa Malaysia has nearly identical objective that is to maximize company’s profit and to maximize shareholders’ wealth. To achieve this, the company must have sound financial planning; good financial decision, and improve profitability which will then increase the value of the firm. In order to obtain success, the company must have a well plan and execution of its capital structure. What is capital structure? Capital structure describes the specific mixture of long-term debt and equity the firm uses to finance its operation and growth. The risk and value of the firm will be affected by this mixture. Hence, it is often a challenging task for the finance managers to determine the optimal capital structure. An error free decision is critical to avoid an incorrect financing decision (Eriotis, Vasilou & Neokosmidi, 2007) and different levels of debt and equity used in capital structure suggest that managers may employ firm-specific strategies for improved performance (Gleason, Mathur, & Mathur, 2000). For this study, we will analyze 2 out of 85 property companies’ (which are listed on Bursa Malaysia) capital structure for the year 2010 and 2011. These two companies are IGB (Ipoh Garden Berhad) and Encorp Berhad. A. IGB (Ipoh Garden Berhad) Company’s Background IGB Corporation Berhad was incorporated on 12 November 1964 and listed in the main market of Bursa Malaysia on 9 October 1981. At the helm of the company is Tan Sri Abu Talib Othman (non-executive Chairman of the Board) and Chung Meng Tan (Group Managing Director and Executive Director). It business address is Level 32, The Gardens South Tower, Penthouse, Mid Valley City, Lingkaran Syed Putra, Kuala Lumpur 59200. IGB involves in re... ... middle of paper ... ...sales will erase profit and may result in a net loss. But for both companies, there is no issue in these areas as both are enjoying good sales and continuous property development activities. In term of activity, both companies showed they are efficient in turning their inventory (the number of on-going projects) into sales. For financial leverage, IGB Corporation showed better result than Encorp. This may be due to the less number of activity undertaken by the company as well as the financial consideration for the projects undertaken is not as high as the capital expenditure for projects undertaken by Encorp Berhad for which the projects development are more recent.. In general overall finding of this study showed that both company are financially sound. This is proven through the number of projects and the result of properties sold before the project’s completion.

Show More
Related

  • Bestcare Health Maintenance Organization Net Working Capital

    579 Words  | 2 Pages

    Balance sheet lists assets, liabilities and owner’s equity. The assets listed on the balance sheet are acquired either by debt (liabilities) or equity. “Companies that use more debt than equity to finance assets have a high leverage ratio and an aggressive capital structure. A company that pays for assets with more equity than debt has a low leverage ratio and a conservative capital structure. That said, a high leverage ratio and/or an aggressive capital structure can also lead

    Read More

  • MCI Case Analysis

    1816 Words  | 4 Pages

    MCI current capital structure is x% debt and y% equity. Their key ratios are a, b, and c. Comparing to other firms in the utilities industry they appear to be underutilizing (debt/equity). (See exhibit D). Referencing the forecast there is expected to b...

    Read More

  • Modigliani And Miller's Theory: The Perfect Conditions Of The Market

    735 Words  | 2 Pages

    The market value is not affected by the firm’s capital structure, that’s what the M&M first proposition stated; in proposition one it is stated that under certain conditions the firm’s debt equity has got no effect on the firm’s market value. This approach is based on the below:

    Read More

  • Financial Analysis of Halliburton

    1523 Words  | 4 Pages

    Important factors of a company’s outlook are its financial strength and weaknesses. These factors can be evaluated by reviewing the firm’s financial statements and using ratios to help measure a company’s liquidity, leverage, activity, profitability, and growth. Financial ratios are computed by using the information found in a company’s financial statements: primarily income statement and balance sheet. The calculations from the current year, previous years, and other companies in the industry are used as a basis to identify and ev...

    Read More

  • BMW

    1885 Words  | 4 Pages

    BMW and Audi, two German automobile manufacturers, have a reputation for making some of the best cars in the industry. Not only are both companies superior in their production, but their financial statements also indicate stability and efficiency. Looking at financial ratios, we will compare both companies on a basis of management efficiency and debt status. As a bank analyst, we will make a recommendation as to which company would be better to approve a loan for. A recommendation will also be made regarding management effectiveness and which company would make a better investment.

    Read More

  • Case Selection Process In Nigeria

    958 Words  | 2 Pages

    Further, firms that were not the typical Nigerian firms were removed even though may be incorporated in Nigeria. This resulted with 24 Nigerian firms, meanwhile, during the case study design phase, the author had personally visited the Headquarters of Nigerian Stock Exchange Commission (NSE), Central bank of Nigeria (CBN), National Bureau of Statistics (NBS) and Nigeria Investment promotion commission (NIPC) in Abuja, Nigerian between December 2014 and January, 2015. In addition, the author have also through the Nigerian Stock Exchange (NSE) website was also used to identify more Nigerian companies’. The companies from both the Osiris database and NSE were eligible for consideration and through purposive selection, the four case firms were included in the

    Read More

  • Case Study: Malaysia Steel Works And Kossan Rubber Industries

    757 Words  | 2 Pages

    The companies I have selected for this assignment is Malaysia Steel Works (KL) Bhd (5098) and Kossan Rubber Industries Bhd. (7153), both of the company is from industrial products sector and its share is traded in main market.

    Read More

  • Summary Of Target Corporation Capital Structure

    1753 Words  | 4 Pages

    The capital structure decisions for Target Inc. are significant since the profitability of the firm is specifically influenced by this decision. Profit maximization is part of the wealth creation process and wealth maximization can be a lengthy process for financial managers. Profits affect the value of the firm and it is expressed in the value of stock. Cost of capital is how investors evaluate weighted average cost of capital (WACC). Capital structure ratios help investors gauge the level of risk that a company is taking on through financing. While Target

    Read More

  • The Purpose of Financial Statements

    1286 Words  | 3 Pages

    Ÿ Capital structure/investment - This information is taking from the Balance sheet, but also from the Profit and Loss Account. This is examining the sources of finance the company has used and also looking at it as a potential investment opportunity. There are certain features, which must be present if financial information is to meet the needs of the user. The two most important features are that: Ÿ The information should be relevant to those who are using it.

    Read More

  • Business Model Analysis of Wal Mart and Sears

    1962 Words  | 4 Pages

    Making an analysis of the profitability of the shareholder can be seen that although both companies have similar returns, the source of this return is different.

    Read More

  • The Debt Crisis in Malaysia

    1035 Words  | 3 Pages

    Can anyone imagine what will happen to Malaysia after a few more decades? Debt crisis in Malaysia is getting more severe due to lack of management among individuals. Serious debt crisis might lead to bankruptcy to our country. Nation leaders should lead others away from debt. If this scenario continues, Malaysia might follow the footstep of Greece, Spain, Italy, and Portugal. Debt crisis can be avoided by providing trainings and courses to the employees, improve individual personal finance management and filtering candidates in hiring process.

    Read More

  • A Case Study Of REIT

    1311 Words  | 3 Pages

    One of the significant contribution of this study is to help investors and managers to determine the capital structure of REITs by analyzing the relationship between determinants of capital structure and leverage. A study about REITs is rarely performed in Malaysia. In this study, it would contribute to a more comprehensive understanding on capital structure of REITs and their characteristics. It helps to identify the main determinants of capital structure of REITs by examining the determinants and their correlation between leverage.

    Read More

  • Advantages And Disadvantages Of Capital Structure

    1186 Words  | 3 Pages

    The capital structure of a firm is the way in which it decides to finance its operations from various funds, comprising debt, such as bonds and outstanding loans, and equity, including stock and retained earnings. In the long term, firms seek to find the optimal debt-equity ratio. This essay will explore the advantages and disadvantages of different capital structure mixes, and consider whether this has any relevance to firm value in theory and in reality.

    Read More

  • The Role of the Financial Manager

    1313 Words  | 3 Pages

    Most critical to this discussion is a clear understanding of what a financial manager is and does and how his or her role aids in helping to establish the valuation of a corporate entity in today's global financial market. Quite simply, a financial manager helps to measure a company's market value and its risk while also helping to systematically reduce its costs and the time necessary to make informed decisions regarding objective driven operations. This is quite a demanding game plan for an individual and most often financial managers, in the corporate world, work in cooperation with a team of financial experts. Each member of that team perhaps having expertise in differing areas of activity, but each however, being no less expert in his or her respective area of endeavors in behalf of the corporation. The team is assembled under the direction of the officer know in the corporation as the Chief Financial Officer who today is becoming increasingly indispensable to the CEO who directs a modern model of action driven, bottom-line oriented corporate activity (Couto, Neilson, 2004). One can accurately state that the role of the competent and capable financial manager is figuratively worth its weight in gold.

    Read More

  • How Useful are Financial Models: The Base Case

    1321 Words  | 3 Pages

    Financial planning model tend to rely on accounting relationships and not financial relationships. The three basic elements usually valuated include the cash flow size, risk and the timing. It does not produce meaningful clues about what strategies are to be put in place, to increase the time value of money instead the association of debt-equity ratio and the firm growth (David Hillier, 2011).

    Read More

More about Capital Structure in Malaysia

Open Document