Analysis of Ajinomoto Berhad's Capital Structure

2.0 Analysis of Ajinomoto Berhad’s capital structure

A capital structure is the mix of a company's financing which is used to fund its day-to-day operations. These source of funds can originate from equity, debt and hybrid securities. The equity will come in the form of common and preferred stocks. The debt is broken out into long-term and short-term debts. Lastly hybrid securities are a group of securities that are a combination of debt and equity. When analyzing a company it is important to note their mix of debt and equity, because it gives a firm picture of the financial health of the company. The higher the company's debt-to-equity ratio the greater the risk of a potential investment.

3.1 Liquidity ratio analysis

On 2007, Ajinomoto Berhad shows a higher Net Working Capital comparing with Dutch Lady Milk Industries Berhad, showing that Ajinomoto Berhad has greater ability to settle its short-term debts and has higher surplus funds in managing its daily operation. On 2008, it shows a slightly difference between both companies where Dutch Lady Milk Industries Berhad has higher Net Working Capital than Ajinomoto Berhad showing the ability of Dutch Lady Milk Industries Berhad to settle its short-term debt has increased and going higher than Ajinomoto Berhad’s and same situation occurred on 2009.

For the plantation sector, the Net Working Capital calculated in part of Liquidity Ratio Analysis showing that Genting Plantations Berhad is grower from year to year, from 2007 until 2009 and the values are always higher comparing with IOI Corporation Berhad. It can be summarized that Genting Plantations Berhad has better ability to settle its short-term debts with surplus funds for its daily operating activities.

The Current Ratio for both companies on 2007 shows a significant value where Dutch Lady Milk Industries Berhad only calculated as 1.41 times comparing with Ajinomoto Berhad that achieve 4.29 times that shows its ability to fulfill its long-term loans and short-term debts using its current assets. It can be justified as only RM 1.41 of its current assets can be made as payment for each ringgit of its current liability comparing with Ajinomoto Berhad which is higher at RM 4.29 and same goes for the 2008 and 2009 where Ajinomoto Berhad is surpass two times higher than Dutch Lady Milk Industries Berhad that obviously showing that its ability to fulfill its long-term loans and short-term debts using its current assets is growing from time to time and the liquidity status of it is better compare to Dutch Lady Milk Industries Berhad.

Average Current Ratio for IOI Corporation Berhad for three sequential years is 4.28 times is lower comparing with Genting Plantations Berhad that is 19.42 times, which shows Genting Plantations Berhad is better in settling short-term debts with its current