Table of Content

1 INTRODUCTION

2 BACKGROUNDo Public Listed Companyo Shared Ownershipo Single Ownership

3 ANALYSISo Public Listed Companyo Shared Ownershipo Single Ownership

4 DISCUSSION

5 SUMMARY

6 REFERENCE

INTRODUCTION

Financial management is a process to maximise the overall of an organisation by

applying general management principles to financial resources of the organisation. It

involved planning, organising, directing and controlling the financial activities such as

obtain and consumption of funding and also procurement.

In this report, three different companies including YTL Corporation, Sin Hup Seng

Trading and Natural Beauty Alteration Centre are compared in term of their financial

structure and their financial year end report. These companies are significantly

different where YTL Corporation is a public listed company; Sin Hup Seng Trading is

shared ownership company whereas Natural Beauty Alteration Centre is single

ownership company. Their main income or funding, and liabilities are identified and

analysed in term of how they manage the fund and balance out the liabilities.

Single ownership is a business which has no separate existence from its owner and

is responsible for the company’s debt and losses personally. This form of ownership

is the simplest business form which one can run a business. All his/her personal

asset will be subjected to the debts or claims of all creditors. All the income and

losses of the business are also taxed on the owner’s individual personal income tax

return. Although this form of ownership has very adverse consequences, it is still a

popular business form due to its low cost, simplicity and ease to setup. Often,

owner’s personal and business property and funds are mixed, which differentiate it

from shared ownership and corporations.

Shared ownership is a business form in which two or more persons run and manage

the business and all owners are equally responsible for the business’s debts and

losses. In most cases, an agreement which is signed by all partners will outline the

allocation of profits and losses, as well as the management and operation of the

business. Both of the single and shared ownership are simple and can be entered

into and dissolved easily, even without a written contract.

Meanwhile, a corporation is more complex in which a company or group of people

are authorized legally to act as a single entity. A corporation is owned by

shareholders and the liability is limited to their investment. Unlike single and shared

ownership, this legal entity do not terminate upon the owner’s death, and can enter

into and dissolve contracts, sue or to be sues, incur debts and buy or sell property as

a normal individual can do.

The related information for this assignment is obtained through the financial year end

report of these companies which generally consists of the company’s balance sheet,

cash flow statement and income statement. This financial year end report is

important for every organisation to provide important financial information for their

stakeholders. Balance sheet is a useful tool in financial management as a summary

of the financial balances of an organisation, either of sole ownership, shared

ownership or public listed corporation. It described the assets, liabilities and owner’s

equity and can used to represent the company’s financial position as of a specific

date.

Income statement or profit and loss account provides the summary of the revenues

and expenses of an organisation through both operating and non-operating activities

and shows the net profit and loss incurred over a specific accounting period.

Meanwhile, cash flow statement is a summary showing the cash obtained and used

during the time interval as specified in its heading. It shows both the operating results

and the associated changes in the balance sheet.

BACKGROUND

1. Public Listed Company – YTL Corporation Berhad

YTL Corporation Berhad is one of the largest public companies listed on the Bursa

Malaysia with the stock code 4677 and company number 92647-H. This company is

founded by Tan Sri Dato’ Seri Yeoh Tiong Lay in 1955 with his eldest son, Tan Sri

Dato’ Seri (Dr) Francis Yeoh Sock Ping as the Managing Director in 1988. In 1985, it

has grown from a single listed company to a group of 5 listed companies which have

a combined Market Capitalisation of approximate RM30.3 billion and total assets of

over RM53.6 billion as at 30 November 2014.

YTL is now an international utilities company where more than 70 percent of its

revenues are come from outside Malaysia. It was also the first Asian non-Japanese

company to be listed on Tokyo Stock Exchange since 1996.

The core businesses of YTL Corporation are ownership and management of

regulated utilities and other infrastructural assets. The major contributor for this

company, which is its utilities division made up of power generation and merchant

multi-utilities businesses in Singapore; water and sewerage operations in UK; and

also power generation, power transmission and communications businesses in

Malaysia, Australia and Indonesia.

The other YTL Corporation’s portfolio of business includes:

1 Cement Manufacturing YTL Cement

2 Construction Contracting Syarikat Pembinaan Yeoh Tiong Lay Sdn

Bhd (SPYTL)

3 Operational and Maintenance

(O&M) Activities

YTL Power International Berhad

4 Property Development &

Investment

YTL Land & Development Berhad

5 Hotel Development & Investment YTL Hotels

6 Information Technology Initiatives YTL e- Solutions Bhd (YTLE)

This company’s strategy to offer “World Class Products and Services at Competitive

Prices” extends across its great range of business activities and had achieved a large

growth rate of 55% over the 15 years to 2010.

2. Sin Hup Seng Trading

Sin Hup Seng Trading is a tyre trading house established in year 1999. It is a

shared ownership company founded by Mr. Tan and Madam Nim, with both holding

the share equally, i.e. 50 % each. The company which is located at Simpang

Rengaam, Johor has more than 10 years’ business experiences in the related field.

The long business period has successfully expanded its customer sources across

several regions in Kluang.

The business scope of Sin Hup Seng Trading not only includes providing wide variety

of tyre products, as well as delivering tyre installation services. A vast selection of

tyre brands, ranging from local to imported ones, such as Bridegestone, Dunlop,

Continetal and others is made available to meet the needs and wants of clients.

Meanwhile, the large stock capacity of tyres allows services to be provided for normal

passenger cars, light truck, bus, lorry etc. To name, there are car tyres, 4x4 tyres,

light truck tyres, truck & bus tyres, off-the-road tyres and forklift tyres.

3. Natural Beauty Alteration Centre

Natural Beauty Alteration Centre was established on year 2013. It is a tailor shop

located at Kluang, Johor. Natural Beauty Alteration Centre is a single ownership

company and it is still consider a new establish company since the tailor shop is

established on March of year 2013 and business is start on May of year 2013.

Natural Beauty Alteration Centre is a small business that establish by a

women and the main product sell by the company are school uniform, fashion clothes

and cloth. The business is only run by the owner herself and sometime by her

daughter. The owner of the business is a professional tailor that undergo training at

Astitchworks Concepts Institution of Singapore. She is knowledgeable regarding to

different type of clothes such as Malay costume, Chinese costume and Indian

costume.

ANALYSIS

Introduction

As the business activities and the method of ownership involved companies are

different, there is no way to compare their financial performance only on numerical

view. Hence, we analysed and compared their financial performance by comparing

their main incomes and liabilities and the way they manage the income and liabilities.

The financial structure of these three companies and their process to produce the

financial year end report are also analysed and compared.

Core Business and Contribution of Main Income

1. YTL Corporation

As stated in the company’s 2013 annual report, the revenue had been increased

from RM8,892,125,000 at 2009 to RM19,972,948,000 at 2013. Their main income

and increase in profit are from their businesses of property development, hotel and

power station O&M operations. Recently, the drastic increase in profit are due to

better margins on electricity sales and tank leasing, better pricing from their water

and sewerage operations and lower operating expenses in the multi-utilities division.

75.3% of the corporation’s revenue and 72.4% of non-current assets are from the

corporation’s overseas operations, especially the corporation’s power generation,

merchant multi-utilities and power transmission businesses. YTL Power’s has several

wholly-owned subsidiaries company in Malaysia and Singapore, namely YTL Power

Generation Sdn Bhd and YTL PowerSeraya Pte Ltd respectively, as well as has

associated companies in Indonesia and Australia, including PT Jawa Power and

ElectraNet Pte Ltd respectively. This also can see in term of their hotel development

Current Asset = RM32,900,115,000Non-current asset = RM20,719,379,000

Total Liabilities = RM38,061,749,000

Total Asset = RM53,619,494,000

 

Current Liabilities = RM38,061,749,000Non-current Liabilities = RM29,952,043,000

Equity = RM15,557,745,000

 

and management in which their Starhill REIT comprises assets in Japan and

Australia

According to the revenue statement in the annual report, the main revenue in 2013 is

their sales of electricity which account for RM11,006,805,000, followed by sales of

water, treatment and disposal of waste water; sales of goods; and sales of fuel oil

which account for RM2,507,191,000; RM2,545,660,000; and RM1,525,348,000

respectively.

By studying their cash flow statement, their main income in term of cash can be

divided into cash from operating activities, cash from investment activities and cash

financing activities. This indicate that the main income for this corporate not only from

their operating activities, but also investment including investment in subsidiaries, in

associated company and in jointly controlled entity, as well as from financing

activities such purchase and selling of share, bonds and borrowing. Based on the

cash flow statement also, the main cash or cash equivalent expenses are

depreciation non-current assets and interest expenses which accounted for

RM1,441,564,000 and RM1,001,293 respective.

In the balance sheet of YTL Corporation, the total assets are balance with

corporation’s equity combine with total liabilities as the shown in the formula below:

Current Asset + Non-current Asset = Equity + Current Liabilities + Non-current

Liabilities

As in 2013, the total asset is RM53,619,494,000 which balances with the

combination of total liabilities of RM38,061,749,000 and equity of RM15,557,745,000

2. Sin Hup Seng Trading

The company, which acts as middle supplier, generates revenue through regional

tyre supply to car services center, transport agency, delivery’s company, tyre trading

and so on. Basically, non-current asset used for revenue generation in this company

is lorry. There are six capital assets (lorries-MW 8114, JEH 8010, JER 8010, JEQ

1431, JKM 5292, JPC 7793) being employed, and yet, one of those (lorry JER 8010)

has been disposed in year 2013 due to termination of life. Not forgetting the fixed

assets that are depreciated by the company for more than a year in earning profit for

their business, namely, office renovation, furniture & fittings, office equipment, mobile

phone, computer and fax machine. Hence, net book value for all the fixed assets are

RM 163,149.23, according to the following formula.

Net Book Value = Cost of Asset – Accumulated Depreciation (disposal value is

applicable in Sin Hup Seng Trading)

While current assets for revenue generation here is referred to accounts receivable,

sundry deposit and cash either in hand or in bank. To explain, trade debtors (sheet 4)

from who cash amounts are collected has contributed RM 135,551.45 for the year

whereas total of cash and sundry deposit (refers to deposit in which no interest is

paid) are RM 30,761.71 and RM 11,500.00 respectively. The amounts might not only

be come from tyre supply, but also from the available tyre installation services.

In Sin Hup Seng Trading, only current liabilities which are expected to be liquidated

within the year have been obliged. As shown in balance sheet, current liabilities for

year 2013 comprised of hire purchase of a lorry (Lorry Hino- JPC 7793) and trade

creditors. There are no non-current liabilities as the portion of bank loan which is

divided into 36 installments (3 years) is due within year 2013 on the balance sheet

date.

Hence, it can be found out that the equity of the company is RM 288,191.59 by

following the below formula.

Equity = Fixed Assets + (Current Asset – Current Liabilities)

= RM 163,149.23 + (RM 177,813.16- RM 52,770.80)

= RM 288,191.59

The half bottom of balance sheet has shown the balanced amount of equity. From

the partner’s current account, it demonstrated that the total sum of retained earnings

brought forward and yearly net profit is RM 194,191.59. The reason of not having

capital in the account might owe to . After partners’ drawings have been deducted,

the equity’s amount shown is RM 288,191.59, same as the value calculated before.

The partner’s drawings for this incorporated company are RM 47,000 each for two

individuals, which have shown in sheet 3.

To make matter clear on net profit in the year 2013, a total amount of RM

1,012,094.80 is obtained through revenue and gain on disposal of fixed asset (lorry-

JER 8010). The net profit can be calculated after deducting the expenses at RM

932,140.94, on items like accommodation, clerk wage, lorry expenses (sheet 5),EPF

contribution etc. which is shown in sheet 2.

3. Natural Beauty Alteration Centre

Natural Beauty Alteration Centre generates income through sales of their handmade

products and also partly from the suppliers. Their handmade products include school

uniform and other fashion products. Their business generates highest profit during

festival seasons such as Chinese New Year in February, Hari Raya in July and so on

as they sell custom made fashion clothes to the customers. Not only that, they also

provide services which helps to alter the clothes of the customers.

The main liability of the company is accrued expenses. The accrued expenses is the

operating cost or expense which use to run the business but the money is not yet

paid for. The is only 1 accrued expenses for the Natural Beauty Alteration Centre

which is the book keeping fee (including 6% printing & stationary) and the cost of

accrued expenses is RM 420. Since the company is only begin their business on

May of 2013 the total income for the year 2013 is only cover 8 months and the total

income value is RM 17,486.00. While for the net profit of the company for year 2013

is RM 2,672.63. The net profit of the company is then become part of the equity of

company. The net profit of the company can calculate by using the formula below:

Net Profit = Revenue or Total Income – (Total Cost of Goods Sold + Total

Expenses)

Hence, net profit for year 2013 = RM 17,486.00 – (RM 11,124.17 + Rm3689.20)

= RM 2,672.63

The equity of Natural Beauty Alteration Centre is RM 27,872.63 and it does not has

non-current liability. The fixed asset of the company consist of renovation (Rm5,

490.00), electrical installation (RM 2,025.00), shop equipment (RM 1, 746.00) and

tool & utensils (RM 243.00). The current assets of the company consist of two

components which are stock (RM12, 774.48) and cash in hand (RM6, 018.15). While

for the current liability, it only has accruals and it cost RM 424.00. The value of equity

can calculate based on the formula below:

Equity = Fixed Asset + (Current Assets - Current Liability)

Hence,

The equity of the company = RM 9, 504.00 + (RM 18, 792.63 – RM424.00)

for year 2013 = RM 27872.63

Financial Structure of Company

1. YTL Corporate

YTL Corporation obtains funds from several sources including through profitable

operations internally and also externally from bond markets, equity market, issue of

share capital and irredeemable convertible unsecured loan stock. The average

revenue of YTL corporate is high enough to fund the future operations of the

corporates. For example, the revenue in 2013 is RM19,972,948,000. The corporate’s

businesses are also financed by bonding and borrowing in which a bond is a promise

to pay in the future in exchange for receiving something today. In 2013, YTL Corp.

has the net cash flow from bonding and borrowing of RM519,122,000 and

RM1,465,920,000. In 2013, YTL also undergo change in composition as a respond to

changing economic and financial market conditions, and had result in RM80,000

extra reserves for the corporation.

Besides, YTL Corporation also issue share capital and issue shares by subsidiaries

to non-controlling interest which contribute total equity of RM1,381,400,000 and

RM181,551,000. YTL Corporation also issue Irredeemable convertible unsecured

loan stock (ICULS) which is a security that can be used to buy underlying common

shares. In YTL Corporation, ICULS is issued by YTL Land & Development Berhad

and YTL Cement Berhad. ICULS can be converted to equity or shares during its

maturity date based on the step-up coupon rate and the interest is payable semi-

annually.

For an insight for the financial organization structure, all the profitability and

development of YTL Corporate Group are fall on the responsible of The Board of

Directors which consists of 9 Executive Directors and 4 non-executive Directors.

Executive Directors are directly responsible for the business operations while the

non-executive directors are independent directors who ensure an independent

judgment on the issues of strategy, performance and resources. The Board and the

13 directors need to make decision on the matters of business expansion and

restricting plans, material acquisitions and disposals, limit of expenditure and capital

alterations plans.

YTL Corporation has also an external Audit Committee to assist the Board of

Directors in the matter of the corporate accounting and practices, as well as

improving the corporate’s business efficiency, the quality of the accounting and audit

function to strengthen the confidence of the public in the corporate and their reported

results. They are required to produce annual financial report. The Audit Committee is

also responsible to review the scope, results, and cost effectiveness of the audit and

also the independence and objectivity of the external auditors, preventing the

external auditors do not give substantial volume of non-audit services to the

Corporate.

Since there is numerous shareholders’ interest needed to be considered,

management of fund is especially important in this corporate. The funds need to be

managed properly to maximise the return for all the contributors of the fund. In this

large company, the management of fund is mainly managed by the Board of

Directors and 13 Directors, and needs to include in the annual report for the

knowledge and reference of all stakeholders, shareholders and whoever interested in

investing in YTL Corporate.

In YTL Corporate, almost two-thirds of the funds are used for investment. Their

investment activities can be further divided into investment in subsidiaries,

investment in associated companies and investment in a jointly controlled entity. In

2013, the net cash flows used in investing activities are RM3,268,342,000. Besides,

the fund is also used for acquisition of property, plant and equipment which can help

in their ongoing operations or increase their productivity capacity. This had cost the

corporate a total of MR1,695,167,000 for property development. Some of the

properties acquired such as hotel properties are also used for lease with a step-up

rate of 5% every five years. According to the annual report, the future minimum lease

payment receivables from leasing hotel properties are around RM573million.

2. Sin Hup Seng Trading

Financial structure is concerned with long-term debt and equity that a company uses

to finance its operation. In the shared ownership company, they raise finance from

bank loans for hire purchase of lorry to support their core business. For example, one

unit of secondhand lorry Hino (JEQ 1431) and one unit of firsthand lorry Hino (JPC

7793) are financed from Public Finance Berhad and RHB Bank respectively. A total

loan of RM 57,500 inclusive interest, payable through 30 installments was taken in

year 2004 for the former while a 36-term interest bank loans at RM 76,930.00 has

been taken in year 2013. Beside of obtaining their funds via bank loan, the company

also operates their business through self-financing.

Basically, Sin Hup Seng Trading employed clerk holding diploma in accounting to

manage its money. Financial statements are produced in planning and organizing the

company’s finances. Yet, no financial department is specially formed as the company

is not incorporated and auditing function is not necessary.

The management of fund is initially started up through issue of sales invoice by

business owner to record the trading parties and lists as well as to describe and

quantify the items sold, with the statement of shipment’s date, prices, delivery and

payment terms. After that, all the source documents are recorded in chronological

order into journal, for posting to general ledger in the end of every month. The

purpose of journal is used to keep track on daily business transaction, and thus,

summarizes the accounting information of the company as central repository. To

check if the general ledger is in balance, trial balance is made for adjustment before

making closing entries. Lastly, financial statement is produced with income statement

and balance sheet as summary report.

3. Natural Beauty Alteration Centre

According to the business owner, their business is solely self-financing. The shop lot

is owned by the business owner’s father. Besides, the sewing machine that played

an important role as a capital to produce the fashion products is owned by the

business owner for years before attending training to be a professional tailor. This is

because of her interest and passion towards sewing and hence, developed into a

business. The raw materials from suppliers and the utilities expenses is paid and

supported by the business owner alone. The financial is solely fund by the business

owner who got support from her spouse and other family members. Her business

does not depend on the loan from bank.

The financial organization structure of the company is managed solely by the

business owner. The owner did not hire any crew or employee to run the business

but the business owner is aided by her daughter. All the revenue of the company will

be collected by the business owner to cover the expenses and the rest will be the net

profit.

The fund is managed through the sales invoice issued by the business owner. It

keeps a record of the sales stating the products, quantity and even services together

with the agreed price and also the date of the sales invoice. The sales will then be

recorded into a journal that keep accounting transaction in sequence, posting to

ledger at the end of each month and prepare of trial balance for annual book keeping

purposes.

Discussion

After analyses the three different type of companies, we have found that, there are a

few difference between the company in the producing the financial year end report.

The differences between the companies is shown on the table below:

Balance sheet

Balance sheet is a summary of the financial balances of the company. Basically

the balance sheet of both of the three companies are same, where it includes

assets, liabilities and equity items of the company. The only different inside the

balance sheet is the complexity and type of items.

Single

Ownership

Shared

Ownership

Public Listed Company

-For the assets, normally will include cash, merchandise, property, customer receivable and equipment.-For the liabilities, normally will include taxes due, outstanding loans and account payable.-For the equity, it will include owner’s capital for single ownership company and partners’ capital for shared ownership company.-

-For the assets, liabilities and equity items it has more complex items such as intangible assets, deferred tax assets and liabilities.-The equity account for public listed company also as varied as common stock, preferred shares, dividend payments, retained earnings and treasury stock.-The public listed company which is large in size is required to prepare balance sheet for each division of their business which is then required to be incorporated in the organization’s annual report.

EquityIn preparing the financial year end report, one of the significance differences is shown in equity. Equity is the residual value of investors in assets after all the liabilities are paid.

Equity = Total Assets – Total LiabilitiesFor the three analyzed companies, the shareholders’ equity is positive where the shareholders’ deficit does not happen.

Single Ownership Shared Ownership Public Listed CompanyThe equity is spread among owner.

The equity is divided evenly among the two shareholders.

The equity is not shared to anyone but only the business ownership.

Taxation

For taxation, the form need to fill by the three companies is different.

Single Ownership Shared Ownership Public Listed Company

-They need to fill in Form B for taxation purpose and the owner of the company need to pay the tax.

-They need to fill in Form P and Form B for taxation purpose. The Form P is fill by the company but the company no need pay the tax, where the tax is pay by the partners/ stake holder of the company.-The partners/stake holder need to fill in the Form B and the tax of the company is share by the partners of the company.

- They need to fill in Form C and Form BE for taxation purpose.- Form C is fill by the company and the tax is paid by using the company funding.- The director of the company need to fill the Form BE and he need to pay their own income tax.

Income Statement

The income statement for the above three company will be prepare first where the

net income or loss will become part of the Statement of Owner’s Capital. However

the income statement for the above three company has a significant different.

Single Ownership Shared Ownership Public Listed Company

- Not including any

salary expense and

income taxes

-Same with single

ownership

- Basically same with single

and shared ownership but

including income taxes and

salary expense

Financial Statement Requirement

A formal record of the financial activities of a business in well structure and easy to

understand.

Single Ownership Shared Ownership Public Listed Company

-Sole ownership is not required to prepare audited financial statements.-They only need to do book keeping to have proper and substantial accounting and other records to show the real financial status of the company.

-The same applied as for the single ownership. But the shared ownership with SDN BHD will have to prepare audited financial statements.-The purpose of preparing financial statement id for the reference of the partners in the company to keep track of company financial status.

-The company is required to prepare complete audited financial statement which includes profit and loss account, balance sheet and explanatory notes to the account.-The purpose of preparing financial statement is for the references of shareholder and to publish it.

Summary

In summary, by analyses the financial statement of Natural Beauty Alteration

Centre (single ownership), Sin Hup Seng Trading (shared ownership) and YTL

Corporation Berhad (public listed company). We found that there are a few significant

differences between the in term of preparation of income statement, balance sheet,

and taxation for the financial year end report. Besides that, the financial organization

structure of the company and the way they manage their fund is also different

depend on the type of company.

However, the process of collect raw information for book keeping purpose is

same for both of the three companies, where both of the companies need to follow

the basic accounting cycle by go through the process of collection of source

document such as receipts, invoices and cheques, posting the information from the

document to the book of original entry, posting to ledgers at the end of each month,

preparation of pre-adjusted trial balance by extract the balance of ledger and

account, adjustment of accrued revenue and expenses, preparation of post-adjusted

trial balance, production of financial statements which including income statement

and balance sheet and finally closing entries of the year end account.

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