Financial Performance Analysis of CV. Khalim in Comparison with Other Local Companies in Rattan Furniture Industries

Financial Performance Analysis of CV. Khalim in Comparison with Other Local Companies in Rattan Furniture Industries Fella Shofatunnisa 1 and Subiakto Soekarno 2 Indonesia has so many natural resources that can be put to good uses which one of them is rattan. Indonesia is the largest producer of rattan where 80% of rattan in the world is produced in Indonesia. CV. Khalim, one of many rattan funiture companies in Indonesia, and is located in Cirebon, the center of rattan furniture industry. CV. Khalim is constituted one of the pioneers in Indonesian rattan furniture industry since 1982. The business expand its market to Japan, followed by export to European countries, including Germany, Netherlands, France, Austria, Belgium, Poland, Ukraine, Turkey and United States. Back than in 2005 in Indonesia, there were a policy that issued by the Ministry of Trade that allow the export of rattan s raw, and impacted to many of rattan s hand craftsmen and rattan entrepreneurs who suffered a setback because they lacked of raw. CV. Khalim was affected too but they sustain from that crisis. This condition is really interesting to be analyzed through its financial performance to know whether the industry is falling down or it is just the CV. Khalim who is falling down. This paper is made for assessing CV. Khalim financial performance with other companies in local rattan industry, which are PT. V. Archipelago Export, CV. Felladiva, CV. Sumber Alam Rotan, CV. Maha Karya as the comparison. There are three methods used to know the condition of CV. Khalim compared to others, there are Financial ratio analysis using CAGR, DuPont system of analysis, and Economic Value Added. The results are used for the recommendation and suggestion for company strategy to enhance company s financial performance in order to be the leader in the local rattan industry. Keywords: Financial Performance, Financial Ratios Analysis, Local Industry, Rattan Furniture, Export Field of Research: Finance (Financial Performance Analysis) 1. Introduction In Indonesia, business in furniture always makes its benefit. Furniture will always be needed by people in the world to support various human s activities such as seating and sleeping. In the last 2012, the trend in Indonesia is still the furniture with minimalist style, the trends does not change even Indonesia in its positive economic and the rising buying power of its citizens. Minimalist-style furniture tends to be simple and modern which fits nowadays situation. Despite of all that facts, there are other furniture producers which one of them is handcrafted furniture whose still reach its own market. Most of handcrafted furniture in Indonesia are made of solid wood and wood s processed (such as plywood, MDF, and particle board), bamboo, and rattan. 1 Fella Shofatunnia S.Mn, School of Business and Management, Institut Teknologi Bandung, Indonesia. Email: fella@sbm-itb.ac.id 2 Ir. Subiakto Soekarno, MBA, RFA, School of Business and Management, Institut Teknologi Bandung, Indonesia. Email: subiakto@sbm-itb.ac.id 1

Unfortunately, in 2005, there were a policy that issued by the Ministry of Trade that allow the export of rattan s raw, and impacted to many of rattan s hand craftsmen and rattan entrepreneurs who suffered a setback because they lacked of raw. It caused the increasing of unemployment rate, bad credit, reduced foreign exchange earnings, and declining contributions to the national rattan processing industry in the creation of GDP (Gross Domestic Product). CV. Khalim, one of many rattan companies in Indonesia, and is located in Cirebon, the center of rattan furniture industry. CV. Khalim is one of a company who sustain from the 2005 policy. CV. Khalim constituted one of the pioneers in Indonesian rattan furniture industry. Focusing its first marketing penetration in domestic market, the company set up its first showroom in the capital city of Indonesia, Jakarta. After big success in the domestic market, in 1987, CV. Khalim started to expand its market to Japan, followed by export to European countries, including Germany, Netherlands, France, Austria, Belgium, Poland, Ukraine, Turkey and United States. Positioning itself in the mid to high quality market segments, the company has all the expertise and experience in producing good quality of rattan furniture for these target market segment. Having production facilities on a total land area of 8,100m2, CV. Khalim has full production capacity of 24-30 containers per month and has around 400 workers. Unfortunately, CV. Khalim s sales from 2009 until 2012 is decreasing continually. Consider the previous description, an analysis to know how the performance of CV. Khalim compared to other local companies in the same industry and to analyze the real problem of CV. Khalim s decreasing performance. 2. Literature Review 2.1 Financial Ratio Analysis Ratio analysis involves methods of calculating and interpreting financial ratios to analyze and monitor the firm s performance. Ratio analysis basically input data from income statement and balance sheet. There are two types of ratio comparisons, cross-sectional analysis and time-series analysis. Cross-sectional analysis is a comparison different firms financial ratios at the same point of time; involves comparing the firm s ratios to those of other firms in its industry or to industry average. While time-series analysis is an evaluation of the firm s financial performance over time using financial ratio analysis. (Gitman, 2012) 2.2.1 Time-Series Analysis Time-Series Analysis is similar with horizontal analysis. This kind of financial ratio analysis is evaluating financial performance company over time. From time to time, the ratio s value indicates the company s progress in a period of time. If there are significant change in the ratio in each year, either positive or negative, than that would mean there is one problematic issues happened in the company. 2.2.2 Cross-Sectional Analysis The other kind of financial ratio analysis is cross-sectional analysis which comparing the financial ratio of one company with the other companies in the same industry in the same time period. The variance of financial ratio from several companies will direct to the 2

industry average of each ratios and it will be compared to each financial ratio. The best year to be evaluated is the recent year because it is considered to be the newest trend happened in the company and it is also happened to be the benchmark of its development. The benchmark in this analysis is more to the competitor in the same industry itself, in other words, this analysis is also called benchmarking. 2.2.3 The Ratios Basically, there are five categories of financial ratio. They are liquidity, activity, debt, profitability, and market ratio. From liquidity, activity, and debt ratios, we could see how risky the company is. Profitability ratios will measure return, and market ratios will show both of risk and return. 2.2.4 CAGR (Compounded Annual Growth Rate) Compounded annual growth rate is one of calculation to know the trend of a company. Assessing financial performance, we need not only the latest financial performance, but it suggested to have more than one year to know their growth, and CAGR is one of the calculation to know it. CAGR is year-over-year growth rate of an investment over a specified period of time. The compound annual growth rate is calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period being considered. (Investopedia, 2013) The equation for CAGR is as following : 2.3 DuPont System of Analysis Source: www.investopedia.com The DuPont system of analysis is used to dissect the firm s financial statements and to assess its financial condition. It merges the income statement and balance sheet into two summary measures of profitability, return on assets (ROA) and return on common equity (ROE). (Gitman, 2012) In simple thinking, DuPont system of analysis is done by breaking the formula of ROE into three parts ROE = Net profit margin x Assets turnover x Equity multiplier 1. Profitability is measured by profit margin : 2. Operating efficiency is measured by asset turnover : 3. Financial leverage is measured by equity multiplier : For Return On Assets (ROA) it is done just by doing 2 parts : ROA = Net profit margin x Assets turnover 3

2.4 Economic Value Added Economic Value Added or EVA is a measure of economic profit. It is calculated as the difference between the Net Operating Profit After Tax and the opportunity cost of invested Capital. This opportunity cost is determined by the weighted average cost of Debt and Equity Capital ("WACC") and the amount of Capital employed. (Stewart, 2013) 3. The Methodology and Model Hereby, the framework that used in conducts this research: 1 Problem Identification 2 Theoritical Foundation 3 Methodology 4 Data Collection 5 Data Analysis 6 Conclusion Figure 3.1 Research Framework In this paper, the data that will be needed and to be gathered are the financial reports of CV. Khalim as the main company for this project from 2009-2012, and also the financial reports of the comparison year 2009-2012 too. The comparison companies are PT. V. Archipelago, CV. Felladiva, CV. Sumber Alam Rotan, and CV. Maha Karya. Some other information is based on research in the internet and a closed interview with the owners of the companies. After completing all the financial reports of each company and all the data needed, the next step is to analyze the data to have the result. The financial report of each company is the basis data which is used for the analyzing the financial performance, finding CAGR from the financial ratio, common size analysis and also the DuPont Analysis. In this paper, the author uses several steps to analyze the financial performance of the companies. The first step is to calculate the financial ratios and to find the Compound Annual Growth Rate (CAGR) of each company. The financial ratio that used in this final project is only 4 categories which is liquidity ratio, activity ratio, debt ratio, and the last is profitability. Market ratio is no needed because all 5 companies are private companies. Analyzing financial ratio itself is divided into two analysis, time-series analysis and cross-sectional analysis. The second step is DuPont Analysis which will be used to dissect the firm s financial statement and to assess its financial condition. The last is analysis using Economic Value Added to know the economic profit of each company. 4

4. Data Analysis 4.1 Time Series Analysis Table 4.1: CV. Khalim Financial Ratio 2009-2012 Financial Ratios 2009 2010 2011 2012 CAGR Liquidity Current Ratio 1.59 1.24 1.40 1.35-5.31% Quick (acid-test) Ratio 1.49 0.71 1.40 1.21-6.52% Activity Inventory Turnover 139.56 11.40-37.96-35.21% Average collection period 18.91 24.12 65.27 42.49 30.98% Average payment period 35.41 85.63 88.97 100.18 41.43% Total assets turnover 8.34 5.25 4.13 5.33-13.88% Debt Debt Ratio 49.36% 63.77% 55.25% 54.99% 3.67% Times interest earned ratio 2.62 1.17 1.54 3.65 11.68% Debt to equity 97.48% 176.05% 122.77% 122.19% 7.82% Profitability Gross profit margin 12.88% 26.06% 21.57% 46.29% 53.16% Operating profit margin 0.51% 1.19% 0.51% -0.96% -223.60% Net profit margin 0.31% 0.03% 0.15% 0.80% 36.86% Return on total assets (ROA) 2.61% 0.16% 0.63% 4.27% 17.87% Return on common equity (ROE) 5.15% 0.44% 1.41% 9.48% 22.59% In these four years, CV. Khalim is not in a good condition, in other word the growth of the company is undesirable, from its each year that is very fluctuated. From 2009 to 2010, there is a surprising decline of ratio because of the bigger the debt that they have but the current asset is not enough to cover it all. In term of activity, CV Khalim s business activity is seen from their inventory turnover that can be sold, the collection period, and how fast CV Khalim could make their payment. The result is, CV Khalim is not in their prime condition because all four activity ratios show negative value of CAGR which means their inventory turnover is not managed well, like in the financial report that stated of zero inventory. Furthermore, the inventory turnover is not the only one that got the negative ratio, the average collection period and the average payment period is longer than usual which means it is negative side for CV Khalim. The longer they pay or collect the money, that means there is something wrong with their liquid assets. Their ROA and ROE are unstable. 5

Liquidity Table 4.2: Pt V. Archieplago Financial Ratio 2009-2012 Financial Ratios 2009 2010 2011 2012 CAGR Current Ratio 1.16 1.77 2.26 2.30 25.42% Quick (acid-test) Ratio 0.43 0.76 0.90 1.23 42.49% Activity Inventory Turnover 10.52 16.15 16.11 16.22 15.53% Average collection period 10.56 10.55 10.56 18.68 20.96% Average payment period 67.16 32.02 23.82 30.21-23.38% Total assets turnover 4.36 6.73 7.29 6.59 14.77% Debt Debt Ratio 51.15% 37.57% 30.26% 34.71% -12.12% Times interest earned ratio 8.16 8.89 8.16 8.16 0.00% Debt to equity 104.69% 60.19% 43.38% 53.17% -20.22% Profitability Gross profit margin 8.92% 9.10% 9.11% 9.08% 0.60% Operating profit margin 2.97% 2.97% 2.97% 2.97% 0.01% Net profit margin 1.79% 1.82% 1.71% 1.94% 2.79% Return on total assets (ROA) Return on common equity (ROE) 7.81% 12.22% 12.44% 12.81% 17.96% 15.98% 19.58% 17.84% 19.62% 7.09% Over the years this company can manage all of their liquid assets so that the current debts can also be covered. Every year, their asset is always incremented while the debt is not too significantly changed. PT. V. Archipelago Export, in terms of making the inventory to be offered to generate profit, each year is declining but their delegated asset when compared to their sales every year is getting nice and makes the management of their assets can be said either. In charge of their account receivable, they found it is a troublesome because it takes a long time but the good things is at least, they be able to pay their bills quickly every year so that the company will be trusted by the supplier.. 6

Liquidity Table 4.2: CV. Felladiva Financial Ratio 2009-2012 Financial Ratios 2009 2010 2011 2012 CAGR Current Ratio 21.05 1.23 1.99 2.92-48.23% Quick (acid-test) Ratio 19.46 0.75 1.35 2.04-52.82% Activity Inventory Turnover 85.53 10.87 19.08 23.49-35.00% Average collection period 38.25 20.12 23.42 15.29-26.33% Average payment period 3.82 101.70 42.86 25.28 87.80% Total assets turnover 1.31 0.40 0.77 1.12-5.13% Debt Debt Ratio 0.78% 4.41% 4.83% 4.33% 76.97% Times interest earned ratio 11.79 26.99 16.45 13.14 3.69% Debt to equity 0.79% 4.89% 5.64% 5.22% 87.81% Profitability Gross profit margin 18.39% 42.89% 24.00% 20.01% 2.86% Operating profit margin 1.82% 4.37% 2.76% 2.29% 7.97% Net profit margin 1.66% 4.21% 2.59% 2.11% 8.31% Return on total assets (ROA) Return on common equity (ROE) 2.18% 1.67% 2.01% 2.36% 2.75% 2.19% 1.85% 2.34% 2.84% 9.05% Seeing from the trends, it's clear this company suffered a setback in terms of coping with their current liabilities, but if we look closely, the actual numbers still look acceptable, but indeed every year they experienced a decline in the ratio numbers which means this company went into decline, but this is due to several factors. In 2009, CV Felladiva has the greatest asset between the other 3 years and has the smallest current liabilities. Judging from the ratio of its activity, the inventory turnover had negative growth. Since 2009 until 2012, CV Felladiva s debt is increasing. In term of profitability, CV Felladiva, in the profit ratio showed a positive ratio which means these companies are getting increasingly good everyday as from the year 2009 to 2010 which shows a very significant growth, but continued with the decrease in gross profit margin, operating profit margin and net profit margin at about 50% of the previous ratio in 2009. For ROA and ROE, it is also following the trend which is growing in a good way except for year 2011 which is being the worse year of CV Felladiva because of its decreasing sales. 7

Table 4.3: CV. Sumber Alam Rotan Financial Ratio 2009-2012 Financial Ratios 2009 2010 2011 2012 CAGR Liquidity Current Ratio 2.35 2.90 3.93 4.38 22.96% Quick (acid-test) Ratio 1.78 2.32 2.74 2.92 17.93% Activity Inventory Turnover 66.99 49.19 6.64 19.57-33.65% Average collection period 17.8 21.46 22.61 10.37-16.49% Average payment period 13.58 17.99 65.85 18.31 10.47% Total assets turnover 17.03 5.92 1.62 8.73-19.98% Debt Debt Ratio 37.28% 16.93% 12.67% 22.85% -15.06% Times interest earned ratio 6.13 8.23 1.94 14.34 32.76% Debt to equity 48.48% 49.93% 33.76% 29.61% -15.16% Profitability Gross profit margin 15.96% 17.09% 38.21% 25.44% 16.82% Operating profit margin 0.94% 0.80% 0.30% 3.85% 60.17% Net profit margin 0.78% 0.70% 0.14% 3.58% 65.92% Return on total assets (ROA) 13.35% 4.15% 0.23% 31.26% 32.78% Return on common equity (ROE) 17.37% 12.24% 0.62% 40.51% 32.62% The company had a positive trend in liquidity ratio that shows that each year the company can always overcome all their current liabilities enough with their current asset. Their asset every year is increasing but not significantly, but the good news is the debt is getting smaller. To conclude of this ratio, this company is experiencing a worse year because in 2009 is good but from 2010 to 2012, the growth is bad - so the inventory turnover drastically dropped. In terms of the collection period, it is nice because judging from the negative CAGR that shows the sooner they get back the value that they remove so that the money can be used for money turnover in the company. In profitability ratio, all the ratios show a positive growth which means good for the company s future. It is fluctuated but it results the positive one. All the CAGR of each profitability ratios is showing a positive growth but actually the sales is not increasing in 4 year. It is positive just because the 2009 CAGR and 2012 CAGR showing a positive growth 8

Liquidity Table 4.4: CV. Maha Karya Financial Ratio 2009-2012 Financial Ratios 2009 2010 2011 2012 CAGR Current Ratio 1.15 1.17 1.31 0.86-9.36% Quick (acid-test) Ratio 0.96 0.90 1.11 0.47-21.24% Activity Inventory Turnover 29.92 10.27 12.66 8.77-33.57% Average collection period 22.51 39.02 92.22 24.85 3.35% Average payment period 91.30 186.21 202.84 153.25 18.84% Total assets turnover 4.22 2.36 2.32 3.58-5.38% Debt Debt Ratio 63.30% 67.80% 69.57% 89.79% 12.36% Times interest earned ratio 5.74 5.07 41.41 7.04 7.05% Debt to equity 172.46% 210.60% 228.57% 879.12% 72.10% Profitability Gross profit margin 14.37% 19.50% 22.76% 14.57% 0.47% Operating profit margin 0.80% 0.67% 7.52% 0.73% -3.06% Net profit margin 0.66% 0.54% 7.29% 0.63% -1.82% Return on total assets (ROA) Return on common equity (ROE) 2.79% 1.27% 16.87% 2.24% -7.10% 0.66% 0.54% 7.29% 0.63% -1.82% If judging from the trends, negative trend shows itself in this company. But the figure still could be accepted only it does not get better every year. For current asset are not included the inventory, this company has been having a bit of trouble and coupled with the reduced asset inventory numbers so that the growth shows a huge decline. CV Maha Karya is in a totally big risk if we see the ratio of their debt ratio. We could say that almost 100% of their assets to generate sales is financed by their debt and it also happen in their debt to equity, the value of ratio is even much bigger that beyond 100% of debt to equity ratio. It is a bit dangerous because they probably do not have much liquid assets for paying their short term debts. Negative CAGR could be presented as a bad condition of this company in generating their profit. Only their gross profit margin that shows a positive growth even it s only less than 1% of growth. The operating profit margin shows a deceleration due to the increasing of their operating expense. The net profit margin is connected to the increasing of operating expense, the operating profit is decreasing and it automatically lets down the net profit. For ROA and ROE also have negative growths that may become unattractive choice to be invested. 9

4.2 Cross-sectional Analysis Table 4.5: Cross-Sectional Result in the Fiscal Year of 2012 Financial Ratios Average CV. Khalim PT. V. Archipelago CV. Felladiva CV. Sumber Alam Rotan CV. Maha Karya Liquidity Current Ratio 2.36 1.35 2.30 2.92 4.38 0.86 Quick (acid-test) Ratio 1.58 1.21 1.23 2.04 2.92 0.47 Activity Inventory Turnover 21.20 37.96 16.22 23.49 19.57 8.77 Average collection period 22.34 42.49 18.68 15.29 10.37 24.85 Average payment period 65.44 100.18 30.21 25.28 18.31 153.25 Total assets turnover 5.07 5.33 6.59 1.12 8.73 3.58 Debt Debt Ratio 41.33% 54.99% 34.71% 4.33% 22.85% 89.79% Times interest earned ratio 9.26 3.65 8.16 13.14 14.34 7.04 Debt to equity 217.86% 122.19% 53.17% 5.22% 29.61% 879.12% Profitability Gross profit margin 23.08% 46.29% 9.08% 20.01% 25.44% 14.57% Operating profit margin 1.78% -0.96% 2.97% 2.29% 3.85% 0.73% Net profit margin 1.81% 0.80% 1.94% 2.11% 3.58% 0.63% Return on total assets (ROA) Return on common equity (ROE) 10.59% 4.27% 12.81% 2.36% 31.26% 2.24% 14.62% 9.48% 19.62% 2.84% 40.51% 0.63% This analysis is based on the ratio that is calculated based on data in 2012. And the industry average is calculated from the average ratio generated by 2012 on the fifth of this Corporation. Broadly speaking, in 2012 is the recent year so that in 2012 it is relevant to see what's going on in the furniture rattan industry between local companies in Cirebon, this numbers generate a positive figure, but the positive figures were not all good when viewed on average collection and payment period which showed positive figures that will be better if it shows negative growth, not that small and not that big, depends on what the companies needed. In term of liquidity, CV. Sumber Alam Rotan got the highest ratio of current asset with 4.38 while the industry average is 2.36. The same thing for quick ratio also goes to CV. Sumber Alam Rotan. The next ratio is activity ratio, CV. Khalim got the highest value in inventory turnover and even higher than the industry average, while the other four companies inventory turnover ratio is slightly close to the industry average which means good because the company is able to utilize their inventory. Between those five companies, in term of debt ratio, CV. Khalim and CV. Maha Karya again becoming the lowest position because it is far from the average. CV. Khalim s debt ratio is acceptable but in CV. Maha 10

Karya, the debt compared to the equity is really a big number and the difference between the CV. Maha Karya ratio and the industry average is four times bigger. The profitability shows a positive average industry. 4.3 DuPont Analysis Table 4.12: Table ROA Result of 5 Companies (2009-2012) ROA Analysis 2012 Net profit/sales Sales/Total Assets ROA 2012 CV. Khalim 0.008 5.329 0.043 PT. V. Archipelago 0.019 6.590 0.128 CV. Felladiva 0.021 1.117 0.024 CV. Sumber Alam Rotan 0.036 8.728 0.313 CV. Maha Karya 0.006 3.576 0.022 2011 Net profit/sales Sales/Total Assets ROA 2011 CV. Khalim 0.002 4.129 0.006 PT. V. Archipelago 0.017 7.286 0.124 CV. Felladiva 0.026 0.773 0.020 CV. Sumber Alam Rotan 0.001 1.623 0.002 CV. Maha Karya 0.073 2.315 0.169 2010 Net profit/sales Sales/Total Assets ROA 2010 CV. Khalim 0.000 5.252 0.002 PT. V. Archipelago 0.018 6.732 0.122 CV. Felladiva 0.042 0.396 0.017 CV. Sumber Alam Rotan 0.007 5.917 0.042 CV. Maha Karya 0.005 2.359 0.013 2009 Net profit/sales Sales/Total Assets ROA 2009 CV. Khalim 0.003 8.344 0.026 PT. V. Archipelago 0.018 4.360 0.078 CV. Felladiva 0.017 1.309 0.022 CV. Sumber Alam Rotan 0.008 17.034 0.134 CV. Maha Karya 0.007 4.222 0.028 From 2009 until 2012, CV Khalim and four others company always get positive ROA. Especially, CV Sumber Alam Rotan who got mostly the best ROA in every years. CV Sumber Alam Rotan s total asset turnover is very high which means the company could wisely and effectively use the assets to generate more sales. In term of profitability, PT V. Archipelago and CV Felladiva is categorized as high if compare to the other one, in every year, both of companies is catching up to be the first in profitability. It means that both companies are more profitable than CV Khalim, CV Sumber Alam Rotan whose ROA are mostly high, and CV Maha Karya. Actually, CV Maha Karya s profitability is the best one in 2010, but CV Felladiva and PT. V Archipelago is leading in term of profit. CV Khalim s ROA is pretty bad even it is not the worst, but the second worst of all. CV Khalim s ROA is keep declining as year goes by, the sales profitability is also decreasing due to competitive competitor in Indonesia with the new company especially who produce synthetic rattan furniture, since CV Khalim is a classic and old fashioned company, so it was a big threat for CV Khalim. 11

Table 4.13: Table ROE Result of 5 Companies (2009-2012) ROE Analyis 2012 Net profit/sales Sales/Total Assets Total Asset/Total Equity ROE 2012 CV. Khalim 0.008 5.329 2.222 0.095 PT. V. Archipelago 0.019 6.590 1.532 0.196 CV. Felladiva 0.021 1.117 1.205 0.028 CV. Sumber Alam Rotan 0.036 8.728 1.296 0.405 CV. Maha Karya 0.006 3.576 9.791 0.219 2011 Net profit/sales Sales/Total Assets Total Asset/Total Equity ROE 2011 CV. Khalim 0.002 4.129 2.222 0.014 PT. V. Archipelago 0.017 7.286 1.434 0.178 CV. Felladiva 0.026 0.773 1.169 0.023 CV. Sumber Alam Rotan 0.001 1.623 2.665 0.006 CV. Maha Karya 0.073 2.315 3.286 0.554 2010 Net profit/sales Sales/Total Assets Total Asset/Total Equity ROE 2010 CV. Khalim 0.000 5.252 2.760 0.004 PT. V. Archipelago 0.018 6.732 1.602 0.196 CV. Felladiva 0.042 0.396 1.109 0.018 CV. Sumber Alam Rotan 0.007 5.917 2.949 0.122 CV. Maha Karya 0.005 2.359 3.106 0.039 2009 Net profit/sales Sales/Total Assets Total Asset/Total Equity ROE 2009 CV. Khalim 0.003 8.344 1.975 0.051 PT. V. Archipelago 0.018 4.360 2.047 0.160 CV. Felladiva 0.017 1.309 1.008 0.022 CV. Sumber Alam Rotan 0.008 17.034 1.301 0.174 CV. Maha Karya 0.007 4.222 2.725 0.076 From the table 4.13, PT V. Archipelago and CV. Sumber Alam Rotan have the highest ROE. The positive ROE is not only for PT V. Archipelago and CV Sumber Alam, all companies in each year has positive ROE. The bigger the ROE, it means bigger profit for common shareholders. Basically, every business has its own characteristic to get higher ROE. Sadly, the main company, CV. Khalim, if to be compared with other four companies, CV. Khalim s ROE is really bad. Especially, in year 2010, CV. Khalim got the worst ROE for over these four years. The profitability is the lowest of all. Compared with the other companies, CV. Khalim got the lowest profitability, although at that year, the sales of each company seems decreasing from their annual sales, but the problem is, CV. Khalim is having really a hard time in adapting with the crisis situation, so that they got the lowest sales by the standard of CV. Khalim who can deliver 17 containers in a month, 12

Economic Value Added Proceedings of 4th Asia-Pacific Business Research Conference From DuPont system of analysis, we can say that PT.V. Archipelago is not doubt at all, PT. V. Archipelago and CV. Sumber Alam Rotan as the highest ROE in 2013. For ROA, PT. V. Archipelago and CV. Felladiva is leading the number of ROA, while CV. Khalim is stagnant in the third or fourth position for either ROA and ROA. It does not mean that CV. Khalim is that bad, CV. Khalim did not got the last place, and is still continue to adapt the new trend of the industry. 4.4 Economic Value Added ECONOMIC VALUE ADDED Rp80,00,00,000 Rp60,00,00,000 Rp40,00,00,000 Rp20,00,00,000 Rp- Rp(20,00,00,000) Rp(40,00,00,000) Rp(60,00,00,000) Rp(80,00,00,000) Rp(1,00,00,00,000) 2009 2010 2011 2012 CV. Khalim Rp(17,72,03,492) Rp61,05,118 Rp(19,12,11,546) Rp(5,62,80,377) PT. V. Archipelago Rp13,03,29,273.1 Rp60,39,45,620.7 Rp31,52,02,470.1 Rp32,89,36,012.0 CV. Felladiva Rp(83,12,92,581. Rp(72,82,62,235. Rp(74,04,04,523. Rp(74,88,86,521. CV. Sumber Alam Rotan Rp1,99,47,417.43 Rp(8,01,39,565.0 Rp(10,40,23,599. Rp8,16,08,331.59 CV. Maha Karya Rp(74,66,861.83) Rp(1,19,93,629.2 Rp8,39,51,160.12 Rp(4,04,65,146.1 Figure 4.1 Economic Value Added Trend From the above figure 4.1, after calculating each company s EVA, the graphics show that PT. V. Archipelago EVA is the highest of all. In every year, PT. V. Archipelago is making its surplus with the highest surplus in 2010 for Rp 603,945,620. The number is the highest and no other company makes EVA approaching that number. Three companies are in the same level of EVA, but CV. Maha Karya is slightly have a higher number that CV. Khalim and CV. Sumber Alam Rotan. Unlike, PT. V. Archipelago who has EVA in positive number for each year, the second highest ranking still has negative number in for their EVA. Negative number here does not mean, the company is bad, because it could possibly be the company wants to expanding their business that makes a higher accounting number and it caused the negative numbers of EVA. The lowest EVA is CV. Felladiva who has their EVA in negative way, than that means the company is expanding their business, or it is having a hard time instead of expanding their business because their negative EVA, their deficit reaches Rp 831,292,581. Focused on CV. Khalim, compared to its local competitor, CV. Khalim s number of EVA is not that bad, not like CV. Felladiva who generates deficit EVA every year from 2009-2012. CV. Khalim is also deficit but the number of deficit is still reasonable. That is why, the position of the EVA is tangent with two other companies, but CV. Khalim s position is below CV. Sumber Alam Rotan and CV. Maha Karya. 13

5. Summary and Conclusions From both of financial ratio, time series and cross sectional analysis, they suffered a deceleration from 2008 until 2012. Some of the ratio is showing a bad condition of CV. Khalim. Their liquidity ratio is acceptable but they are not liquid company. From the activity ratio, their inventory turnover is showing negative growth in these four years. The other activity ratio is showing bad condition of CV. Khalim. In other hand, their ROA and ROE is good. Their gross profit margin, debt ratio, and inventory turnover is above the industry average, but the other ratio is below and worse than industry average. The next method is DuPont analysis, in term of ROA, CV Khalim s ROA not in a good position if compared with others. CV Khalim s ROA is keep decreasing from 2008 until 2012, the sales profitability is also decreasing due to competitive competitor in Indonesia. The profitability of five companies for the ROE is not really high, but on the other categories, which are operating efficiency and financial leverage, the difference is a bit far from each companies. The last method to compare the financial performance of CV. Khalim is EVA. From EVA, we can conclude that CV. Khalim has some deficit in several years, but CV. Khalim s true economic profit is still acceptable because the other two companies is in the same as CV. Khalim. References Damodaran, A. (2010). Retrieved 2013, from http://pages.stern.nyu.edu/~adamodar/new_home_page/dam2ed.htm Euromonitor. (2013, april). Retrieved 2013, from http://www.euromonitor.com/furnitureand-homewares-stores-in-indonesia/report Gitman, L. J. (2012). Principle of Managerial Finance. In L. J. Gitman, Principal of Managerial Finance. New York: Pearson. Helmi, S. (2009). shelmi.wordpress. Retrieved 2012, from http://shelmi.wordpress.com/2009/03/04/rasio-%e2%80%93-rasio-keuangan-perusahaan/ Kompas. (2012, November 8). Retrieved 2013, from http://bisniskeuangan.kompas.com/read/2012/11/08/06375393/ekspor.kerajinan.rotan.m ulai.naik Parahita. (2010, november 28). Parahita.wordpress. Retrieved 2013, from http://parahita.wordpress.com/2010/11/28/menggunakan-dupont-analysis-untukmemahami-karakteristik-industri/ Peavler, R. (2013). Bizfinance. Retrieved 2013, from http://bizfinance.about.com/od/yourfinancialposition/a/common-size-income-statement- Analysis-An-Example.htm Quick MBA. (2010). Retrieved 2013, from http://www.quickmba.com/accounting/fin/statements/ Rafi. (2012, November 20). allfheim. Retrieved 2013, from http://allfheim.com/dasarakuntansi/neraca-balance-sheet/ Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2011). Financial Accounting, IFRS Edition. In J. J. Weygandt, P. D. Kimmel, & D. E. Kieso, Financial Accounting, IFRS Edition. Wiley. Yanti, E. (2011, October 1). dwiermayanti.wordpress. Retrieved 2013, from http://dwiermayanti.wordpress.com/2011/10/01/laporan-keuangan-sistem-du-pont/ 14