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lvency ratios, profitability ratios and market ratios. According to Lev and Sunder (1979), there are two principle reasons for using ratios which are to control for the effect of size on the financial variables being estimated and to control for industry-wide factors. The data obtained for this part are from the financial statements of the sample companies as well as from the annual report provided by Bursa Malaysia.

 

3.2.1         Technique of Analysis

 

In addressing the issue of comparing the firm’s performance with that of other firms in the same industry, a number of ratios such as liquidity ratio, asset management ratio, debt management ratio, profitability ratio and market value ratio were computed. The formulas used in the computation are as below.

 

Ratio

 

Formula

 

1

 

Liquidity Ratio – To measure the company’s ability to meet short term obligation using current assets.

 

Current Ratio

 

Current Asset / Current Liabilities

 

Quick Ratio (Acid Test)

 

(Current Assets – Inventory) / Current Liabilities

 

2

 

Activity Ratio – To indicate how effectively the firm’s resources are being utilized.

 

Fixed Assets Turnover

 

Sales / Net Fixed Assets

 

Total Assets Turnover

 

Sales / Total Assets

 

3

 

Debt Ratio – To reflect to what extend the firm has been finance by the debt

 

Total Debts to Total Equity

 

Total Debts / Total Equity

 

4

 

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