Capital Structure of Dutch Lady Malaysia
Capital Structure of Dutch Lady Malaysia
Basically, capital structure includes equities and only the long term liabilities. It refers to the makeup of the company 's underlying value, in particular the relative balance between funding from equities and funding from long term debt. The presumption is that funds from both sources are used for acquiring income-producing assets. Capital structure is also known as capitalization. Capital structure describes the sources of funds a company uses for acquiring income-producing assets.
The Outstanding shares of Dutch Lady Malaysia as of year-end 2013 are 64 million shares, which is shown in appendix 1. Meanwhile, the market price of Dutch Lady Malaysia as of year-end 2013 is quoted at RM47.14 (refer to Appendix 2)
Thus, the market capitalisation at year end 2013 is calculated which are as follows:-
Market capitalisation = ordinary shares issued * share price (Equation 1) = 64 million * RM47.14 = RM3016.96 million.
Meanwhile, on the long term debt perspective, Dutch Lady Malaysia does not have long term debt. Thus, the gearing ratio cannot be calculated. It simply means that the gearing ratio is 0%. It signifies that the company has lesser risk of liquidation occurrence, and it has reduced its interest payment, which more investments will occur elsewhere and the firm can have more cash flow to take on bigger and potentially more profitable projects. Besides, a 0% gearing ratio also means that any changes in the interest rates, especially upwards trends, will have a lower impact on the firm. This is because Dutch Lady does not have any long term loan, thus interest rate will not have much impact on the firm’s profitability. (TheStudentRoom, 2014)
References:
1. Markets.ft.com, (2014). Dutch Lady Milk Industries Bhd, DLADY:KLS financials - FT.com. [online] Available at:
Basically, capital structure includes equities and only the long term liabilities. It refers to the makeup of the company 's underlying value, in particular the relative balance between funding from equities and funding from long term debt. The presumption is that funds from both sources are used for acquiring income-producing assets. Capital structure is also known as capitalization. Capital structure describes the sources of funds a company uses for acquiring income-producing assets.
The Outstanding shares of Dutch Lady Malaysia as of year-end 2013 are 64 million shares, which is shown in appendix 1. Meanwhile, the market price of Dutch Lady Malaysia as of year-end 2013 is quoted at RM47.14 (refer to Appendix 2)
Thus, the market capitalisation at year end 2013 is calculated which are as follows:-
Market capitalisation = ordinary shares issued * share price (Equation 1) = 64 million * RM47.14 = RM3016.96 million.
Meanwhile, on the long term debt perspective, Dutch Lady Malaysia does not have long term debt. Thus, the gearing ratio cannot be calculated. It simply means that the gearing ratio is 0%. It signifies that the company has lesser risk of liquidation occurrence, and it has reduced its interest payment, which more investments will occur elsewhere and the firm can have more cash flow to take on bigger and potentially more profitable projects. Besides, a 0% gearing ratio also means that any changes in the interest rates, especially upwards trends, will have a lower impact on the firm. This is because Dutch Lady does not have any long term loan, thus interest rate will not have much impact on the firm’s profitability. (TheStudentRoom, 2014)
References:
1. Markets.ft.com, (2014). Dutch Lady Milk Industries Bhd, DLADY:KLS financials - FT.com. [online] Available at:
References: 1. Markets.ft.com, (2014). Dutch Lady Milk Industries Bhd, DLADY:KLS financials - FT.com. [online] Available at: http://markets.ft.com/research//Markets/Tearsheets/Financials?s=DLADY:KLS&subview=BalanceSheet&period=a [Accessed 8 Nov. 2014]. 2. Klse.i3investor.com, (2014). DLADY: Price Chart | I3investor. [online] Available at: http://klse.i3investor.com/servlets/stk/chart/3026.jsp [Accessed 8 Nov. 2014]. 3. The Student Room, (2014). Revision:Gearing - formula and uses - The Student Room. [online] Available at: http://www.thestudentroom.co.uk/wiki/Revision:Gearing_-_formula_and_uses [Accessed 8 Nov. 2014]. Appendix: (Appendix 1: Shareholders Equity of Dutch Lady Malaysia) (Market.ft.com, 2014) (Appendix 2: Price chart of Dutch Lady Malaysia) (KlseInvestor, 2014)