Compilation List : Simplified Risk

Being An Investor
Simplified the Risk

As in general for the financial reports, just search for 4 items below :-

a) Gross Profit Divide by Revenue = Gross Profit Margin in %
b) Net Profit before taxation for the year
c) Current Assets divide by Current Liabilities = Current Ratio
d) Current Assets - Current Liabilities - Long Term Borrowing = Positive,
means does not need to sell fixed assets.

i) Using (a) & (b) above.
A Good profit as in Gross Profit Margin consider above 20% and Positive Net Profit would be nice.
Let's see AirAsia (5099), Ajinomoto (2658), Axiata (6888) and etc...
But doesn't all should have achieve net profit before tax?
Let's see Ekowood (5091), Tiger Synergy (7079)

ii) Paying dividend?
This is quite simple, go to a website and check. Would the share prices up before ex-date?
Dividend Checker Click here

iii) Using (c) above. Able to make payment?
This is where Current Ratio should have at least 1.50
Ever wonder why (6947) and maxis (6012) is lower than 1.00?
But both also could make net profit before taxation.

iv) Using (d) above. Able to cover borrowings at all time?
When current assets - current liabilities - borrowings, if it is still positive, it is better than negative.
We wonder which company is achieving negative...
Yeap, Maxis, Digi since the current ratio is below than 1.00, and even KFC(3492)

v) Industry that we are familiar with?
Telecommunication? Plantation? Food? Banking? .....
Well, once you read the financial reports of the industry we like, it's much more easy to understand to
feel the industry we interested in.

Talking about lowering our risk is simply understand the companies situations by reading their reports.
So what conclusion do we have here?
a) choosing companies with at least 20% profit and
b) achieve net profit previous year and
c) current ratio above 2.0 and
d) current assets - current liabilities - long term borrowing must be positive and
e) with yearly dividends and
f) industry we familiar with.

Ever wonder how many companies would survive with the above list of criteria?


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